The Companies (Guernsey) Law, 2008 (the Companies Law) came into force on 1 July 2008.
Given the significance of the Companies Law, the Guernsey Commerce and Employment Department (the Department) has recently reviewed the Companies Law with a view to making amendments to:
- clarify the current provisions and resolve certain practical issues;
- take account of developments in company law elsewhere; and
- ensure that Guernsey remains a highly regarded and competitive jurisdiction.
The Department has released a consultation paper setting out the proposed amendments to the Companies Law and has invited comments from interested parties which must be provided by 31 May 2010. The Department has also invited comments on any matters relating to the Companies Law which are not covered by the proposed amendments.
Notable proposed amendments include:
- repealing the requirement for the founder member to sign the memorandum of incorporation;
- introducing a criminal offence for breach of the requirement for a company to have a registered office at all times in Guernsey;
- clarifying eligibility/disqualification criteria for directors;
- introducing an optional new court approved share capital reduction process;
- introducing a general provision permitting directors to issue shares to the extent permitted by the company’s memorandum and articles;
- exempting open-ended investment companies from the certification provisions relating to consideration for the issue of shares;
- providing expressly that companies may provide financial assistance for the purchase of their own shares.
Interested parties are also being asked to consider and comment on various provisions including as to whether:
- the restrictions in respect of the notice periods for appointment and termination of a proxy are appropriate;
- the quorum requirements for class meetings where class rights are to be varied should be amended or repealed;
- the distinction between dividends and distributions is appropriate;
- a time limit should be introduced for recovery of distributions from members;
- it would be appropriate for the solvency test to only have a cash flow test (rather than the current cash flow and balance sheet tests) except where the company is migrating into or out of Guernsey.
Ogier is preparing a response on the proposed amendments which will include some suggestions relating to other amendments not covered but which we believe would be beneficial to Guernsey as a jurisdiction of choice.
A public summary of the responses received identifying those amendments which will be taken forward is expected to be issued by the Department once the responses to this consultation process have been collated and analysed.
The Department has indicated that it will give priority to implementing appropriate amendments to the Companies Law. The current indications on likely implementation of any amendments are that it will be towards the end of 2010.
We will provide you with further updates on developments as they occur. In the meantime, if you would like to discuss any aspect of the Department's proposed changes to the Companies Law and, if implemented, how these may affect Guernsey companies.