Sharma Explains: No Company Common Seals Except…
Under the new Companies Act 2015, a company is no longer required to have a common seal.
The common seal is now optional rather than mandatory.
This was highlighted by prominent lawyer, Devanesh Sharma, speaking on “Major Company Legislation Changes” at the tripartite gathering of the Fiji-Australia-New Zealand Business Councils at The Pearl in Pacific Harbour on Friday.
Mr Sharma said a company may wish to retain the seal where it has dealings with other jurisdictions.
“This is where a seal is a requirement, or at least for a while, while Government and other bodies get used to the new requirements,” he said.
“For example the Titles Registry as a matter of practice still requires instruments with respect to Companies to be signed under Common Seal.”
He said changes will have to be made to compliance requirements.
For instance, he said affixing common seals to land transfer documents, requirements of Banks for Companies to open bank accounts etc. “So even though the common seal is no longer required, it is still prudent to retain the same until changes are embedded.”
According to Mr Sharma, the most significant change to the law on companies in recent years was the Companies Act 2015 which came into effect on 1 January this year.
“The Companies Act has significantly changed the landscape for how Companies operate in Fiji,” he added.
Also the foreign Investment (Budget Amendment) Act 2016 will impact all companies with foreign ownership when it comes into effect.
Mr Sharma said under this amendment to section 11 of the Principal Act, any Company with a Foreign Investment Certificate must seek the approval of the CEO of Investment Fiji before making any changes to its ownership or shareholding particulars.
He said the Companies will also be required to inform the CEO of any changes to any particulars supplied to IF at the time that the Certificate was issued.
“Penalties for non-compliance includes a fine of upto $50,000,”he said.
“This requirement is in addition to requirements under the Exchange Control Act for prior approval to be sought from Reserve Bank of Fiji (RBF) where securities are transferred to or from non-residents.”
This amendment, Mr Sharma said means that Companies with an IF Certificate can no longer simply inform Investment Fiji of changes to shareholding- the Boards approval must be obtained first and approval can be denied for good reasons.
Changes to Company structure Include
Mr Sharma said the Corporate Capacity- Section 44 provides that subject to its Articles of Association, a company has “the legal capacity and powers of an individual both in and outside Fiji”.
“Unlike under the previous Companies Act regime, a Memorandum of Association is no longer required to “empower” the company.
“So what can company do? Anything that a natural person can plus some more except that a company cannot do anything- that is not allowed by law (section 44 (4). Section 44 sets out the powers of a Company under the new Act.”
Mr Sharma added unlike the previous legislation, companies are no longer required to have more than one member.
“Previously public companies required 7 and Private companies two shareholders.
“This led to companies having shareholders holding 1 or an insignificant number of shares on trust in order to comply with the legislation.
“This requirement meant that even where the Company effectively had one shareholder, it had to go through the motions of calling a Special General Meeting to pass resolutions where required by the Act- for instance for name changes, amendments to articles etc.
“Now with the legislation allowing one shareholder companies, such companies may pass resolutions in writing (section 138).
These changes he said, will simplify company administration significantly.
“Another change is that single member companies are no longer required to hold AGMs (section 169).
He added companies are no longer required to specify authorised share capital (section194). Shares do not have par value (section 193).