The current Companies Act came into force February 1, 2004. One of the deficiencies of the 2004 Act is that companies formed under the repealed Companies Act of 1965, called 'existing companies', are not legally able to amend their memorandum of association and articles of association.

This problem is compounded by the fact that there are no provisions in the 2004 Act that permit existing companies to make the transition to the new 2004 regime and thereby enjoy several undeniably desirable modern developments in company law.

As a result, when the 2004 Act came into force, existing companies faced the double dilemma of not being able to amend their constitutive documents as well as not being able to legally transition to the new regime offered by the 2004 Act.

Existing companies have been caught in this startling position for over five years and continuing. The 2004 Act is, therefore, in urgent need of amendment even while Parliament devotes itself to what it considers to be more deserving business of the nation.

In the meanwhile, as commerce must go on, the Companies Office has permitted existing companies to 'adopt' articles of incorporation using a procedure that has no sanction under the Act.

Practical solution

'Adopted articles of incorporation' are articles that the Registrar of Companies permits existing companies to file in order to make the transition to the new company law regime. After the 'adoption' the articles of existing companies may be amended in the same manner as the articles of companies formed under the new Act.

Using this practical solution offered by the Companies Office, many private, public listed and unlisted existing companies have in fact 'adopted' articles of incorporation to respond to the needs of commercial enterprise in this modern competitive environment.

Last October, a bill to amend the 2004 Act was introduced in Parliament to address the above long outstanding issues.

The bill, if it is passed into law, does not, however, include a provision that ratifies the adoption of articles of incorporation by existing companies.

It is important that Parliament ratifies or retrospectively endorses the procedure invoked by the Registrar of Companies to address the lacuna in the 2004 Act so as to assure many existing companies, their directors, members and creditors that such adoption was legally effective in enabling existing companies to make the transition to the new regime and legitimising all directors' and corporate actions taken pursuant to the adopted articles and by boards of directors on the basis of adopted articles.

In addition to a ratifying provision, it is recommended that the Bill should provide that the 2004 Act be amended to provide that where existing companies adopted articles of incorporation that they be issued with a form of certificate of adoption of articles of incorporation which should be treated as conclusive evidence of the fact that the company comes under the operation of the 2004 Act as if it were formed under that Act.

Certificates of continuance

It is of interest to note that existing companies that have not adopted articles of incorporation before this Bill amending the 2004 Act comes into force will thereafter be able to make the transition by filing what are to be called 'articles of continuance' within three years or within any extended period permitted by the Registrar of Companies.

To the companies that file articles of continuance, the Registrar will issue 'certificates of continuance' which will be "proof that the existing company is a company to which this Act applies as if the existing company had been incorporated under the 2004 act".

This is a single page document. On the other hand, the bill to amend the 2004 act does not provide that existing companies that adopted articles of incorporation will be issued with certificates that will be treated as conclusive proof of theircoming under the provisions of the new act.

The current way in which existing companies prove this is by producing a photocopy of the certified copy of their adopted articles of incorporation which in most instances is a lengthy document comprising approximately 40 pages.

This is both cumbersome and expensive.

There are in fact several other amendments that need to be made to the 2004 act, the most significant of which are inconsistencies created by the legislators attempting to super-impose modern company law provisions into the framework of the old company law regime of the 1965 act.

Many amendments have been separately recommended by the Institute of Chartered Accountants of Jamaica, the Jamaican Bar Association and individual company law practitioners. It is fervently hoped that, not only the ratifying of the adoption of articles of incorporation and the issue of a certificate to existing companies will be addressed, but that such additional proposed amendments will soon be considered and made into law by Parliament.

Janet Morrison is an attorney-at-law, DunnCox, Kingston.

janet.morrison@dunncox.com