New bill won't plug all the gaps in company law
February 09, 2007
The long-awaited bill to amend the Companies Act, 2004 is to be debated in Parliament.
The Companies Act (Amendment) Bill is drafted to expressly provide that a company formed under the repealed Companies Act of 1965 (a Former Act Company) may file 'Articles of Continuance' to transition to the new regime, and, to recognise that the Memorandum of Association and Articles of Association of a Former Act Company are deemed 'articles' until the company files Articles of Continuance.
The bill further provides that a Former Act Company that does not file Articles of Continuance within the prescribed time period of one year of enactment or within an extension of that period granted by the Registrar, will be unable to pay dividends to its shareholders without permission from the court.
It is now widely accepted that the 2004 Act does not provide that a Former Act Company has the right to file or adopt Articles of Incorporation so as to entitle it to exercise the new powers contained in the new Act.
Those powers include, for example, the power to buy back its own shares and to issue redeemable shares.
Lively debates
Further, since the 2004 act came into force on February 1, 2005, there have been lively debates raging in legal circles about whether a Former Act Company's Memorandum of Association and Articles of Association may be amended under the 2004 Act because, whereas the 2004 Act gives the power to a Former Act Company to amend its 'articles', surprisingly, 'articles' as defined in the Act do not include Memoranda and Articles of Association of a Former Act Company.
The Companies Office of Jamaica (COJ) exercised the initiative to keep industry and commerce turning while the lawyers debated by permitting Former Act Companies by special resolution of the company to adopt Articles of Incorporation notwithstanding the lacuna in the law.
Several Former Act Companies employed this procedure sanctioned by the COJ and accordingly have been able to take advantage of the new powers of the 2004 Act.
Therefore, the bill may quiet some of the legal debate because it provides, first, that the directors of a Former Act Company will have the right to file Articles of Continuance and by so doing they will have the benefit of using the new powers of the 2004 Act. Second, 'articles' will be widely defined not only to mean the Articles of Incorporation of a new company formed under the 2004 Act but the Articles of Continuance filed by a Former Act Company, as well as the adopted Articles of Incorporation of a Former Act Company permitted by the COJ.
Third, while the Memorandum and Articles of Association of a Former Act Company are to be included in the definition of 'articles', it will be for a specified period of time only, that is until the Former Act Company adopts Articles of Continuance.
However, there remains this question: Does the bill expressly recognise and give validity to the adopted Articles of Incorporation of a Former Act Company?
Unfortunately, it does not do so. It is critical to give legitimacy to the procedure sanctioned by the COJ because it is outside the ambit of the 2004 Act....
Author: Janet Morrison
Source: Jamaica Gleaner
