Commonwealth Caribbean Company Law

Title
Copyright
Dedication
CONTENTS
Preface
Table of Cases
Table of Statutes
1 MODERN COMMONWEALTH CARIBBEAN COMPANY LAW IN PERSPECTIVE
INTRODUCTION
ENGLISH ORIGINS OF COMMONWEALTH CARIBBEAN COMPANY LAW
Legislative roots
Summary of English Company Legislation in the Commonwealth Caribbean
ENGLISH CASE LAW DEVELOPMENTS AND COMMONWEALTH CARIBBEAN COMPANY LAW
An overview
NEW COMPANIES LEGISLATION IN THE COMMONWEALTH CARIBBEAN
Caricom Draft Model Act and the Barbados Act
Purposes of the new Companies Acts
Major changes introduced by new Companies Acts
Canadian cases in Commonwealth Caribbean company law
Methodological problems and solutions
CONCLUSION
2 CLASSIFICATION OF COMPANIES
INTRODUCTION
MEANING OF ‘COMPANY’
PRIVATE AND PUBLIC COMPANIES
PUBLIC COMPANIES AND COMPANIES WHICH ARE NOT PUBLIC COMPANIES
Non-profit companies
Incorporation
Directors
Membership
Bye-laws
Dissolution and distribution of property
COMPANIES LIMITED BY GUARANTEE
Meaning of company limited by guarantee
Uses of company limited by guarantee
Incorporation of companies limited by guarantee
COMPANIES INCORPORATED OUTSIDE THE TERRITORY CONCERNED
Overview of the provisions in the Acts
EXTERNAL COMPANIES
Carrying on of undertaking by external company
Obligation to register
Requirements for registration
Restrictions on activities
Obligation to name attorney
Certificate of registration
Effect of registration
Suspension of registration
Cancellation of registration
Revival of registration
Name display
Fundamental changes
Returns
Incapacity of external company
Resumption of action
OUTSIDE COMPANIES
Obligation to deliver documents to Registrar
Power of Registrar to direct name change of outside company
Power of outside company to hold land
Duty of outside company to deliver to Registrar alteration of documents
Duty in respect of outside company’s accounts
Obligation to state name of its country of incorporation
Service on outside company
Removing outside company’s name from the register
FORMER-ACT COMPANIES
CONSTRAINED SHARE COMPANIES
CONCLUSION
3 COMPANY FORMATION
INTRODUCTION
NATURE OF THE RIGHT TO INCORPORATE
Voluntary and involuntary incorporation
Registrar’s duty to register
Certificate of incorporation
Right to incorporate in a foreign language
EXERCISING THE RIGHT TO INCORPORATE
Who may exercise the right to incorporate
Formalities for incorporation
Articles of incorporation Acts
Articles of incorporation
Memorandum of Association Acts
CORPORATE NAME
Overview
Request for name search and reservation application
Principles applicable to the granting of a name
THE BYE-LAWS
LEGAL STATUS OF ARTICLES OF INCORPORATION
Articles of Incorporation Acts other than the Jamaican Act
Under the Jamaican Act
ARTICLES OF CONTINUANCE
CONCLUSION
4 PROMOTION AND PRE-INCORPORATION TRANSACTIONS
INTRODUCTION
COMPANY PROMOTERS
Meaning of promoter
Need to regulate company promoters
Duties of promoters
Remedies for breach of promoter’s fiduciary duties
PRE-INCORPORATION CONTRACTS
Basic statutory provisions
The common law and statutory intervention
The scope of section 16
Section 16(1) and personal liability and rights
Section 16(2): adoption by the company
