Lessons for Jamaica from new UK companies legislation
May 25, 2007
THE NEW United Kingdom Companies Act 2006 comprises 1,300 sections and is said to be the single largest piece of United Kingdom (U.K.) legislation.
Some eight years in the making, the new act received Royal Assent on November 8 and is expected to be fully implemented by October 2008.
However, some provisions like those facilitating electronic communication to shareholders were already implemented in January of this year.
The new act is a comprehensive code of company law described as 'the long awaited legislative reform needed to streamline the law governing companies'.
The Secretary of State in the Department of Trade and Industry, is quoted as saying that: "This act will help ensure Britain remains one of the best places in the world to set up and run business. It makes sure the regulatory burden on business is 'light touch', promotes shareholders engagement and will help encourage a long-term investment culture in the U.K."
Filing of a 'memorandum'
What can we learn from some of the provisions of this modern piece of legislation that is designed to achieve these lofty goals in the U.K. that we may successfully apply here in Jamaica?
The drive of the reform process was to simplify how companies are formed, managed and wound up.
As of January 2007, the formation of a company involves the filing of a 'memorandum', which is not a memorandum of association as we knew it - and which we have also in fact discarded - but an agreement to form a company made between the persons forming the company.
That, together with Articles of Association, which have been modernised and standardised to suit small private companies, are the only requirements.
The clear intention of the U.K. legislators is to encourage the formation of private companies by providing model articles which are easy to understand and apply. We could examine this approach given that in forming a company under our own new Companies Act, one is now required to file more, rather than fewer, documents since the repeal of the old act.
In fact, the articles scheduled to our act have not yet been modernized or standardised to reflect the new provisions of the 2004 legislation.
U.K. companies are now "capable of exercising all the powers of an incorporated company."
Thus the U.K. act has effectively abolished the 'ultra vires rules' that could limit the activities of a company to its stated objects.
An important dissimilarity in approach with our Companies Act which conferred the rights, privileges and power of an individual on a company has been created here, because the drafters of the new U.K. Act recognise the practical impossibility of a company being able to act in every manner as an individual, and, respects the fact that a company may do things that an individual cannot legally do, for example, like being an investment manager and a trust administrator of a superannuation pension fund, or, carrying on a banking or an insurance business....
Author: Janet Morrison
Source: Jamaica Gleaner
