Some salient features of the new company law

Abstract

The Companies Bill, which is in an advanced stage of becoming an Act, follows the relative EU Directives and is primarily modelled on the UK Companies Act 1985, as amended by the Companies Act 1989, the UK Company Directors Disqualification Act 1986, and the UK Insolvency Act 1986. However, the bill opted for a rather simplified and less cumbersome approach. Consequently, the object ofthis work is to examine a number of features which have been introduced within the corporate sphere. The Companies Bill has thus been reviewed in the light of the Malta Commercial Partnerships Ordinance 1962, the EU Directives applicable to company law and the relative-UK legislation, which provides a vast source of caselaw which may be refered to by our Courts. The responsibility of directors has been radically increased, imposing both civil and criminal liabilities on directors who fail to perform diligently or responsibly. Directors cannot assume that their duties may be left to others, since they are expected to give reasonable attention to their duties and to exercise ongoing care and diligence. Passivity, ignorance or incompetence are not considered to be a defence. Thus, professional advice must be sought in view of the implications resulting from any acts or omissions. The corporate entity is governed by the concept of majority rule. However, the Bill provides certain minority protections for specific circumstances. Moreover, the duties of the majority shareholders are governed by the general principles of law, binding them to act bona fide for the benefit of the company as a whole. The Bill introduced the notion that a company may even purchase its own shares, although this option is qualified by a number of restrictions and qualifications, which include that the company may not at any time end up merely with redeemable shares. This was to complement the already existing notion of the redemption of preference shares. The notion of a Single Member Company was introduced to provide access to company status to the individual entrepreneur. This does away with the previous requirement of having another member holding a nominal amount of shares, merely to comply with the statutory provisions of having a minimum of two shareholders. A fair and equitable balance between the interests of the individual entrepreneur and that of the business community is necessary to promote the promulgation of trade. In this regard, the Bill has introduced added disclosure requirements.