Distinction between public and private companies in Jersey28 Jan 2009
This briefing outlines the distinctions between public and private companies in Jersey. The Companies (Jersey) Law 1991, as amended (the "1991 Law") provides for companies incorporated in Jersey to be either public or private. This briefing reflects the recent changes made in relation to public and private Jersey companies by the Companies (Amendment No. 9) (Jersey) Law 2008, of which the majority of provisions came into force on 27 June 2008 and the remainder on 1 August 2008.
A Jersey company will be a public company if either its memorandum of association states that it is a public company or it became a public company on 30 March 1992 by virtue of deeming provisions which came into force on that date and has not subsequently become a private company. A Jersey private company will be treated as a public company for the purposes of the 1991 Law for as long as it has more than 30 members (unless the Jersey Financial Services Commission (the "Commission") directs otherwise following application by the company, the Commission being satisfied by reason of the nature of the company's activities that its affairs may properly be regarded as the domestic concern of its members) or if it circulates a prospectus relating to its own securities.
A Jersey company will be a private company if either its memorandum of association states that it is a private company or it was a private company immediately before 1 September 2002 and has not subsequently become a public company.
It is open to a private company to alter its memorandum and so become a public company. Conversely, a public company which has no more than 30 members may alter its memorandum to become a private company. In addition, as stated above, where a public company has more than 30 members, if the Commission so directs following application by the company (the Commission being satisfied by reason of the nature of the company's activities that its affairs may properly be regarded as the domestic concern of its members), it may become a private company.
The 1991 Law contains stricter regulations and filing requirements for public companies than for private companies. Some of the more important provisions of the 1991 Law in this regard are as follows.
Names of directors on incorporation
On incorporation, the names, former names, business or usual residential address, nationality, occupation and date of birth of each director of a public company must be filed with the Commission. This is not required in the case of a private company.
Only a public company may circulate a prospectus relating to its own securities, being an invitation to the public to acquire or apply for its securities. If a private company circulates such a prospectus, not only will it be treated as a public company for the purposes of the 1991 Law, but the company and its officers will each be guilty of an offence.
Where a company, whether public or private, wishes to pay a commission to a person in consideration of his subscribing or agreeing to subscribe for shares in the company or procuring or agreeing to procure subscriptions for shares in the company, the company must ensure that it is so authorised by its articles of association and that such commission does not exceed the lesser of ten per cent. of the price at which the shares are allotted or the amount or rate authorised by the articles. Further, in the case of a public company, the amount or rate per cent. of commission and the number of shares which persons have agreed to subscribe for absolutely for a commission must be disclosed in the prospectus (where the shares are offered for subscription by prospectus), or (in other cases) in a statement signed by each director or his agent and delivered to the registrar of companies (the "Registrar") before the commission is paid.
Members and the register of members
A public company must have at least two members, unless it is a wholly owned subsidiary: if a public company has a single member for more than six consecutive months that member may become liable (jointly and severally with the company) for the company's debts unless it is a wholly owned subsidiary. A private company need only have one member.
The register of members can be inspected by any member of the company without charge during business hours (and by any other person upon payment of a fee if required by the company) and any person can require a copy of the register of members of a company. In the case of a public company, and a subsidiary of a public company, the applicant for a copy of the register must submit a prescribed declaration to the company as to the proposed use of such information. Within ten days after receipt of any payment required by the company (not exceeding the prescribed maximum) and the declaration (in the case of a public company), the company must make the copy available for collection during business hours at the place where the register is kept.
A public company which transacts business in any country, territory or place outside Jersey can keep at such location a branch register of members resident in that country, territory or place. Such a register is known as an overseas branch register and the company must give the Registrar in Jersey notice of the office where the branch register is kept and of any change in its location. If the overseas branch register is discontinued, notice of that fact must be given. An overseas branch register is deemed to be part of the company's register of members and must be maintained in similar manner. A duplicate of an overseas branch register must be kept with the register of members at the registered office of the company in Jersey. A private company may not maintain an overseas branch register of members.
The maintenance of the register of members must be carried out diligently, as it is an offence for a Jersey company to fail to maintain its register of members in the manner prescribed by the 1991 Law. It is also an offence for a Jersey private company to fail to inform the Registrar within 14 days of its number of members exceeding 30.
Allotment of shares with special rights
Where a public company allots shares with rights not stated in its memorandum or articles of association, or in a resolution or agreement a copy of which is required to be delivered to the Registrar, the company must deliver a statement to the Registrar within one month from the allotment of the shares giving particulars of such rights. The same requirement applies with regard to the variation of share rights. There are no such requirements in the case of a private company.
