Susan Smith, Staff ReporterTHE NEW Companies Act applies to medium-size and large public or private companies which are eligible for limited liability protection from the state, says the Offices of the Registrar of Companies (ORC).
Although the new act has no impact on owners of small businesses registered under the Registration of Business Name Act, these persons can still take advantage of it as it contains a sole proprietor component.
The act, which came into effect yesterday, stipulates that public companies have a minimum share capital of J$500,000 and be registered with the registrar in order to conduct business legally in Jamaica.
The act also reduces the documentation needed to form a company and gives a person permission to be its sole director or shareholder. Under the new act of 2004, the two documents now needed to register a company, are the article of incorporation and a declaration of compliance.
NO LONGER BURDENED
This means that a company is no longer burdened with the tedious exercise of listing all its objects and powers as it would in former times in the memorandum of association.
Other basic stipulations of the new act are that companies notify the registrar of any changes or new appointments of directors made within seven days. Mutual funds are also expected to be registered under the new act and companies can now adopt pre-incorporation contracts after they have been incorporated.
Furthermore, a company is given a grace period of 90 days to retain its name in cases where it has been incorporated or amalgamated.
According to Mrs. Trudy-Ann Bartley Thompson, attorney-at-law and business registration manager for the ORC, one of the main benefits of the act to companies is that it gives limited liability protection to their owners or operators.
In cases where companies are forced to become insolvent or reduce their share capital, "The new Act will separate the owners and their personal assets from those owned by the companies," she explained.
In the past, when a private or public company went into receivership, liabilities were paid out of the person's pocket. "Your personal assets could not be touched," she said with relation to any such case in the future.
She said the act will also achieve more corporate governance by the state making it easier to monitor the action of directors and officers within companies. "Liability issues were always there. With the New Company's Act more accountability to ensure transparency within companies is ensured," she stated.
Mrs. Bartley Thompson believes it will be easier to hold persons accountable for unfiled annual returns documents or incomplete records in cases of court matters and other types of settlement.
ENCOURAGED TO REGISTER
Although some smaller businesses are encouraged to register under the New Companies Act, others are not advised to by the attorney. "We would advise someone who is just starting up, not to register because the overheads of having to file annual returns of $4,000 per year may be too high," she pointed out. Smaller business will continue to register under the Business Names Act with an option to renew every three years.
Businesses registering as public companies must now pay a fee of J$2,000 up from $1,500. Every change incurred by the business should be filed to the registrar and will attract a charge of $2,000 by the registrar.
