Competition between international financial centres is strong and increasing. The foundation for a competitive jurisdiction is up-to-date legislation that helps the finance sector to do business flexibly and bears scrutiny. A new book provides a guide to Guernsey's comprehensively revised Company Law.
Company law in Guernsey has developed through accumulation of amendments and revisions. In 1994 a new law, the Companies (Guernsey) Law 1994 was introduced, which consolidated a law of 1908 together with subsequent laws. The 1994 law ran to 124 Sections. Since then much has changed in the field of company law.
The new legislation ran to some 545 sections and 5 Schedules. The legal draftsmen not only consolidated Guernsey's existing law and ordinances but also took into consideration ideas and concepts from other jurisdictions. The intention was to provide legislation that matches the standards that are expected around the world but will remain flexible.
Since its introduction on 1 July 2008 the Company Guernsey Law 2008 has been the focus of many seminars and briefings on the island. Now specialist legal publisher Key Haven of Oxford, is producing a book that provides a comprehensive guide to the law. The book, titled 'Kirk on Guernsey Company Law' is expected to be published on the anniversary of the Law's introduction - 1 July 2009. It is expected to be a valuable reference resource to those who need to know about Guernsey company law, including lawyers, accountants, insolvency practitioners, corporate secretaries, and other corporate administrators, whether based locally or internationally.
The length of the draft legislation makes it evident that much has changed or been introduced since the previous law. The principal areas of change include:
New Types Of Company
Two new types of company are introduced: 'Unlimited Companies' (where the liability of the members is unlimited) and 'Mixed' liability companies (which can have shares, unlimited liability members and guarantee members).
Simplified Incorporation Of Companies
Incorporation of companies is no longer a judicial process. A newly created Company Registry controls this function.
Online incorporation, filing and notification of changes have been introduced. Searches can be done online. Different service levels, including a fast-track incorporation within 15 minutes, are available.
Standard Articles Of Incorporation
Standard articles are prescribed which are adopted automatically unless otherwise indicated on incorporation.
Unrestricted Objects, By Default
Unless a company's memorandum of incorporation specifies, its objects are unrestricted.
Better Scope For Compromises And Arrangements
The law facilitates compromises and arrangements between a company and its creditors (or a class of creditor) or its members (or a class of member). The Royal Court can sanction a compromise or arrangement agreed by 75% or more of creditors or of members, helping to avoid situations where minorities block proposals against the will of substantial majorities.
A proposed purchaser with 90% acceptances will be able compulsorily to acquire remaining shares.
A New Solvency Test
A new solvency test applies to a number of company actions including:
- making distributions (including dividends)
- reduction of share capital
- financial assistance for the acquisition of a company's own shares
- certain payments associated with the acquisition of shares by a company
Under the new provisions a three part solvency test is introduced that offers greater certainty and consistency.
Optional Use Of Electronic Communication.
The law permits documents to be sent electronically to shareholders by the company if such means of communication is agreed by the shareholder
Dividends And Distributions
There are multiple changes affecting dividends and distributions.
Overall, this is a progressive piece of legislation that helps to underpin Guernsey's position as a specialist financial centre.
About the Author And The Publisher
Author Ian Kirk is the head of the Commercial department at Guernsey law firm Collas Day. He is a noted authority on the island's law, with over 25 years legal practice. An English solicitor and Guernsey Advocate, he specialises in banking, company and commercial law and is a regular author and speaker on Guernsey Company Law, directors' duties and financial services. He is widely consulted as an advisor to companies and boards and holds several directorships himself. He is a former Chairman of the Institute of Directors, Guernsey.
Key Haven is a publisher of books and professional reviews and event organiser, based in Oxford. It specialises in legal topics including Company Law and Channel Island Law as well as Taxation, Trusts, Charities, Comparative Law, European Law and Constitutional Law. www.khpplc.co.uk.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.