Every Jersey company (other than a company in a creditors' winding up or which has been declared bankrupt) is required to file an annual return before the end of February in each year following the year in which the company is incorporated. The annual return contains certain prescribed information, given as at 1 January, including, in the case of a par value company (i) the authorised share capital of the company; (ii) the name and address of each member of the company; (iii) the number and class of shares held; and (iv) the amount paid up on such shares. Similar information must be provided in relation to no par value companies and where the company has members holding unlimited shares or guarantor members.
In the case of a public company or a subsidiary thereof, particulars of the directors of the company as at 1 January must also be filed. There are no requirements to file details of the directors of a private company.
The Registrar will require an applicant carrying out a company search against a public company to make an appropriate declaration as to the proposed use of the information before revealing copies of the annual returns of such company.
Directors and secretaries
A public company must have at least two directors. A private company may have a sole director, however a sole director must not also be the secretary of the company. A body corporate may be a director of a private or public company provided that it is a company that is permitted under the terms of its registration under the Financial Services (Jersey) Law 1998, as amended, to act as, or fulfil the requirements of, a director and the body corporate has no director that is itself a body corporate.
Every company must have a secretary. The required qualifications for a secretary of a public company are such that such appointments are limited to members of stipulated professional bodies or persons who, because of holding or having held any other position or being a member of any other body, appear to the directors capable of discharging the functions of a secretary. In any event, it is also for the directors to satisfy themselves that the secretary has the requisite knowledge and experience to act in such capacity. There are no such regulations concerning the appointment of a secretary of a private company.
The register of directors and secretaries of a Jersey company must be kept at the registered office in Jersey. The register can be inspected by the Registrar, the shareholders and the directors during business hours (subject to such reasonable restrictions as the company may impose). Further, in the case of a public company, or a subsidiary thereof, any other person can also inspect the register upon payment of such sum, if any, as the company in question stipulates.
Annual general meetings
An annual general meeting must be held in each year save for the year of incorporation of the company and the following year, provided that the first such meeting is held within eighteen months of incorporation Not more than eighteen months must elapse between the annual general meetings in the case of a public company and not more than twenty-two months must elapse between the annual general meetings in the case of a private company. The requirement to hold annual general meetings may, however, be waived in respect of both private and public companies by the written agreement of all of their shareholders.
A shareholder of a public or private company is entitled to appoint a proxy to attend and vote in his place at a general meeting of the company (save that the proxy may only vote on a poll unless the articles of association of the company provide otherwise). The proxy of a member of a private company may speak at such a meeting. By contrast, there is no statutory right for a proxy of a member of a public company to speak.
All Jersey companies must keep accurate accounts for periods not exceeding eighteen months starting with the date of incorporation.
A public company (or private company where required by its articles or resolved in a general meeting) must have its accounts prepared, examined and reported on by auditors. Such accounts must be presented at a general meeting of the company, together with a copy of the auditors' report thereon (if a public company or private company in the circumstances set out above), within seven months in the case of a public company or tenth months in the case of a private company after the end of the financial period to which the accounts relate. A private or public company which has agreed to dispense with an annual general meeting is not required to lay its accounts before a general meeting, unless it receives written notice from a shareholder requiring it to do so. The accounts of both public and private companies must be approved by the directors and signed on their behalf by one of them.
A public company must deliver such accounts to the Registrar in Jersey for filing within seven months after the end of the relevant financial period, together with a copy of the relative auditors' report and the published fee.
In the case of a private company, whilst the directors are required to keep accounts, there is no requirement to file the same with the Registrar nor to have the same audited (save where a public company becomes a private company during a financial period).
If a public company's accounting records are kept outside Jersey, returns with respect to the business dealt with in the accounting records must be kept at the registered office in Jersey. They must be open to inspection at all times by the company's officers and secretary and must disclose with reasonable accuracy the financial position of the business at intervals of not more than six months and enable the directors to ensure that the accounts prepared comply with the 1991 Law. There are no such regulations concerning a private company's accounting records being kept outside Jersey.
Auditors and liquidators
Auditors must be appointed in the case of a public company or in the case of a private company where required by the articles of association or where resolved by the company in a general meeting. At each annual general meeting, a public company (or private company in the circumstances set out above) must appoint auditors to hold office from the conclusion of that meeting until the conclusion of the next annual general meeting. If the company has waived the requirement to hold annual general meetings, any auditors in office will continue to act and be deemed to be re-appointed for each succeeding financial period until the conclusion of the next annual general meeting or until the company resolves that such appointment shall be brought to an end. If there are no auditors in office and the company has waived the requirement to hold annual general meetings, the directors must appoint auditors who will continue to act until the conclusion of the next annual general meeting or until removed by a resolution of the company.
There are provisions in the 1991 Law specifically dealing with qualification of a person for appointment as an auditor which essentially limit the office to persons holding appropriate professional qualifications. There is also subordinate legislation similarly dealing with qualification of a person for appointment as a liquidator of a public company or a private company which is subject to a creditors' winding up.