The Companies (Amendment) Act (the “Amendment Act”) came into force on 30 April 2019. The purpose of the Amendment Act was to provide for increased protection of minority shareholders and to align certain aspects of the Companies Act, 1992 (the “Principal Act”) with international best practices.
The amendments to the Principal Act implemented by the Amendment Act include the following:
- Where a share is held by a nominee, both the memorandum and the share register must indicate that the share is held by a nominee, a declaration of trust must be executed by the nominee naming the beneficiary for whom the share is held and a copy thereof must be must be maintained at the company’s registered office. For the purposes of this section of the Amendment Act, a “beneficiary” is the natural person who ultimately directly or indirectly owns the company.
- Where authorized by a resolution of the company or its articles, the directors may exercise the power of the company to allot shares, to grant rights to subscribe for shares or to issue an instrument that allows for the conversion of any of the value of the instrument into shares in the company.
- In order to protect shareholders from undue board control, a subsidiary company is prohibited from holding shares in its parent company except where the subsidiary company held shares in the parent company before 30 April 2019. Going forward, any issue of shares by or transfer of shares from a parent to its subsidiary is void and no effect.
- Where a dividend is declared, companies are now mandated (i) to provide all shareholders with a copy of the resolution declaring the dividend; (ii) in the case of public companies, to publish a copy of the resolution in a local newspaper within 21 days of the passing of the resolution; and (iii) to pay the dividend to all shareholders within 120 calendar days of the declaration of the dividend, unless it is a prohibited dividend under section 61 of the Principal Act.
- The directors must send written notice of the time and place of each general meeting to each shareholder and director, not less than 21 days before the scheduled date of the meeting. However, the requirement to give notice of the meeting may be waived by at least 90%, or such lesser majority as is specified in the company’s memorandum, articles or unanimous shareholders agreement, of (i) the total number of shares of the shareholders entitled to vote on all matters to be considered at the meeting or (ii) the votes of each class or series of shares entitled to vote thereon and an absolute majority of the remaining votes.
- Upon receiving notice of a meeting of the shareholders and not less than 7 days before the scheduled date of such meeting, a shareholder holding 5% or more of the voting shares of a company may require the directors to include specific items on the agenda. The directors may not refuse to add any requested items to the agenda, unless the item is considered to be (i) materially and commercially sensitive, (ii) subject to legal professional privilege, (iii) a breach of employee privacy or (iv) otherwise unreasonably frivolous in nature.
- Where a director or officer of a company is a party to a material contract or proposed contract with the company, that director or officer must disclose in writing to the company’s board of directors, both the nature and extent of the interest and all material facts relating to the interest including the monetary value of the interest if such interest is able to be quantified. The same type of disclosure must be made to the board of directors, by a director or shareholder of the company with an interest in a contract or a proposed contract, which in the ordinary course of the company’s business does not require approval of the company’s directors or members, immediately upon such director or shareholder becoming aware of the contract or proposed contract. The Amendment Act has expanded the potential sanctions for failure to disclose an interest. Specifically, if a director or officer fails to disclose his interest in a material contract as required, the court may, upon application of the company or a shareholder, (i) set aside the contract on such terms as the court thinks fit and (ii) find the director or officer who failed to made the required disclosure, liable for any damage caused to the company, if the interested director acted negligently, fraudulently, in bad faith or in a manner that was unfairly prejudicial to the shareholders.
- Directors with interests in material contracts must provide the company with an annual certification of their interest. In the case of public companies, this certification must be included in the company’s annual report. All shareholders of the company have the right to inspect the report of all directors’ interests.
- Directors and officers are now prohibited from voting on any director or shareholders’ resolutions to approve (i) any material contract in which such director or officer has an interest or (ii) any contract whatsoever, if the contract relates in any way to personal loans or advances to such director by the company or the director or officer’s personal remuneration or benefits.
- A new section has been inserted into the Principal Act which allows any shareholder of a company, either in person or by their attorney, and in furtherance of a proper purpose, to request in writing, specifying the purposes, to inspect the share register, books, records, details of transactions with related parties, directors’ disclosures of material interests, minutes and consents kept by the company, during normal business hours and to make copies. In this context, a “proper purpose” is a purpose reasonably related to a shareholder’s interest as a shareholder. If a company refuses a request, a shareholder may within 90 days of his receiving notice of the refusal apply to the court for an order to allow the inspection.
- The Registrar of Companies is mandated to remove a company from the register of companies (i) after being notified by the Competent Authority that the company is not compliant under the Commercial Entities (Substance Requirements) Act, 2018 or (ii) the company’s registered office failed to meet its obligation to identify and verify its beneficial owners in accordance with the provisions of the Register of Beneficial Ownership Act, 2018. Before removing a company from the register of companies, the Registrar will send a notice to the company (i) advising of its findings of non-compliance and (ii) stating that the company will be removed from the register, unless (a) the default is remedied within 21 days of receipt of the notice or (b) the beneficial owners are identified and verified within 21 days after receipt of the notice.
- Where a company is removed from the register of companies all property of the company (including money and negotiable instruments), except property which is being held on trust for another person, will be held on trust by the Treasurer for the shareholders of the company for 20 years. After the expiration of the 20 year period, the property is deemed to belong to the Treasurer for the benefit of The Bahamas. Any property vested in the Treasurer may not be disposed of without the prior approval of both Houses of Parliament.