This briefing note has been prepared as a supplement to Mourant Ozannes' client guide in relation to the Companies (Jersey) Law 1991 (the Law) to provide further details as to the distinction made by the Law between public and private companies.
Definitions of public and private companies
A company will be a public company where:
- The Memorandum of Association of the company states that it is a public company; or
- The company had more than thirty members on its register on 30 March, 1992 (the date on which the Law came into force).
All companies which are not public companies are classified as private.
A public company which has fewer than 31 members may become a private company by altering its Memorandum of Association.
A private company may become a public company by altering its Memorandum of Association.
Private company treated as a public company
A company will be subject to the provisions of the Law as a public company even if it does not fall into the definition of a public company if:
- an entry is made on the register of members such that the members of the company exceed thirty in number;
- the company issues a prospectus (as defined in the Law); or
- it is a market traded company (which includes a company whose transferable securities have been admitted to trading on a regulated market).
Joint holders of shares in a company are treated as one member of a company for the purpose of determining whether a company is a public company. No account is taken of shareholders who are directors and employees past or present of the company, the holding company of the company or a subsidiary of the holding company (but not past directors or employees who acquire shares after their directorship or employment has ceased) in determining how many members a company has.
If a private company does issue a prospectus or increase its membership above thirty so that it is treated under the Law as a public company it will only be able to avoid that consequence by applying to the Royal Court or to the Jersey Financial Services Commission to relieve it from the extra duties imposed on it by virtue of being treated as a public company.
The Takeover Code applies to public companies but it does not apply to a private company which is treated as a public company unless the company issues a prospectus.
Issue of prospectuses
As mentioned above a private company may not issue a prospectus without becoming subject to the law as if it were a public company.
- A prospectus is defined in the Law as "an invitation to the public to acquire or apply for any securities".
"Securities" are widely defined as:
- shares in and debentures of a body corporate;
- interests in any such shares or debentures;
- rights to acquire any of the foregoing.
The Law further defines what constitutes "an invitation to the public".
A private placement document issued to a maximum of fifty targeted individuals only and which otherwise falls outside the definition of an invitation to the public will not result in a private company being treated as a public company although if the result of the placement is to bring the number of members on the register to more than thirty the company will be treated as a public company.
Public company requirements
- The Certificate of Incorporation of a public company will state that the company is a public company.
- A public company must have at least two directors whereas a private company need have only one director.
- A public company must have at least two shareholders, unless it is a wholly-owned subsidiary of a holding company, in which case it may have a single shareholder, whereas a private company may have a single shareholder irrespective of whether it is a wholly-owned subsidiary of a holding company.
- Whilst the register of members of both a public company and a private company may be inspected by anyone on payment of a prescribed sum, copies of a public company's register may only be taken in certain limited circumstances and for certain purposes.
- A public company must notify the Registrar of Companies when shares are allotted with rights which are not specified in the company's Memorandum or Articles of Association.
- The register of directors of a public company must be made available for public inspection.
- The secretary of a public company must be appropriately qualified in accordance with the Law.
- A public company must hold an Annual General Meeting within 18 months of the last Annual General Meeting unless such company has dispensed with the requirement to hold an Annual General Meeting. A private company must hold an Annual General Meeting within 22 months of the last Annual General Meeting if the private company is required to hold Annual General Meetings under the Law. A private company will be required to hold Annual General Meetings if:
- this is required by a provision in its articles of association made after 1 August 2014; or
- this was required by a provision in its articles of association made before 1 August 2014 and which was confirmed by a special resolution passed after 1 August 2014.
- A public company must appoint auditors qualified in accordance with the Law and have its accounts audited. This is not required in the case of private companies (unless it is a requirement of the private company's articles of association).
- A public company's accounts must be laid before a general meeting of the company together with the auditor's report within seven months (10 months in the case of a private company required to produce audited accounts by its articles of association and which is required to hold Annual General Meetings under the Law) of the end of the company's financial year.
- A public company must ensure that its accounts together with the auditor's report are filed with the Registrar within seven months of the end of the financial year to which they relate. Private companies are not required to file accounts with the Registrar.
- Additional formalities apply in the case of a creditor's winding up of a public company.
- The liquidator of a public company must be qualified in accordance with the Companies (General Provisions) (Jersey) Order 1992 (as amended).