Section 16(4) and apportionment of liability by the court
Exemption from personal liability
CONCLUSION
5 CORPORATE PERSONALITY
INTRODUCTION
SEPARATE LEGAL PERSONALITY
The Salomon principle
Separate legal personality and constitutional fundamental rights
Separate legal personality and the ‘one-man company’
Corporate personality and corporate groups
Separate legal personality and limited liability
‘PIERCING OR LIFTING THE CORPORATE VEIL’
Concepts and definitions
Under case law
Corporate structure a device to evade limitations imposed on conduct by law
Under legislation
SEPARATE LEGAL PERSONALITY AND CORPORATE CIVIL AND CRIMINAL LIABILITY
Rules of attribution
Attribution of corporate civil liability
Attribution of corporate criminal liability
CONCLUSION
6 CORPORATE CAPACITY AND CORPORATE AGENCY
INTRODUCTION
CORPORATE CAPACITY
The basic statutory provisions
Rules on corporate capacity
THE EXERCISE OF CORPORATE POWER
Corporate agency
The Companies Acts and the constructive notice doctrine
The Companies Acts and the rule in Turquand’s Case
CONCLUSION
7 RAISING SHARE CAPITAL
INTRODUCTION
SHARE CAPITAL
Legal concept of capital
Nominal or authorised capital
Authorised minimum share capital
SHARE ISSUE
Meaning of share issue
Nominal or par value and no par value
Issue at discount
Issue at premium
Bearer shares or share warrants and bearer certificates
Pre-emptive rights issue
Conversion privileges, options and rights issue
PAYMENT FOR SHARES
The basic rule
Payment in money
Payment in property or past services
STATED CAPITAL ACCOUNT
Meaning of stated capital account
Rules governing operation of stated capital account
CONCLUSION
8 CAPITAL MAINTENANCE
INTRODUCTION
THE CAPITAL MAINTENANCE DOCTRINE
Common law doctrine
STATUTORY RULES ON OWN-SHARE OWNERSHIP
The general statutory prohibition
The statutory exceptions to the general prohibition
Statutory rules on own-share purchase
Statutory rules on share redemption
Donated shares
FINANCIAL ASSISTANCE IN OWN-SHARE ACQUISITION
Rationale for statutory provisions
Overview of the statutory provisions
Acts other than Guyanese Act
Cases where company permitted to give financial assistance
Under the Guyanese Act
DIVIDENDS
Authority to declare dividends
Payment of dividends
Form of dividend
STATED CAPITAL REDUCTION
Rationale of the stated capital reduction rules
Permitted reduction of stated capital
Procedure for reduction
Protection of creditors in stated capital reduction
Directors’ liability for improper capital reduction
STATED CAPITAL ADJUSTMENT
PAYMENT OF COMMISSIONS OUT OF STATED CAPITAL ACCOUNT
CONCLUSION
9 SHARES, CLASSES OF SHARES AND CLASS RIGHTS
INTRODUCTION
LEGAL NATURE OF SHARES
Statutory provisions
Legal nature of shares
CLASSES OF SHARES
Concept of classes of shares
Power to issue classes of shares
Issue of shares in series
Rights attaching to different classes of shares
Ordinary shares
Preference shares
Redeemable shares
CLASS RIGHTS
Construction of class rights articles
Equality of rights
Rights set out in articles are exhaustive
Cumulative dividends
ALTERATION OF CLASS RIGHTS
Power to alter class rights
Protection of class rights from prejudicial alteration
CONCLUSION
10 DIRECTORS AND OTHER OFFICERS
INTRODUCTION
WHO ARE COMPANY DIRECTORS?
