Questions and Answers

Topics 2 & 3- Promoters, Pre-Incorporation & Incorporation and Articles of

Incorporation

Topic 2- Promoters Pre-Incorporation & Incorporation

1) Ques: As a result of the ‘fiduciary duty’ that a Promoter owes to the company which
he sets up, what legal obligations are he bound to adhere to?

Ans: These are as follows:

 A promoter may not personally make secret profits in transactions with the
company.
 To avoid breach of his fiduciary duty, a promoter must disclose to the
company personal profits emanating from the promotion of the company.
 A promoter must also give full disclosure to the company of all relevant facts
pertaining to any transaction from which he has gained personal profits due
to the promotion of the company.

2) Ques: What remedies may the Courts grant to a company that wishes to bring an
action against the Promoter for breach of fiduciary duty?

Ans: The remedies are as follows:

a) Rescission is the primary remedy- which is the unmaking or undoing of a contract
which is intended to bring the parties as close as possible to the same position that
they were in before they entered into the contract (but there are bars to the equitable
remedy of rescission).
b) Company can sue for return of the profits (Gluckstein v. Barnes (1900) – promoters
had to account to the company for the profits).
c) Damages for breach of fiduciary duty.

3) Ques: When a company is described as ‘an unlimited company’, what does it mean?

Ans: An unlimited company is a separate legal entity from its members, but its
members are personally liable for its debts in full.

• The company therefore has no limit on the liability of its members.

• This form of company is used by some professions who seek the administrative
convenience of incorporation but who are subject to professional rules which do not
allow them to limit their liability.

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 4) Ques: Name and distinguish between the four (4) types of company which can be
formed under the Companies Act, 2004.

Ans: These are as follows:

i. Company limited by shares: a company wherein the liability of its members is limited

to the unpaid amount, if any, on the shares owned by them i.e. they’re liable for their

investment only.

ii. Company limited by guarantee without a share capital: a company wherein the

liability of the members is limited to the amount the members undertake to contribute

to the assets of the company, in the event of its being wound up. These companies

have members and not shareholders.

iii. Company limited by guarantee with a share capital: a hybrid of a company limited by

shares and a company limited by guarantee (two above named), wherein the liability

of the members is limited both by the amount unpaid on the shares as well as the

amount they undertake to contribute in the event of winding up.

iv. Unlimited company : a company in which there is no statement of limited liability in

its articles and the members are liable to contribute without limit whatever is required

for the payment of the debts of the company in liquidation (i.e. the members are

personally liable for the company’s debt in full).

5) Ques: Name (a) the forms which the Business Registration Form (BRFI) also known
as the ‘Super Form’ has replaced when registering a company; and
(b) Name the requisite Government Licences, Tax Certificates or Tax Numbers that a
company or business can apply for automatically on the BRF1 form.

Ans: (a) –The forms which have been removed/replaced by the BRFI when
registering a company are:
i. The Declaration of Compliance
ii. The Notice of Registered Office
iii. Notice of Appointment/Change of Directors

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iv. Notice of Appointment /Change of Company Secretary

(b) – The requisite Government Licences, Tax Certificates or Tax Numbers that a
company or business can automatically apply for on the BRF1 form are:

 TRN-Tax Registration Number (administered by Tax Administration of Jamaica-TAJ)

 NIS- National Insurance Scheme (administered by National Insurance Scheme Office
under the Ministry of Labour and Social Security)
 GCT-General Consumption Tax (administered by Tax Administration of Jamaica-
TAJ)
 TCC- Tax Compliance Certificate (under the Tax Administration of Jamaica-TAJ)
 HEART TRUST–NSTA - Human Employment and Resource Training
Trust/National Service Training Agency (administered by the Human Employment
and Resource Training Trust/National Service Training Agency)
 NHT- National Housing Trust (administered by the National Housing Trust)

6) Ques: What is the significance/function of a company’s Articles of Incorporation?

Ans:
a) The Articles of Incorporation (AOI) is the company’s Constitution/Charter.
b) The AOI contains the agreement to incorporate as well as the regulations governing
the internal affairs of the company.
c) The AOI enables those dealing with the company to know the following-
 Name of Company
 Main Business of the company
 Whether the company is private or public
 Whether the liability of the members are limited
 Whether there are any restrictions on the business

7) Ques: What is the significance of a company’s ‘Certificate of Incorporation’?

Ans: The Certificate of Incorporation is conclusive proof of the incorporation of the

company from the date shown on it; and it is also conclusive evidence that the
requirements of the Companies Act in respect of registration have been complied
with.

8) Ques: State the factors under the Companies Rules, 2006, which the Registrar must
take into consideration when approving a company’s name for registration.

Ans: These are as follows:

a) A company shall not be registered in a name which:
 Is identical to a name of an existing company.

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  Is in the opinion of the Registrar, too close to the name of an existing
registered company (likely to cause confusion).
 Infringes in whole or part on a registered Trade Mark.

AND

b) A company’s name will not be approved if:

 It is offensive.
 It will outrage public decency.
 It connotes an undertaking that is scandalous, obscene or immoral.
 It contravenes government policy on security or gives the impression that
the company is associated with the government.
 The use of certain words in a proposed company name which refer to a
profession, occupation or business which require certification from the
relevant professional body will not be approved without the certification.
e.g., the word Engineer, Medical, Dental, Bank, Cambio, Pharmacy,
University.

9) Ques: Section 15 (1) of the Companies Act, 2004, ‘provides that no company shall
be registered with a name that is in the opinion of the Registrar is undesirable’.
What steps can the Registrar take to remove an undesirable company’s name from the
Register after it has already been registered/ incorporated?

