JIS News

A Bill titled An Act to Repeal and Replace the Companies Act was passed on Thursday (March 5) in the Senate. The Bill will employ more stringent measures to make directors and other such persons who are entrusted with the proper operations of companies, more accountable for the actions of these entities.
“The law recognizes that a company is an abstract entity which cannot act only through individuals. The law also recognizes that the right to limited liability carries with it certain responsibilities and that the advantages should be matched by arrangements for accountability,” Minister of Justice and Attorney General Senator A. J. Nicholson argued.
He said that persons who were entrusted with the responsibility for the proper operations of companies should approach their task with a high degree of care and skill.
Mr. Nicholson pointed out that the 1965 Act had served its purpose in its historical context, but the challenges of the law must now face new realities given the change in business environment in which there were a new breed of investors and shareholders, enticed by a new vision of corporate democracy and expanding share ownership.
“We are obliged therefore to examine the breadth and capacity of the present law to meet the challenging and changing role of small enterprises, the impact of information technology and fact of the international marketplace,” he said.
With the new reality of corporate definition, those who controlled the operations of companies were not necessarily the majority owners of shares, said Senator Nicholson. Continuing, he said: “There is then, evidence of an expanding group of new shareholders, often unsophisticated, who know little and often are less about how their shareholding investments are managed. The opportunities for corporate manipulation and insider trading have therefore become more manifest”.
The Attorney General said a company law, such as this, which had been reformed to suit the 21st Century, was a key element of promoting enterprise and raising productivity. In stressing the need for more emphasis on the responsibility of directors, he pointed out that the 1965 Act, did not specify the duty of care that was owed by directors.
“It has been quite horrifying to think that directors of a company may make decisions and take actions having such wide ranging implications and yet bear no liability if damage results from the decisions or actions purely on the basis that their conduct was within the scope of a person sharing their level of knowledge and experience,” Mr. Nicholson said.
Meanwhile, Opposition Senator Shirley Williams contended that the Bill was a disincentive to companies that wished to invest and that the law should not only seek to protect employees, but investors as well. She also said that the provisions in the Act as they related to solvency were not in the best interest of the companies.
Speaking on the issue of winding up procedures, she submitted that provisions should be made to allow companies to continue to function under the supervision of the courts instead of making these companies insolvent.
State Minister in the Ministry of Foreign Affairs and Foreign Trade, Senator Delano Franklyn insisted that the Act was drawn upon some of the most modern pieces of legislation in the world, including the Barbados Companies Act; the CARICOM Companies Bill; the Alberta Business Corporation Act and the UK Companies Act.
Addressing further concerns by Opposition Senators regarding stamp duty and insolvency, Information Minister and Leader of Government Business, Senator Burchell Whiteman assured that there would be specific legislation on those matters as it was thought unwise to include those issues in this legislation and then have to further refine the Act to address matters arising.
While lauding the provisions made in the Bill for conducting legitimate meetings through teleconferencing, Government Senator Norman Grant expressed some concern over the fact that small companies were exempted from audits. He cautioned that this exemption should not be seen as a ‘passport’ to not keep proper records.
Senator Grant also spoke on the issue of directors being made liable, noting that such persons were, “afforded a defense if they believed in the existence of facts, which if true, would render the directors’ conduct reasonably prudent. It is also a defense that in the absence of fraud and bad faith, the director relied on documents prepared by professionals or other directors regarding the company’s affairs”.
Although the 396-clause Bill was passed without amendment, Senator Whiteman noted that future amendments were inevitable, however immediate additional changes could not be accommodated.