- Debate on a Bill to repeal and replace the Companies Act began in the Senate last Friday (February 27).
- The amendments will, among other things, simplify the formation of a company and give recognition to the 'sole member' company.
- In his contribution to the debate, Senator Keste Miller said one of the most important aspects of the Bill was the removal of the ultra vires principle.
Debate on a Bill to repeal and replace the Companies Act began in the Senate last Friday (February 27).
The amendments will, among other things, simplify the formation of a company and give recognition to the ‘sole member’ company.
In his contribution to the debate, Senator Keste Miller said one of the most important aspects of the Bill was the removal of the ultra vires principle. “It is very important, because over the years, this ultra vires rule has caused us to develop our case law in a direction where the Court has always had to grapple with the issues having to do with companies doing activities that were outside of their scope,” he said, adding that with the abolition of this principle, directors and heads of companies could not hide behind the corporate veil to carry out activities that were “injurious”.
“That is a fundamental change. We have gone much further than even the British legislation in this regard. When you act, your actions are now accountable and you have no veil behind which to hide,” the Senator pointed out.
Responding to a concern by Leader of Government Business, Senator Anthony Johnson, that a sole member company which would be recognized by the new law, could create a problem as authority and power would be held by only one individual, Senator Miller said unlike a company that had a Board of Directors, “it makes it much easier for the courts to remove the corporate veil and see who the culprit is behind these activities”.
He said the sole director could not separate himself in law from the company and would be made liable for breaches of the Act.
Senator Miller also called for the fine for breaches of the Act to be increased to a more stringent sum. The current fine is $50,000.
The Bill, which was piloted by Leader of Government Business in the Senate, Burchell Whiteman makes provisions for minimum capitalization of companies having a share capital; and for shares to be issued without a par value attachment.
The amendments also provide for the empowerment of Directors to take account of the interests of employees and the community as legitimate objects in their own right on the corporate agenda. Also set out in the legislation is the provision to empower the court, upon application, to appoint an administrator for a company facing impending insolvency, who will assume management for the company so as to ensure, among other things, its survival as a going concern or a more beneficial realization of its assets than would result on a winding up.
The Bill also provides for the exemption of certain professionals such as accountants and attorneys-at-law as well as other prescribed groups of professionals from the restrictions regarding the maximum number of persons in a partnership.
In addition, the amendments expressly provide that redundancy payments owed to company employees on a winding up constitute preferential debts, regardless of whether the payment falls due before or after the appointment of a receiver.
Debate on the Bill will continue in the Senate this week.