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KEY TAKEAWAYS
- Required documents and the solvency statement
- Content of the "Minute"
- Procedure and effectiveness
The Companies (Jersey) Law 1991, as amended, (the "Law") includes a simple procedure by which Jersey companies are able to carry out a reduction of capital without obtaining court approval, thereby providing a further mechanism by which capital can be returned to shareholders.
Documents Required
The documents required are as follows:
- the shareholders of the company must pass a special resolution authorising the reduction of capital;
- the directors must approve the reduction of capital and make a Solvency Statement (as set out below) within 15 days of the special resolution; and
- the directors must also produce a separate document called a "minute" (distinct from board minutes) that confirms information pertaining to the capital accounts and share capital of the company.
The Solvency Statement
The directors who authorise the reduction of capital must make a statement (a "Solvency Statement") that they have formed the opinion that:
- as at the date of the Solvency Statement, the company is able to discharge its liabilities as they fall due; and
- having regard to (i) the prospects of the company and to the intentions of the directors with respect to the management of the company's business and (ii) the amount and character of the financial resources that will in their view be available to the company, the company will be able to:
- continue to carry on business; and
- discharge its liabilities as they fall due,
until the first to occur of the expiry of the period of 12 months immediately following the date of the Solvency Statement, or the company is wound up on a solvent basis.
A director who makes a Solvency Statement without having reasonable grounds for the opinion expressed in it is guilty of an offence and, upon conviction, is liable to a fine, imprisonment for up to two years or both.
The Content of the Minutes
The minute produced by the directors must include the following information:
- the amounts of the capital accounts of the company following the reduction;
- the number of shares into which the share capital is to be divided and, in the case of a par value company, the amount of each share;
- in the case of a par value company the amount (if any), which will remain paid up on each share which has been issued; and
- in the case of a no par value company, the amount (if any) remaining unpaid on issued shares.
Procedure
Within 15 days of the special resolution being passed, the company must file with the registrar of companies:
- a certified copy of the special resolution;
- a copy of the Solvency Statement; and
- a copy of the minute.
The registrar will review the documents then issue a certificate which is conclusive evidence that the requirements of the Companies Law have been complied with, and the company's share capital is as stated in the minute. In addition, upon the registration of the minute, the company's memorandum is deemed to have been automatically amended.
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.
