COMPANY DIRECTORS, shareholders, investors and creditors may well be concerned about how the Companies Bill may change the face of business as we have known it for over 37 years after it becomes law.
Existing companies incorporated with a share capital have shares, each of which has a nominal or par value. Existing companies which continue under the new regime may continue to maintain such shares. The shares of companies incorporated under the new Act will not have a nominal or par value and will be issued with a no par value. Such new companies will be obliged to maintain a separate stated capital account for each class of shares, or where applicable, for each series of shares.
The amount to be credited to this stated capital account is the full amount received by the company for the shares (including non-cash consideration such as property and past services), transfers to capital from reserves and the issue price of bonus shares. The value of each no par share will therefore bear a relation to the sum in the relevant stated capital account. This proposed change will make it easier for prospective and existing investors and shareholders to ascertain the value of the shares and directors can issue shares for a price a willing purchaser will pay rather than offer the shares at a "premium" as they presently do.
All public companies whether incorporated under the existing Act or to be incorporated under the new Act, shall be obliged to obtain a certificate from the Registrar of Companies in order to "do business or exercise any borrowing powers". The application for this certificate shall be accompanied by a statutory declaration made by a director or secretary of the company which states:
that the value of the company's allotted share capital is not less than $500,000.00;
the amount paid up on the company's allotted share capital at the time of the application;
the amount or estimated amount of the company's preliminary expenses, and, the person who paid those expenses or by whom those expenses are payable; and
the amount or benefit given or intended to be given to any promoter of the company and the consideration for the payment or benefit.
Failure to obtain this certificate will force a public company to cease doing business or to exercise any borrowing powers and to continue in business, that public company will have to re-register as a private company.
The impending regime will not change the present requirement that every company must keep proper books and documents of account in order to give "a true and fair view of the state of the company's affairs and to explain its transactions". However, it does as presently drafted, require that directors shall be obliged to disclose more extensive financial information about the company's affairs in highly prescriptive formats in order to comply with the obligation to give such "a true and fair view". These more stringent requirements of disclosure have been reviewed by the Senate Committee that has been appointed to review the Companies Bill and it has recommended that accounts should simply, except those for small companies and small groups of companies, "be prepared in accordance with generally accepted accounting principles
promulgated by the Institute of Chartered Accountants of Jamaica or such other body as the Minister may prescribe."
The criteria for small companies and small groups of companies will include most companies registered under the present Act and which will continue under the new Act. It has been recommended by the Senate Review Committee that those companies "present accounts in accordance with accounting principles that are appropriate to (their) circumstances having regard to the requirements for those accounts to present a true and fair view of the state of affairs..."
Accordingly, for most directors, compliance with accounting requirements will be even less cumbersome and expensive than the present system, because, as will be seen later, there is also a recommendation that some accounts may not have to be audited.
The Senate Committee has also proposed an amendment to the Bill that only the following companies should be obliged to have their accounts audited - public companies, banks, near-banks, building societies, co-operative societies, entities licensed under the Securities Act, private companies whose articles provide that their accounts be audited and any subsidiary of the above listed. It is further proposed that shareholders who hold 10 per cent or more in the capital of a company which would otherwise be exempted, may also demand that the accounts be audited.
SAVINGS PROVISIONS
There is no requirements for an existing company to file documents with the Registrar of Companies to notify that the company has elected to continue under the new regime.
Companies in existence before the new Act comes into force will continue after the Act comes into force using the original Memorandum and Articles, and, all documents, resolutions and regulations and all proceedings lawfully done before the new Act comes into force will be deemed lawfully done under the new Act notwithstanding that the law has changed.
The above changes have been achieved in other Commonwealth countries and in other Commonwealth Caribbean countries, including Trinidad and Tobago and Barbados. We are taking an innovative step in our own company law to facilitate the dynamics of a new world market.
If you would like to know more about this topic or any other aspect of the new Act soon to become law, please do not hesitate to contact us.
This article was contributed by Dunn Cox, attorneys-at-law, 48 Duke Street, Kingston.