Ans: If at any time after registration of a company, it appears to the Registrar that the
company’s name is undesirable, the Registrar may request that the company changes
its name within 6 weeks of the Registrar’s notice to this effect (see S.15 (3)).
A company in this situation, has the right to appeal to the Court.

10) Ques: Under Section 107 (1) of the Companies Act, 2004, where is it compulsory for
a company to display its name?

Ans: A company must display its name:

 outside its offices or place where its business is being carried on
 on its seal
 on all letters, orders, invoices, notices, and receipt
 on negotiable instruments

11) Ques: State the steps which a company must take in order for it to change its name.

Ans: For the Registrar to approve a change of name of a company, the following
must be in place:

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  A ‘special resolution’ regarding the name change must be first passed by the
members of the company (majority of not less than three-fourths of the
members) stating that they have voted to change the company’s name.
 The company must then submit/file a written request to the Registrar for it to
change its name along with a certified copy of the resolution passed by the
company in this regard.
 The company’s file must be up to date with respect to all statutory returns.
 The prescribed fees must be paid.
 The Registrar will after conducting his /her examination, issue an ‘altered
Certificate of Incorporation’, stating that the company’s change of name will
take effect from the date of the altered Certificate.

12) Ques: What are the main statutory documents that a Public Company is required to
file with the Registrar of Companies?
Ans: A Public Company must file the following documents:

a) A prospectus or statement in lieu of prospectus.

b) A List of persons who have consented to be directors of the company.
c) Consent in writing from the persons to act as directors.
d) An undertaking by the directors to take and pay for qualifying shares

13) Ques: According to Section 23 of the Companies Act, 2004, who are the persons
qualified to be members of a company and are entitled to be entered on its Register of
Members?

Ans: a) The personal representatives of a deceased member and the Trustee in

Bankruptcy of a bankrupt member.

b) Persons who subscribe to the articles whose names shall on registration of the
company be entered in the company’s register.

c) Persons named as a principal account holder or subsidiary account holder, during

any period in respect of which eligible securities carrying voting rights are entered
against their names in the register of the licensed Central Securities Depository for
the company’s shares.

14) Ques: According to Section 29 of the Companies Act, 2004, what is the extent of a
Promoter’s liability in relation to pre-incorporation contracts?
(a) Ans: a) A promoter is prima facie personally liable for any contract made on the
company’s behalf before it is formed/incorporated and is entitled to any benefits
arising from the said contract, from the time that it was made .

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 (b) After a company has been formed, it may adopt a pre-incorporation contract. If it
does so, then the company is liable and entitled to the benefits under the contract from
the time the contract was made.

(c) Following adoption by the company of a pre-incorporation contract, the promoter

would not have any liability or would not be able to claim any benefits arising from
the contract from the time that it was made.

15) Ques: What is the main distinction between a private company and a public company
as it relates to the manner in which the company can procure investment?

Ans: Only a public company can issue a prospectus inviting the public to subscribe
for shares or debentures in that company. A private company is prohibited form
extending any invitation to the public to subscribe for shares or debentures in that
company.

16) Ques: According to Ewing v Buttercup Margarine Co. Ltd. (1917), what course of
action is available to a new company which has inadvertently or otherwise, register
by a name which in the opinion of the Registrar is too closely resembling the name of
another registered company (i.e., under the common law doctrine of “passing-off”)?

Ans: The new company may elect to change its name with the sanction of the
Registrar or the Registrar may within 6 months of it registration, instruct the company
to change its name.

Topic 3- Company’s Articles of Incorporation (AOI)

17) Ques: According to Section 19 (1) of the Companies Act, 2004, what is the ‘legal
status ‘of the Articles of Incorporation?

Ans: The Articles of Incorporation (Articles) are deemed to be a contract which binds
the company and the members, and they also bind the members inter se.
OR

“The Articles of Incorporation constitute a contract not merely between the

shareholders and the company, but between each individual shareholder and every
other”. (See Wood v. Odessa Co (1889) as per Stirling J).

18) Ques: What are the legal consequences of the fact that the Articles of Incorporation
are deemed to be a contract between the members and the company and between each
individual shareholder/member and every other?

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 Ans: These are as follows:
 The provisions of the Articles may be enforced as between the company and a
member or as between a member and another member.
 Members of the company are bound by the Articles in their capacity as
members, hence only membership rights are enforceable.
 The Articles do not constitute a contract between the company and an
outsider. This means that the provisions of the Articles are not enforceable by
someone acting in a non-member/outsider capacity (e.g. an individual who is
employed as a company’s Doctor or Lawyer cannot apply/ enforce the
provisions of the company’s Articles for his benefit in the capacity of a Doctor
or Lawyer, as he is therefore considered to be a non-member/outsider).
 Rights conferred in the Articles on outsiders are typically unenforceable.

19) Ques: State the rules governing a company ‘Altering’ its Articles of Association?

Ans: The rules are as follows:

 S. 10 of the Companies Act, 2004 allows a company to alter or add to its
Articles by passing a ‘special resolution’.
 S.138 specifies that in order for a company to alter its articles, it must pass a
special resolution by a majority of not less than three-fourths of members at a
general meeting called with at least twenty-one days notice.
 The right of the company to change its articles should not be fettered.
 Even an alteration which results in a breach of contract is valid. The outsider’s
remedy in this situation is to claim damages for breach of contract.

20) Ques: State the Restrictions in Company Law on a Company ‘altering’ its Articles?

Ans: They are as follows:

 An alteration which purports to increase the liability of an existing member to
the company will not be valid unless it has been obtained with his written
consent (see S. 21 of the Companies Act, 2004).
 Where an alteration has not been done bona fide for the benefit of the
company as a whole i.e. the shareholders must act honestly having regard to
and endeavouring to act for the benefit of the company.

Prepared by: Aldith Hylton

Date: January 12, 2022

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