Comparison of the Old and New Companies Acts

Comparison of the Old and New Companies Acts

1. NEW

Under the Companies Act, 2004 you will be required to file two documents for the incorporation of a Company. These documents are:

(1) Articles of Incorporation; and
(2) Declaration of Compliance.

The Articles of Incorporation will be required to state the following:

(a) The Name of the Company, in the case of a Company limited by shares or by guarantee it must include “Limited” as the last word of the name
(b) The country of domicile of the company;
(c) In the case of a Company having a share capital, the classes of shares, if any, and any maximum number of shares the Company is authorized to issue
(d) Restrictions, if any, on share transfers
(e) Number (or minimum or maximum number) of Directors
(f) Any restrictions on the business that the Company may carry on

OLD

The current Act requires the filing of three documents:

i) Memorandum of Association
ii) Articles of Association
iii) Declaration of Compliance.

2. NEW

“One-man" companies will now be permissible under Jamaican law. This will mean that a single person may form a company and also be its sole director, and shareholder.

Section 172 (1) of The Companies Act, 2004 prescribes that a private company must have at least one (1) director, while a public company must have no fewer than three (3) directors, at least two (2) of whom are not officers or employees of the company or any of its affiliates.

OLD

This once again represents a change from the current Companies Act, which requires that every Company upon Incorporation must have at least two (2) persons subscribing to the Memorandum and Articles of Association for a private company and seven (7) in the case of a public company.

3. NEW

The Companies Act, 2004 will now require that Notice of Situation of Registered Office be filed concurrently with the Articles of Incorporation. The Registrar should be notified of any change of the Registered Office of the Company within Seven (7) days of the date of the change.

OLD

This compares with the period of within Twenty-eight (28) days of incorporation, which is allowed under the current Act to file Notice of Registered Office location and for the filing of Notices advising of any changes therein.

4. NEW

It will become mandatory under the Companies Act, 2004 for all Companies to file with the Office of the Registrar of Companies, Notice of Appointment of Secretary and any Change therein.

Section 172(6) of the Companies Act allows a period of Fifteen (15) days from the date of the appointment of the Company Secretary for the Notice of Appointment to be filed with the Registrar.

Further, in the case of Public Companies it will be the duty of the Board of Directors to take all reasonable steps to ensure that the person appointed to act as Company Secretary possesses the requisite skills and acumen to carry out the duties and functions of that Office.

The Secretary is responsible, among other things, for ensuring that the documents a Company must send to the Registrar are accurate and are delivered to the Registrar on time.

OLD

There is no provision in the current act for the filing of a Notice of Appointment of Secretary nor is there a provision that a Company’s secretary must be named in the Articles of Association.

5. NEW

A Public Company will be unable to conduct business or exercise any borrowing powers without first receiving the Registrar’s certification that the Company’s allotted share capital is not less than the authorized Minimum. The current authorized minimum is set at $500,000.00. The Act allows the Minister the discretion to adjust the authorized minimum share capital requirement for Public Companies.

OLD

There is no provision in the current act for a minimum authorized allotted share capital for a Public Company. Therefore there is also no requirement for a Public Company to obtain the Registrar’s certification that its allotted share capital is not less that the authorized minimum.

6. NEW

Section 174 of the Act provides that every director and officer of a company in
exercising his powers and discharging his duties must:

a) act honestly and in good faith with a view to the best interests of the company

b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances

In determining what are the best interests of the company, directors are required to have regard to the interests of the company's employees in general as well as to the interests of its shareholders.

OLD

There was no statutory duty of care and the common law standard was what was adhered to. The test for determining if the standard of care required had been discharged was a subjective test.
1. The duty not to make a secret profit.
2. The duty not to have a conflict of duty and interest.
3. The duty to act bonafide and in the interest of the company.
4. A director need not exhibit a greater degree of skill than can reasonably be expected from a person of his knowledge and experience.
5. A director is not liable for errors in business judgment as his primary function is to use his own particular talents in advocating corporate risk taking.
6. A director is not bound to give continuous attention to the affairs of the company. In the absence of grounds for suspicion he is fully justified in trusting corporate officials to be honest.

7. NEW

Section 18 of the Companies Act, 2004 provides that a name for an intended company or a company about to change its name may be reserved for ninety (90) days. During this period, no other company may be incorporated with or be allowed to have the reserved name.

OLD

No provision for company name reservation is included in the current act.

8. NEW

The Companies Act, 2004 abolishes the par value share. As a result shares issued before the Act takes effect will be deemed to be shares without par value.

However, a Company can, within six (6) months of the Act taking effect elect to maintain its existing shares with a par value and continue to issue shares with a par value. Such an election must be communicated to the Registrar of Companies.

The provisions of the Companies Act, 1965 relating to a par value regime will continue to have effect for those Companies that elect to retain the par value regime within the six (6) month period aforementioned. Those Companies that do not make such an election will be deemed to have converted their shares to no par value.

In any event, 18 months after that initial six (6) month period all Companies will be deemed to have converted to a no par value regime. Therefore after a two year period after implementation all Companies will be subject to the no par value regime.

OLD

Under the current Act, a Company having a share capital and limited by shares, was required to have its authorized capital stated in its Memorandum with a nominal value attached to those shares.

The nominal or par value of the shares is fixed by the Company’s constitution. However, it is in most cases an unrealistic and artificial figure bearing no relation to the actual value of the shares at the time of their issue.

