Ashford W. Meikle, Staff Reporter
FILE -
Tax principal at Deloitte and Touche, Ethlyn Norton-Coke (left), listens keenly to Linroy Marshall, president of the Institute of Chartered Accountants in Jamaica (ICAJ), as he discusses changes to the legislative arrangements for businesses under the new Companies Act. Looking on is deputy CEO and director of operations at the Office of the Registrar of Companies (ORC), Shellie Leon. Occasion was a seminar to educate accountants on the provisions of the new Act, at the Jamaica Conference Centre, downtown Kingston.
When the new Companies Act comes into effect on February 1, sweeping changes will be effected in the local business community and the way business is conducted in Jamaica.
In addition to more transparency by companies and increased policing by the Office of the Registrar of Companies (ORC), the mechanics of forming a company will be greatly simplified. The most obvious and far-reaching change will be the reduction in the number of documents required to form a company. When the new act is effected, only two documents will be required to incorporate a company, the articles of incorporation and the declaration of compliance.
The current act, as the ORC points out, requires the filing of three documents the memorandum of association, the articles of association and the declaration of compliance.
SOLE DIRECTOR
Another important change will be that a single person will now be able to form a private company and be its sole director. However, if it is a public listed company, there must be at least three directors. The present act requires that once private companies are incorporated, they must have two persons subscribing to the memorandum and articles of association. For publicly listed companies, the requirement is seven persons.
Unlike the current situation, the Companies Act 2004 will abolish the par value share. According to the act, "As a result, shares issued before the act takes effect will be deemed to be shares without par values." The current situation allows for the nominal or par value of the shares to be fixed by a company's constitution.
An important change which the finance sector should welcome is that the new act will allow for the establishment of mutual funds companies. The absence of this regulatory approval meant that the the mutual funds operating in Jamaica are actually incorporated abroad, such as in the Cayman Islands.
According to the ORC. "The 2004 Act will provide an additional method for companies to raise capital by the creation of redeemable shares ... No provisions were previously available for ordinary shares." The ORC also notes that the with the pending act, the
abolition of the ultra vires doctrine should result in a company's articles of incorporation "becoming a much shorter and simpler document."
COURTS CAN NOW DISQUALIFY DIRECTORS
An important change, as it pertains to the role of directors, is that the courts can now
disqualify directors for up to five years, contrasting with the present situation which does not provide for the disqualification of directors.
Also, directors must now "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."
Attorney-at-law at DunnCox, Janet Morgan and a specialist in commercial law, told The Financial Gleaner that "The first thing it (2004 Act) does is that it simplifies the act of incorporating a company so it will be easier for [someone] to carry on business as a corporate entity."
She reflected that, "The idea of forming a company seems remote to most Jamaicans so it is a desirable development."
Mrs. Morgan pointed out that with the enactment and implementation of the act there will be a multiplier effect. "The creation of more companies will generate more employment and that in turn will increase the level of
industry and employment in the country."