De jure and de facto directors
Shadow directors
Alternate directors
DIRECTORS’ MANDATE TO MANAGE
Legal basis of management mandate
Nature of management mandate
The management mandate and the unanimous shareholder agreements
Management mandate and the articles of incorporation
Directors’ role in relation to bye-laws
Delegation of directors’ powers
NUMBER OF DIRECTORS
Setting the number
Alteration of number
DISQUALIFICATION OF DIRECTORS
Minors and persons of unsound mind
Bankrupt persons
Court disqualified directors
Person persistently in default of the Companies Act
Company as corporate director
SHARE QUALIFICATION OF DIRECTORS
APPOINTMENT AND ELECTION OF DIRECTORS
Appointment of first directors
Consent to appointment
Election of subsequent directors
Filling directors’ vacancies
Defective appointment or election of directors
Tenure of directors
REMUNERATION OF DIRECTORS
REMOVAL OF DIRECTORS
Shareholders’ power of removal
Limitations on shareholders’ power of removal
Filling vacancy on removal of a director
Director’s right to state case to shareholders
Removal of director under the Jamaican Act
DIRECTORS’ MEETINGS
Organisational meeting
Regular directors’ meetings
Alternative to directors’ meetings
Other officers
The secretary of the company
CONCLUSION
11 DIRECTORS’ STATUTORY FIDUCIARY DUTY
INTRODUCTION
THEORETICAL UNDERPINNINGS OF THE STATUTORY FIDUCIARY DUTY
TO WHOM AND BY WHOM IS THE STATUTORY DUTY OWED?
To whom is the duty owed?
Who owes the duty?
NATURE OF THE DUTY TO ACT ‘HONESTLY AND IN GOOD FAITH WITH A VIEW TO THE BEST INTERESTS OF THE COMPANY’
What is acting honestly and in good faith?
Determining the best interests of the company
THE STATUTORY FIDUCIARY DUTY AND THE PROPER PURPOSE TEST
The basic statutory provision and the proper purpose test
Does the statutory provision exclude the proper purpose test?
THE STATUTORY FIDUCIARY DUTY AND THE DUTY NOT TO FETTER DISCRETION
The basic statutory provision and the no-fetter rule
The case authority
Interpretation of the basic statutory provision
CONCLUSION
12 DIRECTORS’ DUTY OF LOYALTY
INTRODUCTION
STATUTORY DUTY TO DISCLOSE INTERESTS IN CONTRACTS WITH COMPANY
Basic statutory provision
Common law background to statutory provisions
Analysis of the statutory provision
COMMON LAW NO-PROFIT DUTIES
Applicability of common law no-profit rules
No-profit rule stated
Misuse of corporate opportunities or information
DUTY TO AVOID COMPETITION
CONCLUSION
13 DIRECTORS’ STATUTORY NON-FIDUCIARY DUTIES
INTRODUCTION
DUTY OF CARE, DILIGENCE AND SKILL
Basic statutory provisions
Content of the statutory duty
‘Care’ and ‘skill’ in conducting company’s affairs
Standard of care, diligence and skill
Statutory defences to breach of care and skill duty
DUTY TO COMPLY WITH THE ACT, ARTICLES AND UNANIMOUS SHAREHOLDER AGREEMENT
CONCLUSION
14 DIRECTORS’ LIABILITIES
INTRODUCTION
SPECIFIC STATUTORY LIABILITIES
Liability for shares issue
Liability for certain other dealings with share capital
Liability to contribute to judgment
Limitation on actions to enforce liability
STATUTORY DEFENCES TO LIABILITY
Defence based on lack of consent
The good faith reliance defence
WAIVER OF BREACHES OF DUTY
INDEMNITIES
Policy goals of indemnity provisions
Discretionary indemnity
As of right indemnity
INSURANCE
CONCLUSION
15 SHAREHOLDERS’ DECISION-MAKING RIGHTS
INTRODUCTION
MEETINGS AND CORPORATE DECISION-MAKING
The theory
Different types of meetings
Place of meetings
Calling meetings
PROPOSALS AND MEMBERS’ RESOLUTIONS AND CIRCULARS
Background to the statutory provisions
Proposals
Members’ resolutions and circulars
Shareholders’ list
Quorum
Voting the shares
PROXIES
Background to the proxy provisions
