Senate Approves Bills to Modernise Methods of doing Business

Photo: Mark Bell Leader of Government Business in the Senate, Hon. Kamina Johnson Smith, addresses the Senate today (October 13).

Three Bills that seek to modernise methods of doing business in Jamaica were approved in the Senate today (October 13).

The Bills are the Income Tax (Amendment) Act, the Stamp Duty (Amendment) Act, and the Transfer Tax (Amendment) Act.

They will allow for the exemption of stamp duty and income and transfer tax on share buy-back transactions involving listed companies.

Piloting the Bills, Leader of Government Business, Senator the Hon. Kamina Johnson Smith, said they are being amended to allow for a tax exemption for listed companies on the Jamaica Stock Exchange to repurchase their shares.

She explained that the share repurchase option was introduced through an amendment to the Companies Act in 2004.

Section 58 of the Act allows a company the power to redeem, purchase or otherwise acquire shares issued by the company.

Senator Johnson Smith informed that there was a discrepancy between this option and related tax laws, which made it unattractive to shareholders.

She said the legislation was approved by Cabinet on the basis that there is little to no fiscal implications whatsoever. 

“The amendments will assist with the ease of doing business. It will assist in increasing liquidity in the markets, and, perhaps, increase the desire to move towards a regional stock exchange. We all know now that there are cross-listings which are permitted and facilitated by technology,” she noted.

Senator Johnson Smith argued that companies that are able to repurchase their stocks as one of the mechanisms available to them, employ more people, pay more taxes overall and generally contribute to economic prosperity.

She added that similar legislation have been implemented within the Caribbean and other developed countries.

Opposition Senator, Sophia Fraser Binns, said the country has been doing “very well” in terms of the ease of doing business, adding that the Bills are another step in that process.

She noted that buying back shares is part of the general operation of companies and is done for several reasons, including the balancing of ownership.

Government Senator, Don Wehby, said share buy-backs are virtually non-existent in Jamaica due to the tax implications.

“As a result, there may have been missed opportunities for public companies that would have wanted to pursue a share-repurchase programme,” he noted.

Senator Wehby suggested that a share buy-back should be subject to the approval of shareholders by way of special resolution. “The declaration that is made under the Companies Act should also be accompanied by the company’s liquidity and solvency ratios,” he said.

He lauded the Minister of Finance, Hon. Audley Shaw, for taking a consultative approach, adding that relevant stakeholders, such as the Jamaica Stock Exchange, the accounting fraternity and the private sector, were consulted and are supportive of the Bills.

The Jamaica Stock Exchange Rules and the Companies Act have requirements that must be met for a company to purchase its own shares. Under the rules of the Stock Exchange, the controls include giving 21 days’ notice of the intention to repurchase stocks, stating the purpose of the share acquisition and the source of funding for the transaction.

Under the Companies Act, a declaration regarding the company’s ability to pay its liabilities after the stock repurchase must be lodged with the Registrar of Companies, accompanied by the company’s last audited financials, made up to no more than 12 months before the date of the statutory declaration; the company’s unaudited accounts up to no more than 45 days before the date of the statutory declaration; and any other relevant factors, of which the shareholders should be made aware.

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