New amendments to the Companies (Guernsey) Law 2008 entered into force on September 3 2015 following approval by the States of Guernsey on July 29 2015. Transitional regulations will assist this change process.
These welcome changes based on industry experience of operating under the Companies Law are intended to provide clarification and increase operational efficiency and flexibility, all of which will help to keep Guernsey well placed as a jurisdiction of choice.
Further, regulations which were introduced to transition companies incorporated before the Companies Law entered into force will continue to apply until December 31 2016. This will give companies ample time to implement any changes necessary to fully comply with the law (eg, amending their memorandum and articles of incorporation).
The law came into force on July 1 2008. It was a major revision and upgrade of local companies' legislation and focused on maintaining Guernsey's position as an internationally competitive business jurisdiction.
In November 2012 the Commerce and Employment Department reported on its post-implementation review of the Companies Law (2012 Report). The 2012 report recommended a number of amendments to the law, with a view to ensuring that it is as effective and practical as possible, as well as a general tidy-up of the drafting where required. These recommendations, which had been made following consultation with industry, were agreed by the states.
Certain recommendations of the 2012 report have already been put into effect by the Companies (Guernsey) Law 2008 (Amendment) Ordinance 2013, which amended annual validation requirements and introduced indefinite audit exemptions; and by the Companies (Guernsey) Law 2008 (Amendment) Ordinance 2014, which widened the circumstances under which a company can be restored to the Register of Guernsey Companies.
The Companies (Guernsey) Law 2008 (Amendment) Ordinance 2015, which was approved by the States on July 29 2015, brought further recommendations and came into effect on September 3 2015.1
The key changes introduced by the ordinance are as follows:
- Simplify the distribution process and
provide greater certainty in relation to its operation by providing
- distributions can be recovered from members only for a period of two years after being made;
- a director who would otherwise be personally liable to repay such amounts as are not able to be recovered from members where a distribution was made without the statutory process having been followed is not personally liable to repay a distribution if the company was able to pass the solvency test at the time it was made and remains able to do so at the relevant time; and
- amounts paid to a company's share capital account can be distributed, whether as dividends or otherwise (subject to the usual provisions in the law governing the making of distributions).
- Allow certain companies to waive the requirement to prepare directors' reports if members pass a waiver resolution (90% majority).
- Permit certain types of corporate
body to amalgamate with each other so that amalgamating companies
could be any of, or any combination of, the following:
- protected cell companies;
- incorporated cell companies;
- incorporated cells of the same company; and
- non-cellular companies.
- Give directors the authority to issue more than one class of share without the need for shareholder approvals.
- Remove the requirement for directors to consider whether the issue of shares is fair and reasonable to all existing members (the directors must still consider whether it is fair and reasonable to the company), as well as the need for directors to approve and sign a separate consideration certificate when issuing shares.
- Simplify the provisions relating to declarations of interest of directors by removing the requirement to quantify the monetary value where possible, such that the requirement is limited to disclosure of nature and extent of the relevant interest.
- Allow a Guernsey company to register an alternative name in non-Roman script.
- Remove the statutory four-month period for acceptances in relation to the operation of statutory squeeze-out to expedite such processes where appropriate and make provision to reduce the times needed for migrations and amalgamations.
- Simplify the provisions in relation to the appointment of auditors by removing the restrictive concept of the period for appointing auditors (ie, within a 28-day period linked to the sending out of accounts and reports).
- Allow a cell of a protected cell company to convert into a standalone (non-cellular) company.
- Expand the potential list of persons who can incorporate companies and reserve names (and expand the circumstances under which a company name may be reserved to include proposed name changes), by allowing the department to make provisions in this regard by regulation.
- Permit the registrar to strike off any company which does not have at least one director.
- Allow anyone who has been disqualified as a director or officer in another jurisdiction to apply to the Guernsey Royal Court for a ruling that this should not prevent him or her from acting as a director or officer in Guernsey.
- Reduce the time allowed for a company to respond to requests for disclosure of a director's usual residential address from two weeks to five working days of receipt.
- Prohibit a company from indemnifying the directors of any of its overseas subsidiaries.
- Deem the register of members of a company to be closed temporarily, solely for the purposes of determining which members are eligible to vote on a specific resolution.
- Permit protected cell companies to prepare individual accounts for each cell.
- Give the department the power to provide that individual protected or incorporated cells may waive audit requirements.
- Permit the redemption of shares even if not fully paid up.
- Prohibit the making of an application to strike off a company voluntarily where it has outstanding liabilities.
Additional transitional regulations have been promulgated alongside the ordinance to manage the change process.
Other existing transitional provisions which remain in force have now been extended by a further year until December 31 2016. This will be welcome news for companies incorporated before the law enters into force which are waiting for these proposals to be brought into force before reviewing their memoranda and articles for compliance with the law.
For further information on this topic please contact Andrew Munro or Frances Watson at Ogier by telephone (+44 1481 721 672) or email (firstname.lastname@example.org or email@example.com). The Ogier website can be accessed at www.ogier.com
An original version of this article was published by the International Law Office, September 2015.
1 - The full text of the ordinance is available here.
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.