The basic model used to fashion the new Trinidad & Tobago Companies Act is excellent. It is modern and flexible. There is also a wealth of material and precedents available from Canada to assist practitioners in meeting the challenges of operating the new law. The in-depth process of review of the original 1995 Act by local practitioners has also resulted in the legislation being suitably tailored to meet particular local conditions. A number of major problems with the original legislation have been ironed out as a result of that review. Overall, the Act will serve Trinidad and Tobago well. However, despite the review process, a number of technical, drafting problems remain.
There are two main areas of the Act which require urgent amendment:
- the procedure for continuance of existing companies; and
- the provisions with respect to financial assistance.
The Act requires existing companies to continue under the Act and, for this purpose, it is necessary to file Articles of Continuance. Because these Articles of Continuance have the effect of amending the existing Articles of Association, they must be approved by a special resolution, consisting of seventy-five per cent of the shareholders attending and voting at the relevant general meeting. A difficult question arises as to the position of the company if a seventy-five per cent majority does not give approval. This difficulty can be avoided if the Act is amended to state specifically that the Articles of Continuance only require the approval of a simple majority. Minority shareholders would then have the option of pursuing the remedies under the Act, which permit them to have the Articles altered if they have been deprived of their rights under a former-Act company.
The difficulty posed by the provisions in the Act relative to the company's ability to provide financial assistance to a shareholder, director, officer or employee of the company is even more serious. Such assistance is only allowed if the company can satisfy specified solvency tests. While this provision is generally sensible, it raises a serious problem in relation to loans made to parent companies which are guaranteed by its subsidiary, secured by a charge over all of the subsidiary's assets. This is because the solvency tests are so framed that such a subsidiary would never be in a position to satisfy them due to the fact that it would have charged all of its assets. It is for this reason that the Canadian Act specifically exempted certain categories of transactions from the solvency tests. The failure to include these exceptions in the local Act will have a significant negative impact on the borrowing capacity of many groups. The commercial sector needs to petition the Government to amend the Act to avoid the consequences of this omission.
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