9. NEW

Companies will now be able to adopt pre-incorporation contracts (oral and/or written) that were made on their behalf provided that the contracts are adopted within a reasonable time after the company is incorporated.

OLD

Under the current Act, Companies are not bound by any contracts made by other persons on it behalf before its incorporation nor can it ratify any contract entered into before it was incorporated. This also meant that the other party who entered into the contract could not enforce it. The person(s) who entered into the contract on behalf of the company would be personally liable on the contract.

10. NEW

Companies will now be required to maintain “stated capital” accounts. Companies must add to the appropriate stated capital account, the full consideration received by the company on the issue of any of its shares.

The stated capital account may also be reduced in specified circumstances without making an application to the Court provided that the Directors of the company file a Statutory Declaration. The Declaration must state that there are no reasonable grounds to believe that after the reduction of the stated capital of the company that the company would be unable to pay its liabilities when they become due. It must also state that there are no reasonable grounds to believe that the company’s assets would be less than its liabilities and the stated capital remaining.

OLD

There is no provision for the keeping of “stated capital accounts” in the current Act.

11. NEW

Contracts may be made with a Director of a company subject to the approval of the Board of Directors (excluding the Director concerned). There is a general duty imposed on Directors to disclose their interests in the Company as well as their shareholdings (including the shareholdings of their spouse and children) in affiliated companies.

Directors’ service contracts are to open to inspection. They are to be kept at the Registered Office of the company, at the place where the register of members is kept or at the principal place of business of the company.

OLD

Directors are required to disclose the nature and extent of contracts as well as their interest in contracts to the Board, which would then be subject to the Board’s approval. Interested directors may attend these meetings and in some instances vote on the contract.

12. NEW

Mutual Fund Companies may be registrable under the Act. A Mutual Fund Company is defined by the Act as “a company having a share capital and incorporated for the purpose of investing the monies of its members for their mutual benefit and stating in its articles that it is a mutual fund, having the power to redeem or purchase for cancellation its shares without reducing its authorized share capital and is registered under the Securities Act as a mutual fund”.

OLD

The current Act does not allow for the incorporation of Mutual Fund Companies.

13. NEW

The 2004 Act will provide an additional method for companies to raise capital by the creation of redeemable shares Redeemable shares may be issued on terms that they will be either redeemed by the company itself or by the company at the option of the holder at a future date. Redeemable shares may only be redeemed if fully paid. The Articles of Incorporation must provide for the terms and manner in which the shares may be redeemed. A company must have some shares that cannot be redeemed, otherwise, the Company could potentially lose its capital base if all it holds are shares that are redeemable (section 56(2)).

OLD

No provisions were previously available for ordinary shares.

14. NEW

The Abolition of the ultra vires doctrine. This should result in the Articles of Incorporation becoming a much shorter and simpler document as the company now has all the rights ,powers and privileges of an individual (Section 4(1). Therefore there will no longer be a need to include an exhaustive list of objects and powers of the company.
Restrictions on the company’s business can be effected in the Articles of Incorporation.

OLD

As a result of the ultra vires doctrine companies were obliged to list all the objects of the business and it was restricted in it business dealings by the objects stated in its Memorandum of Association.

15. NEW

The 2004 act will allow for removal of requirement for Court Order to be obtained in respect of charges being filed outside the required 21 days. Where a charge is filed within the 21 days of creation, it will rank in priority to any charge created after it. Where a charge is not registered within the 21 days of creation, it will for the purposes of priority be deemed to have been created on the date of registration
Where a subsequent charge is registered in respect of the same property/undertaking and written notice thereof is given to the prior charges the amount secured by the prior charge cannot be increased to the prejudice of the later charge. Particulars of any increase in an amount secured by a charge must be registered with the Registrar.

OLD

Where a registrable charge is not registered within 21 days of its creation then it becomes void. The time for registration may however be extended on an application to a Supreme Court Judge. The Court on the appropriate application may extend the time for registration of the charge on such terms and conditions as may seem to the Judge to be just and expedient.

16. NEW

The Court can disqualify directors for up to five years. A complaint must be made to the Registrar by shareholders, directors or creditors or the liquidator or the trustee that the director is unfit to be concerned in the management of the company. Following an investigation by the Registrar a complaint may be made to the court. Unfit includes: a Breach of any duty in relation to the company and for persistent breaches of the Act. Such as failing to fulfill the requirements for the filing, delivering or sending any return, account or other document or the giving of notice of any matter to be given to the Registrar.

OLD

No provisions for the disqualification of directors exists under the current act.

17. NEW

Doctrine of Constructive Notice abolished. The Company must ensure that documents are made known to persons who are required to know.

OLD

The doctrine of Constructive Notice meant that where certain documents were lodged with the Registrar of Companies they were deemed to be seen by all persons whether those persons had actually attended on the Registrar of Companies or not and had actual sight of the said documents.

18. NEW

The Notices relating to the removal of Company from the Register must now be published in a daily newspaper in addition to the their publication in the Jamaica Gazette.

OLD

The requirement under the current act is for the two notices to be published in the Jamaica Gazette.

19. NEW

Registrar has the power to restore companies to the RegisterNo court order is required.

OLD

An order had to be obtained from a Judge of the Supreme Court sitting in Chambers.