The proxy voting machinery
The proxy solicitation machinery
SHARE REGISTRANTS
RESOLUTIONS IN LIEU OF MEETINGS
SHAREHOLDERS’ AGREEMENTS
Pooling agreements and voting trusts
Pooling agreements
Unanimous shareholder agreements
CONCLUSION
16 SHAREHOLDERS AND THE COMPLAINANT REMEDIES
INTRODUCTION
THE CONCEPT OF COMPLAINANT
Basic statutory provisions
Shareholders and debenture-holders
Directors and officers
The Registrar
‘Proper person’
DERIVATIVE ACTION
Basic statutory provisions
Background to statutory provisions
Statutory derivative action
THE OPPRESSION REMEDY
Basic oppression remedy provisions
Background to the oppression remedy provisions
Analysis of the oppression remedy provisions
Court orders
Shareholder ratification and derivative and oppression actions
Settlement of derivative and oppression actions
Interim costs in derivative and oppression actions
CONCLUSION
17 OTHER SHAREHOLDERS’ REMEDIES
INTRODUCTION
INVESTIGATIONS
Types of investigations
Nature and function of investigations
Court-ordered investigations
Registrar’s investigations
Minister’s investigations
Registrar’s inquiries into proxies and insider trading
Compliance and restraining orders
Rectification orders
CONCLUSION
18 DISSENTING SHAREHOLDER’S APPRAISAL REMEDY
INTRODUCTION
NATURE OF THE APPRAISAL REMEDY
Overview of the dissent right provisions
Unconditional right to dissent
Conditional right to dissent
Right to dissent non-exclusive
Interpreting the dissent provisions
THEORIES OF THE ROLE OF THE APPRAISAL REMEDY
Legislative balance of minority and majority rights theory
Solution to asset substitution problem theory
Solution to the agency problem theory
DETERMINING FAIR VALUE
Overview
Time of valuation
Value arising from the fundamental change
Approaches to determining fair value
Fair value and premiums
DISSENT PROCEDURE
Who may exercise the right
Initiating the dissent process
Notice to dissenter of adoption of the resolution
Dissenter’s notice of demand for payment
Dissenter’s share certificates
Legal effect of notice of demand for payment
Written offer to pay
Notification of inability lawfully to pay
Payment for shares
FIXING FAIR VALUE BY THE COURT
Application to the court
Directions by the court
Appointment of appraiser
Final order of the court
Power to allow a reasonable rate of interest
FIXING FAIR VALUE UNDER THE BAHAMAS ACT
CONCLUSION
19 PROSPECTUSES
INTRODUCTION
PROSPECTUS PROVISIONS
Aims and objectives of the prospectus provisions
What is a prospectus?
Contents of a prospectus
When is a prospectus required?
NOTICES PROVISIONS
General prohibition against notices
Exceptions to the prohibition
Application of the notices rules
Certificate of non-contravention of notices rules
REGISTRATION OF PROSPECTUS
Requirement for registration
Conditions to be satisfied for registration
Refusal of registration by Registrar
PROSPECTUS PRESUMED
CONTRACTS TO SUBSCRIBE FOR OR PURCHASE SHARES OR DEBENTURES IN A PROSPECTUS
Making the contract
Subscription lists
Minimum subscription
STATEMENTS IN LIEU OF PROSPECTUS
CONCLUSION
20 LIABILITIES FOR MISLEADING PROSPECTUSES
INTRODUCTION
DAMAGES AT COMMON LAW
Contractual claims
Tort claims
DAMAGES UNDER THE MISREPRESENTATION ACTS
RESCISSION IN EQUITY
Overview of the rescission remedy
What must be proved
Summary of applicable rules
Rescission against the company
Loss of the right to rescind
REMEDIES UNDER THE COMPANIES ACTS
Claim for loss or damage
Defences to claim for loss or damage
Indemnification of persons named without their consent
STATUTORY RESCISSION AND REPAYMENT
Nature and scope of the remedy
Who may claim the remedy
When may the remedy be claimed
Effect of rescission and repayment judgment
