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Changes in a new Companies Decree in Fiji may hold directors and past directors of companies jointly liable with the company for debts and liabilities contracted during their periods of office under a personal liability company model says former High Court judge Nazhat Shameem.
Shameem said the South African example was being considered in an issues paper prepared by Australian-based international law firm Minter Ellison, as part of a government-commissioned review of Fiji’s Companies Act which she described as outdated.
In a paper prepared for the 2010 Certified Practicing Accountants (CPA) Fiji Congress at the Sheraton Resort in Denarau, Nadi, Shameem said proposed reforms include the minimum numbers of directors and secretaries, the rules on appointment and retirement of directors (the New Zealand minimum age is 18, in the UK it is 16) and on termination payments as compensation to directors for loss of office.
They also include proposals to broaden the duty of directors to disclose personal and financial conflicts of interest, and a prohibition on the assignment of the office of a director or officer, she said.
The proposed reforms may also change requirements for the holding of AGMs and statutory general meetings.
“It is likely also that a new Decree will define the word “securities” to include shares, debentures and interests in managed investment schemes,” said Shameem.
“It is also likely that companies may be able to buy back its securities, return paid up capital as part of an honest compromise, reduce its issued share capital with the approval of a company’s shareholders, and provide financial assistance to buy its own shares.”
Reform is also proposed on the duty of disclosure and on directors’ duties.
“The Companies Act and the CMDA Act provide for only one type of disclosure document – the prospectus. Section 42(1) provides that a prospectus must state the matters referred to in Part I of the Fourth Schedule, and must contain the reports referred to in Part II of the same schedule. Section 49 of the CMDA Act provides that every prospectus must be in writing, dated and contain an expert’s report and any other information required by regulations under the Act. However no regulations have been passed and the CMDA website refers to a “draft CMDA (Securities Issues) Regulations” as the benchmark for approval of a prospectus.”
Shameem pointed out that disclosure by prospectus is not mandatory in Fiji and there is a lack of clarity about what is adequate disclosure.
Among other proposed reforms is to move away from winding up companies at the first sign of non-payment of debts, towards voluntary administration.
“The idea is to rehabilitate companies in trouble so that it can continue to do business,” she said.
By Richard Naidu
