Forming a company

Many businesses today are run by companies rather than by sole traders. The single most important feature which helped the development and added to the attractiveness of companies is that of limited liability, that is, a person’s liability is limited to the shares he has in the company. Before this, a person could find himself personally ruined because his creditors could demand all that he owned even the clothes on his back. Moreover, a company has a legal personality that is separate and distinct from the individuals comprising it. It can sue and be sued under its own name and its life could continue even after the death of its original shareholders.{{more}}

There are two main types of company – private and public. The main difference between the two is that the public is invited to buy shares in the public company, but not with the private company. Attention in this article is given to the private local company.

To derive all the benefits of the law, a company must be registered under the Company Act, No. 8 of 1994. The Act provides for the formation of a company by one or more persons. Prior to this, a company could not be registered unless there were a minimum of seven persons.

The Act identifies those persons who may not incorporate a company. These include persons who are less than 18 years, persons of unsound mind and persons who are bankrupt. To satisfy the law, an attorney-at-law must attest to the fact that the incorporator in question is not a person who is under 18 or of unsound mind or is a bankrupt. A declaration must be filed to this effect.

The first step towards incorporating a company is to have a name search and to reserve the name. This is done by filing the requisite document at a fee of $25. This is an important step, as the Registrar of company must make sure that the name that is requested does not conflict with the name of a company that is already registered.

The Act provides for certain information in prescribed form. Among these are the articles of incorporation (fee $850) including $100 for the certificate, a notice of the address of the registered office of the company (filing fee $50) and a notice of the names of the directors of the company (filing fee of $50). The articles of incorporation provide information on the name, class of shares and number of directors of the company. Two duplicate originals must be filed. A non-profit organization is required to pay 20 per cent of fees.

A company may file its by-laws, if it so desires. The by-laws give such information on the powers of directors, share-holders and officers of the company, among others. The filing fee for this is $100. Once the required fees are paid and the documents meet the requirements of the law, the Registrar will issue a certificate of incorporation to the company. The fees quoted are government fees and are separate from the fees that have to be paid to the lawyer who prepares the document.

A company registered under the provisions of the Act must, in accordance with section 511, send to the Registrar any return, notices, fees and documents to meet the requirements of the law. The company could be removed from the register, if after it is notified of the default, it fails to comply.

A file bearing a number, for example, No. 1 of 2005, is kept at the Registry and could be inspected by members of the public at a fee of $5.00. It is especially important for persons who intend to lend money to a company to know the financial state and viability of the company.

Registration of company is now done at the Commerce and Intellectual Property Office (CIPO) located in the ground floor of the Methodist Building, Granby Street, Kingstown opposite the Seventh Day Adventist Church.

Ada Johnson is a solicitor and barrister-at-law.
E-mail address is: exploringthelaw@yahoo.com