Guernsey has updated the Companies (Guernsey) Law, 2008 (the "Companies Law") with effect from 1 May 2021. This update introduces a number of practical changes which make the Companies Law even more flexible and user-friendly (the "Update"). We summarise below the main changes introduced by the Update.
Location of board meetings
The Update modifies the general rule that the location of a board meeting is the place where the chairman of the meeting is physically present, by allowing the memorandum, articles or a board resolution to adopt a different rule setting out where a board meeting is treated as occurring.
Companies that are considering adopting any changes that override the general rule should be mindful of Guernsey economic substance requirements and non-Guernsey tax issues, especially if changes could cause a board meeting to be treated as being held outside of Guernsey.
Takeovers
Previously, for a takeover to proceed the 90% threshold had to be met and the offer period had to expire. Following the Update the takeover can proceed once the 90% threshold has been reached. The Update also increases the categories of shares that are excluded from the calculation of the 90% threshold.
Share buybacks
Shareholder approval of an "off-market" share buyback is now made by an ordinary resolution, as opposed to a special resolution. Further, the shares that are the subject of the buyback are excluded from voting.
Incorporated cell companies ("ICCs")
Directors - The general requirement that an ICC and each of its incorporated cells ("ICs") must have the same directors has been replaced with the more flexible position that the ICC and its ICs only need one director in common. This change will be welcomed by the captive insurance industry as it allows the owner of an IC in a manager provided ICC structure to appoint representatives to the board of the IC. From a more general perspective, the change will also be helpful in managing any conflicts issues where an ICC and/or its ICs are contracting with each other.
Accounts, accounting records and appointment and remuneration of auditors - Following the Update each IC, and not the ICC, is responsible for its own compliance with requirements relating to the preparation, maintenance, delivery, retention and inspection of accounts and accounting records.
Conversion of a cell of a protected cell company ("PCC") into a non-cellular company
Where a cell of a PCC is converted into a non-cellular company, the cell shareholders must consent to various matters, including the adoption of memorandum and articles. Previously, the shareholder consent could be given in writing (if holders of at least 75% in number of those shares give their written consent), or at a shareholder meeting on a show of hands (if at least 75% of the holders of the cell shares who are entitled to vote and do vote in person or by proxy give their consent by a show of hands).
The Update now allows shareholders to also give their consent at a shareholder meeting on a poll (if at least holders of cell shares representing at least 75% of the total voting rights of the holders of cell shares who are entitled to vote and do vote in person or by proxy).
The Update also clarifies that only one cell shareholder needs to sign the memorandum to comply with the requirement that all founder members sign the memorandum.
Migrations into Guernsey and amalgamations
The Update clarifies that only one shareholder needs to sign the memorandum being adopted by a company that is migrating into Guernsey or by a new company formed on an amalgamation, in each case to comply with the requirement that all founder members sign the memorandum.
Court-sanctioned compromise between a company and its members or creditors
Broadly, the Companies Law gives the Royal Court the power to sanction a compromise or arrangement between a company and either its members (or class of members) or creditors (or class of creditors), provided that a majority in number representing 75% in value of the members or creditor in question has agreed to the arrangement at a members/creditors meeting.
The Update clarifies that the reference to "75% in value" means in the case of members, 75% of the voting rights of the members or class of members (as the case may be), and in the case of creditors, 75% of the value of the debts owed to the creditors or class of creditors (as the case may be).
General meetings
Where a general meeting is to be held entirely by video conference or over the telephone, the notice of that meeting must also give details of how persons can attend.
Auditors
The Companies Law requires that an auditor meets certain statutory qualification requirements, whether they are an individual, partnership or company. If an individual does not satisfy these the Committee for Economic Development (the "Committee") can authorise that individual to audit company accounts.
The Update expands the class of partnerships and companies that can audit company accounts and allows the Committee to authorise partnerships and companies as being able to audit accounts where they do not meet the statutory qualification requirements. The Committee also now has the power to pass regulations prescribing a fee for authorisation applications.
Scrip dividends
The Companies Law requires that any offer of shares in lieu of a dividend must be made to all shareholders in the same class of shares. This can be problematic where a company has shareholders who are resident or located in a jurisdiction with securities laws that prohibit or restrict such an offer. The Update solves this problem by allowing a company to make the scrip dividend offer by publishing it in the La Gazette Officielle or in any other manner allowed by the company's articles.
Name change
In addition to a company changing its name by special resolution, a company can now change its name by any means specified in its articles. This means that the directors can be given the power to change the company's name, or the level of shareholder approval for the name change can be lowered.
Conversion of shares into stock
The Update removes the ability for a company to convert its shares into stock, as following consultation it was generally thought to be unnecessary.
Walkers' comment
The Update introduces many welcome practical changes that ensure the Companies Law remains highly competitive, and allows Guernsey companies to continue to be used in a number of differing structures.
About Walkers corporate team
Walkers has a dedicated corporate law team in Guernsey who work with a broad base of clients on a diverse range of matters. We advise on all aspects of Guernsey corporate, regulatory, tax and economic substance law. Our Guernsey team works closely with our corporate law experts across our global network to ensure that each client obtains the appropriate multi-jurisdictional advice.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