Effect of liquidation or insolvency of company on remedy
Defences to rescission and repayment action
Underwriting contracts and rescission and repayment
CONCLUSION
21 COMPANY CHARGES
INTRODUCTION
LEGAL NATURE OF A COMPANY CHARGE
Charges and security interests
A charge distinguished from personal rights
A charge distinguished from other forms of consensual real security
A charge and retention of title agreements
DETERMINING WHETHER A CHARGE EXISTS
TYPES OF COMPANY CHARGE
Overview
Fixed charges
Floating charges
Unsettled aspects of the floating charge
Nature of the interest created by floating charge
Theoretical basis of power to carry on business
Crystallisation
REGISTRATION OF CHARGES
General comment
Obligation to register
Registration of charge on acquisition
Certificate of registration
Registration with the Registrar of Titles
Charges requiring registration
Effect of registration
Effect of non-registration
Effect of insufficient stamp duty
Endorsement on debenture
Memorandum of satisfaction and payment
Rectification of omission or misstatement
Company’s duty to retain copy of charge instrument
Registration of charges created by external companies
REGISTRATION OF CHARGES IN ANGUILLA
CONCLUSION
22 DEBENTURES AND TRUST DEEDS
INTRODUCTION
DEBENTURES
Debentures defined
Power to issue debentures
LEGAL REQUIREMENTS OF DEBENTURES
Overview
Unsecured debenture
Debenture covered by trust deed
Debenture without a covering trust deed
Consequences of non-inclusion of statements
TRUST DEEDS
Meaning and advantages of covering trust deeds
Legal recourse for non-execution of covering trust deed
Formalities of a covering trust deed
Trustees of trust deeds
Duties of trustees
Rights of trustees
Rights of debenture-holders
CONCLUSION
23 RECEIVERS AND RECEIVER-MANAGERS
INTRODUCTION
APPLICABILITY OF THE COMPANIES ACTS AND THE BIAs
CONCEPTS AND DEFINITIONS
Meaning of receivers and receiver-managers
Meaning of receiver
Meaning of receiver-manager
APPOINTMENT OF RECEIVERS AND RECEIVER-MANAGERS
Who may be appointed a receiver or receiver-manager?
Who may appoint a receiver or receiver-manager?
Time at which right to appoint arises
Procedure to be followed in appointing
Registration of the receiver
Validity of appointment
Judicial guidance on validity of appointment
REMOVAL, REPLACEMENT AND RESIGNATION OF RECEIVERS AND RECEIVER-MANAGERS
Removal and replacement
Resignation
EFFECT OF APPOINTMENT OF RECEIVERS AND RECEIVER-MANAGERS
Effect upon company’s personality
Effect upon company’s management
POWERS OF RECEIVER AND RECEIVER-MANAGER
Power to take possession of assets subject to security interest
Power of sale
Power to carry on the business of the company
Powers conferred by the instrument of appointment
DUTIES OF RECEIVERS AND RECEIVER-MANAGERS
Overview
Duty to act honestly and in good faith
Duty to deal with company property in a commercially reasonable manner
Duty to give notice of appointment
Duty to take company’s property in custody
Accounting duties
Duty to take action in relation to statement of affairs
Duty in respect of preferential debts
Recoupment of payments to preferential creditors
Duty to cease acting
LIABILITY OF RECEIVER AND RECEIVER-MANAGERS
Contractual liability
Liability in respect of invalid appointment
CONCLUSION
24 INSIDER TRADING
INTRODUCTION
INSIDER TRADING AT COMMON LAW
An overview
Directors’ fiduciary duties
Breach of confidence
Misrepresentation
STATUTORY CIVIL ACTION FOR INSIDER TRADING
Overview
Who may bring an action
What must be proved
Measure of damages
Onus of proof
Liability to compensate claimant
Liability to account to the company
Time limit on action
PROHIBITIONS AGAINST AN INSIDER SELLING SHORT, SELLING CALLS OR BUYING PUTS
