The Companies (Amendment No.11) (Jersey) Law 2014 and related Orders (the "Amendment") came into force on 1 August 2014. It provides a suite of changes to the Companies (Jersey) Law 1991 (the "Companies Law"), to further enhance its flexibility and appeal to the international legal and finance community.
The Amendment makes the following changes:
The Amendment introduces greater flexibility to shareholder decision-making by permitting the company to specify different (increased) voting thresholds (including unanimous) for different special resolutions. This allows a company more control in its management of its own affairs and aligns the Jersey process with that in other offshore jurisdictions.
There is also enhanced flexibility in the way written resolutions may be obtained (unanimity is no longer required), accompanied by a regime for the requisitioning of the circulation of written resolutions.
REDUCTIONS ON SHARE CAPITAL
A company wishing to reduce its capital may now do so without court approval (although the existing procedure remains in place). A reduction can now take place provided that a special resolution sanctioning the reduction is filed with the Registrar, accompanied by a directors solvency statement.
RATIFICATION OF BREACH OF DIRECTORS' DUTIES
For most companies, if the shareholders wish to ratify a director's breach of duty, they can now do so by way of an ordinary resolution (or, if the articles of association require, a special resolution) (the votes of director connected parties will be discounted), provided that a solvency test is satisfied.
Under the former regime (which will continue to be available to those companies wishing to use it) ratification required the unanimous consent of the shareholders. The new regime is not, however, available for various collective investment schemes.
A COMPANY'S PURCHASE OF OWN SHARES
Under the new regime, it is made clear that payment for shares may take the form of cash or non-cash consideration.
A new and more flexible process has been introduced for the purchase of depository certificates issued in respect of its shares, which now allows them to be purchased directly by the company in accordance with the share repurchase mechanics.
Where a dividend, or other distribution, does not have the effect of reducing the net assets of the company, the Amendment clarifies that it will not be treated as a distribution for the purposes of the Companies Law. This will be of particular benefit when considering up-stream guarantees/indemnities by Jersey companies.
RATIFICATION OF UNLAWFUL DIVIDENDS
The Amendment creates a new statutory procedure which allows a company to ratify a dividend or distribution made otherwise than in strict compliance with the Companies Law. To ratify such a payment, an application to the Court must be made with supporting solvency statements. The process does not require shareholder consent or creditor notification (unless the Court otherwise orders). A Court ratified dividend will be deemed lawfully made at the time of its initial payment.
COMMISSION AND DISCOUNTS
The prohibition on paying commissions in respect of newly issued shares and on disclosing the amount of commission paid has now been abolished. The restriction on issuing shares at a discount to their nominal value has also been abolished.
ANNUAL GENERAL MEETINGS
Private companies will no longer need to hold an annual general meeting ("AGM"), unless required by its constitutional documents. Previously, the shareholders of a private company had to opt out of holding AGMs.
For existing companies, unless they pass a special resolution requiring AGMs to be held, they will cease to be obliged to hold an AGM. Public companies, however, must still hold AGMs.
OVERSEAS BRANCH REGISTERS
The overseas branch register rules have been amended to permit companies to include the details of any shareholder, rather than just those residents situated in that overseas jurisdiction. Accordingly, Jersey companies can be listed on multiple overseas exchanges which require branch registers.
Although the finer details of a proposed change to the prospectus regime will be contained in a further Order, it is proposed that new exemptions to the prospectus regime will be introduced which will remove the need for a prospectus for certain share offerings.
STATUTORY MERGERS AND MIGRATIONS
The Amendment reduces various time periods from 28 to 21 days. We expect that the shortening of these timeframes will further increase the usage of these processes.
A new demerger procedure will enable an existing company to be split into two or more surviving companies. The details of the demerger procedure will be set out in a separate Order.
The procedure for the compulsory buyout of minority shareholders on takeovers has been clarified by confirming that a takeover offer that, in order to avoid contravention of law, excludes shareholders in certain territories shall still be a valid takeover offer.
The quorum for a creditors' meeting will be changed to one instead of three. The rationale behind this change is to remove the possibility for one large single creditor to be prevented by other creditors from holding a creditors' meeting. This change has the potential to speed up the winding up of a Jersey company, particularly in circumstances where there is a dispute between the company's creditors.
CHANGING A COMPANY'S STATUS
The Amendment clarifies that where a company changes its status from private to public by special resolution, the altered status will take effect from the date on which the new certificate of incorporation is issued and not before.
THRESHOLD FOR SHORT NOTICE OF GENERAL MEETINGS
The 95% shareholder consent threshold required to enable a general meeting to be given on short notice is aligned with English law, by reduction to 90%.
NUMBER OF CORPORATE REPRESENTATIVES
Changes also align Jersey with English law to the extent that a body corporate is able to appoint more than one person to represent it at any meeting of the company, at which it is entitled to attend.
DELIVERY OF PROXIES
The Amendment allows non 'working days', such as weekends and bank holidays, to be ignored when calculating the 48 hour period for proxies to be delivered before a business meeting, bringing Jersey law in line with the English position.
If approved by all shareholders, public companies falling into specified categories may now dis-apply the requirement to have their accounts audited. The Companies (Exemptions) (Jersey) Order 2014 specifies that this exemption applies to certified funds that have issued no shares to external third parties.
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.