Amendments to the Companies Law

20 November 2007

A number of key changes to the Companies Law are being proposed by the Minister for Economic Development, Senator Philip Ozouf. The aim of these changes is to both up-date and introduce more flexibility, to the Companies Law. This will benefit all users of Jersey companies and specific measures are adopted that will further develop the Funds and Trust sector of the finance industry.

One of the most significant proposals which will benefit the funds sector is to allow a company to hold treasury shares. This change means that a company can purchase its own shares and hold them for a period of time, rather than cancel them. If adopted this means that a company would be able to purchase its own shares from one investor and then transfer them to a new investor.

Another recommendation which will benefit the trust industry is to allow a regulated financial services business to act as a corporate director of a Jersey company. It is currently common practice for directors of companies to be employees provided by a regulated business. It makes more sense that the business itself, rather than the employees, should act as the director. This will benefit the trust industry by reducing the administration burden on companies when an employee leaves.

A further change is proposed to move away from complicated, time consuming and often expensive procedures when certain types of companies wish to reduce capital or distribute money to its shareholders. The key to these changes is the adoption of a simplified procedure requiring directors to make a statement in relation to the company’s solvency. This will greatly simplify the ability of a company to make payments to its shareholders while maintaining protection for creditors.

Senator Ozouf is also proposing that some rules are removed. One such rule prevents a person acquiring a company using a loan, and at the same time using the shares in the company as security for that loan. This rule is technically known as the prohibition against a company giving financial assistance for the purchase of its own shares. As with many of the proposed changes to the Companies Law, the new rules permitting financial assistance act to safeguard the interests of creditors by concentrating on the solvency of the company.

Senator Ozouf commented: “The proposed amendments set out a number of substantial and important changes to the Companies Law. They are all aimed at ensuring that Jersey companies remain flexible vehicles suitable for the widest possible range of corporate activity. I am convinced that these changes will help to ensure that Jersey companies continue to be widely used, and will be beneficial to the Island.”