Prohibition against selling short
Prohibition against selling a call or buying a put
Liability for contravention of prohibitions against selling short, selling a call or buying a put
CONCLUSION
25 FUNDAMENTAL COMPANY CHANGES
INTRODUCTION
FUNDAMENTAL CHANGES TO ARTICLES
An overview
List of fundamental amendments allowed
Procedure for amendments to articles
Amendments and class votes
Registration of amendments
Re-stated articles
ALTERATION OF ARTICLES (BAHAMAS, BELIZE, JAMAICA, ST CHRISTOPHER/NEVIS)
Nature of the power of alteration
Judicial review of the statutory power of alteration
The Allen v Gold Reefs of West Africa Ltd test
AMALGAMATIONS
An overview
Definitions and concepts
Legal consequences of an amalgamation
Procedure for effecting amalgamations
Amalgamations by agreement
Vertical short-form amalgamation
Horizontal short-form amalgamation
Registration of the amalgamation
Certificate of amalgamation
MERGERS AND CONSOLIDATIONS (BAHAMAS)
Definitions and concepts
Conditions for mergers or consolidations
Procedure for merger or consolidation
Merger with subsidiary
Legal effect of mergers and consolidations
REORGANISATIONS
Definitions and concepts
Powers of the court in making reorganisation order
Implementation of reorganisation order
No dissent rights
ARRANGEMENTS
Definitions and concepts
Application to court for approval of arrangement
Powers of the court in respect of applications
Filing of articles of arrangement
CONCLUSION
26 FINANCIAL DISCLOSURE AND AUDIT REQUIREMENTS
INTRODUCTION
DISCLOSURE REQUIREMENTS
Maintaining financial records
Annual accounts
Auditors’ report
Further financial information
Exemption from disclosure of financial statements
Directors’ approval of financial statements
ACCESS TO FINANCIAL STATEMENTS
Shareholder access
Public access
AUDIT REQUIREMENTS
Audit committees
Auditors
Rights and powers of auditors
Auditor’s duty in the conduct of the audit
Liability for negligent audit
Exemption from liability for defamation
CONCLUSION
27 TRANSFERS OF SHARES AND DEBENTURES
INTRODUCTION
RIGHT TO TRANSFER SHARES AND DEBENTURES
Transfer of shares
Transfer of debentures
Transfer of shares or debentures by person entitled by operation of law
Effect of provisions in articles or bye-laws on statutory transfer rules
RESTRICTIONS ON THE RIGHT TO TRANSFER
Basic rules relating to restrictions on the transfer of shares
General approach to restriction provisions
Approach to restrictions in pre-emption provisions
Approach to restrictions conferring discretion on directors
MANNER OF TRANSFERRING SHARES AND DEBENTURES
Sale and purchase
Share certificates and debentures
GIFT TRANSACTIONS
LIENS ON SHARES
CONCLUSION
28 CORPORATE REGISTERS AND RECORDS
INTRODUCTION
REGISTERED OFFICE OF COMPANY
COMPANY REGISTERS AND RECORDS
Company registers
Company records
ACCESS TO REGISTERS AND RECORDS
Access by directors and shareholders
Access by creditors
Access by the public
Access to shareholders’ lists
Access to options list
CONCLUSION
29 TAKEOVER BIDS
INTRODUCTION
TAKEOVER BIDS UNDER THE COMPANIES ACTS
Concepts and definitions
Companies Acts provisions
COMPANIES REGULATIONS ON TAKEOVER BIDS
Overview
The mandatory offers rules
The takeover bid circular rules
Information in takeover bid circulars generally
The rules on permissible conditions on a formal offer
The Directors’ Circular Rules
The rule against unequal consideration
The rule against lock-up of shares
The rule that offeror must take up and pay for shares
The rule that offeror must appoint member of the Exchange as manager
The special rules in respect of listed companies
TAKEOVER BID DEFENCES
The poison pill defence
Validity of takeover bid defences
CONCLUSION
Index