Directors More Accountable Under New Companies Act

Chief Executive Officer of the Office of the Registrar of Companies (ORC), Judith Ramlogan, has said that while the new requirements of the Companies Act may be a bit more stringent than the old Act, they should not deter persons from either becoming directors or from retaining their position as directors of companies. The Act came into force on February 1.
She was speaking at last week’s Friday Policy Forum held at the Management Institute for National Development (MIND), at its Old Hope Road campus, where she addressed the topic, “Responsibilities of Directors and other Officers under the New Companies Act”.
An officer, she told the gathering of business persons and senior executives in the public sector, could be defined as anyone who was a director, a secretary, or a manager of the company.
Mrs. Ramlogan examined the issues of responsibility as they pertain to registration and regulations. She noted that companies were required to file the following documents for registration: notice of registered office; notice of company secretary and particulars of directors. Notice of the registered office, that is the location, must now be given at the time of registration of the company, she informed.
“Prior to the 2004 Act, that is under the 1965 Act, you could give notice of your registered office, some time after [registration]. Now you’re required to give it upon incorporation,” she pointed out.
She also stressed that the notice of appointment of the company secretary must be filed 15 days after registration. The ORC head further told the audience that now, public companies would not be permitted to do business or exercise borrowing powers unless the Registrar was satisfied that the company’s allotted share capital was not less than the authorized minimum, which is presently $500,000.
Moving on to other roles played by directors, Mrs. Ramlogan noted that while a private company may have one director, a sole director could not play the role of company secretary. Additionally, for a public company, which may now have at least three directors, it must be ensured that two of these directors were not employees of the company or its affiliates.
Turning to the area of regulations, she noted that a duty of care by directors and officers was always present, but not codified, a situation, which has changed under the new Act.
She explained that directors had a duty of care to act honestly and in good faith, in the best interest of the company; to exercise the care, diligence and skill that a reasonably prudent person in comparable circumstances would. “That is the objective test,” she pointed out.
The duty of care is owed to the company, but the interest of the shareholder, employees and the community in which the company operates may be taken into account, she added.
Mrs. Ramlogan further noted that there was a common law duty not to make a secret profit, not to have a conflict of duty and interest, and to act bona fide in the interest of the company.
Turning to notification of change of address of the registered office, she said that notice of a change, must be filed within seven days of doing so. “In default, the company and every officer is liable to a fine not exceeding $50,000,” she said.
Speaking to the issue of annual returns, Mrs. Ramlogan noted that these should be filed every calendar year. “Under the 1965 Act, there was a little confusion of when annual returns should be filed, because of how the Act was worded. That has been clarified now,” she informed.
“So annual returns are to be made up to a date not later than the anniversary of incorporation, or the anniversary of the date up to which the last return was made. and filed within 28 days of the date,” she said.
Mrs. Ramlogan also told the audience that if companies did not file their annual returns, such companies were liable to a penalty of “$100 per day, up to $10,000 for failure to file returns.” That is in addition to the late fees, which the ORC charges. Friday’s Policy Forum was the 18th in the series of Forums designed by the Management Institute for National Development, to help disseminate information on matters of national importance.