ACADEMIC YEAR 2011/2012
INTRODUCTION TO THE COMPANY LAW REGIME
TYPES AND NATURE OF COMPANIES
Learning objectives: The student should be able to:
✓ describe the various kinds of companies that may be registered under the Companies Act; ✓ explain the distinction between private and public companies with reference to the relevant provisions of the Companies Act; ✓ explain the concept of limited liability; ✓ describe the consequences of separate corporate personality; ✓ use decided cases to demonstrate how these consequences have been applied; ✓ apply the principles in these cases to hypothetical fact situations; ✓ explain the circumstances in which the law will ignore the principle of separate legal personality, using case law where applicable to illustrate the explanations ✓ analyse the effect of ignoring the principle of separate legal personality on limited liability
INTRODUCTION TO THE MODERN LEGISLATIVE REGIME FOR COMPANY LAW IN JAMAICA In Jamaica, the primary legal source of company law is the Companies Act, 2004 which came into effect in 2005. This Act replaced the Companies Act of 1965 which itself was based on a UK Act which had been promulgated more than 15 years before. The 2004 Act was motivated by a need to modernise the legal framework for companies in Jamaica. This modernisation process commenced with the commissioning by the government of a review of the law relating to companies. This resulted in a report by the review committee which was chaired by Dr the Hon Kenneth Rattrary, OJ, QC, a former Solicitor General of Jamaica. Among the reforms recommended by the Committee were the ‘simplification’ of the incorporation process which would provide for one-man companies and the abolition of the Memorandum of Association as one of the required constitutive documents. In addition, the Committee recommended the abolition of certain doctrines (the ultra vires and the constructive notice doctrines) which tended to restrict the powers of a company. These doctrines had traditionally plagued many corporate transactions, some with unjust results. The Committee also recommended the tidying up of rules governing pre-incorporation contracts allowing for more rational outcomes in respect of the liabilities emanating from such contracts. Another major area recommended for reform surrounded issues of capitalisation of companies which included the suggestion to abolish the regime which required a nominal (par) value for shares issued by a company and for a statement regarding the authorised capital. The recommendation was for this regime to be superseded by a no-par value regime and the maintenance of a stated capital account. The Committee also proposed that companies be permitted, subject to certain conditions, to buy back their own shares – something which had been prohibited under the then existing company law rules. Rules governing the registration of charges were also recommended for modification in order to prevent, in the event of liquidation, invalidation of company charges which were registered outside the statutory period. Another important area in which reforms were proposed was the body of rules governing the conduct of directors. Many of the proposals made by the Review Committee formed the basis of the 2004 Act which in some respects mirrors trends in company law in other jurisdictions which have updated their company law regime. Although the Review Committee also made proposals for reform in the area of corporate insolvency, a decision was taken to postpone amendments to the scheme of corporate insolvency in order to facilitate a focused and comprehensive review and reform of this area.
As you have perhaps surmised, the Companies Act 2004 presents several new elements for study. This...