The Companies (Guernsey) Law, 2008 (the Law) came into force on 1 July 2008. It was a major revision and upgrade of local companies legislation, focused on maintaining Guernsey's position as an internationally competitive business jurisdiction.
In November 2012, the Commerce and Employment Department (the Department) reported on its post-implementation review of the Law (the 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 a period of consultation with the 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 (the Ordinance), which was approved by the States on 29 July 2015, will bring further recommendations into effect. The Ordinance will come into effect on 3 September 2015.
We have highlighted below some of the key amendments. You can access the full text of the Ordinance by clicking here.
Summary of Key Amendments
- Simplify the distribution process and provide greater certainty in relation to its operation by:
- providing that distributions can only be recovered from members for a period of two years after being made,
- providing that 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 had been able to pass the solvency test at the time it was made and remains able to do so at the relevant time; and
- expressly providing that 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 different types of corporate bodies to amalgamate with each other such that amalgamating companies may 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 still need to consider whether it is fair and reasonable to the company) as well as the need for the directors to approve and sign a separate consideration certificate when issuing shares.
- Simplify the provisions relating to declarations of interests 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 4 month period for acceptances in relation to the operation of statutory "squeeze-out" to expedite such processes where appropriate and make provision to effectively reduce the times needed for migrations and amalgamations.
- Simplify the provisions in relation to appointment of auditors by removing the restrictive concept of the period for appointing auditors (i.e. 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 provision in this regard by regulation.
- Permit the Registrar to strike off any company which does not have at least one director.
- Allow any person who is disqualified as a director or officer in another jurisdiction to apply to the Royal Court in Guernsey for a ruling that this should not prevent them 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.
- Prohibit the making of an application to strike a company off voluntarily where it has outstanding liabilities.
There will be additional transitional regulations promulgated alongside the Ordinance to manage the change process.
It is also worth noting that other existing transitional provisions which remain in force have now been extended by a further year until 31 December 2016. This will be welcome news for companies incorporated prior to the Law coming into force which are waiting for these proposals to be brought into force before conducting a review of their memorandum and articles for compliance with the Law.
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.