The concept of a “Limited Liability Company”
was first legislated in the United Kingdom
in 1855. Its purpose is to separate the
legal identity of the Company from the
personal identity of its owner (or owners).
In particular the creation of a separate
corporate and legal identity allowed the
owners not to be personally liable (i.e.
from their personal assets) for the
liabilities of the Company. It also enables
the existence of “Shareholders” – a number
of owners who each have a share in the
Company. Under a shareholding arrangement
each owner is only liable up to the limit of
what he or she has promised to put into the
Company. This is why the term “Limited
Liability Company” is used. The word
“Limited” (Ltd in brief) warns involved
third parties – e.g. Lenders, Creditors etc.
– that the liability of the Company’s owners
is limited in amount. Note that it is also
possible to have a “Limited Partnership”.
COMPANY TYPES
Under Vanuatu law a Limited Liability
Company can be Limited by shares (as above)
or by Guarantee. Limited by Guarantee is
where the owners guarantee debts up to a
certain sum. This usually a limit per head
and is usually small. Often used by clubs –
e.g. the Golf Club, Club Vanuatu etc.
There are 3 types of Limited Liability
Company in Vanuatu and each type must comply
with all laws which apply to them. They are:
Local Companies
These have full powers to do business in
Vanuatu. They must have a valid Business
Licence if their activity requires it. They
can conduct their business anywhere in the
world.
Local Companies can either be Public or
Private. Public Companies are entitled to
sell shares to the general public if they
issue a prospectus while Private Companies
are not allowed to.
Exempted Companies
These are severely restricted as to what
they can do in Vanuatu. They cannot make
contracts or agreements with local companies
or persons except in regard to business
carried on outside of Vanuatu. They can have
bank accounts and agreements with Vanuatu
based Banks, Accountants, Lawyers, Trust
Companies etc. They can contract with other
Exempt Companies and International
Companies.
International Companies
These cannot do business in Vanuatu except
to further their business elsewhere. This
category of company provides for more
flexibility and simpler administration than
an Exempted Company.
(Note that a TRUST is not a legal entity but
something which sets out the terms on which
someone holds property on behalf of another.
Only a Local Company which holds a valid
Trust Company Licence can charge for trustee
services.)
REGISTRAR OF COMPANIES
What
has to be filed and what is available to the
public?
Local
Companies
Must file with the Registrar of Companies
the following:
·
Legal Documents which govern the Company’s
incorporation – its Memorandum of
Association (which is the constitution of
the Company and which specifies its
objectives and activities that it is allowed
to take part in); its Articles of
Association (these are the internal rules of
the Company).
·
Notification of any changes to the Company’s
Directors, Shareholding and Secretary, and
of most mortgages or charges on its
property.
·
Certain Special Resolutions of the Company.
·
An “Annual Return”. This gives standard
information about the Company as at a
specified annual date – e.g. Authorised
Shares and Issued Shares. The Annual Return
is due on the anniversary date of the
Company’s incorporation (see below) and must
be filed within 28 days of that date.
·
If
the Company’s turnover exceeds VT 20 Million
in any year it must have audited accounts
and must file the audited accounts with the
Registrar of Companies. The Registrar will
examine the “Audit Certificate” and if it is
“Qualified” will demand the reasons
surrounding the qualification.
All the above information is available for
public inspection at the Registrar’s Office.
A search fee is charged by the Registrar.
The persons searching the records of a
company cannot remove any of the records but
the Registrar’s Office will provide
photocopies on request for a nominal charge.
Exempted Companies
Exempted Companies which carry on the
businesses of banking, insurance, trustees
or selling securities must file the same
documents as Local Companies and file
audited accounts. Other Exempted Companies
need not be audited nor file annual
accounts, and the Annual Return is simpler.
There is no public file for Exempted
Companies. The Registrar’s Office cannot
show documents in respect of any Exempted
Company except under a Court Order or at the
written direction of the Exempted Company.
International Companies
International Companies have a public file
but such companies do not have to file as
many documents as the other three categories
of companies nor do they have to file an
Annual Return. They have a “Constitution”
instead of Memorandum and Articles of
Association. They must file the details of
their Incorporators, their Registered Office
and their Registered Agent and of mortgages
and charges on their property.
NOTES ON INCORPORATION OF COMPANIES AND SHAREHOLDING
·
Before the Registrar
signs the “Certificate of Incorporation” for
a Company all legal requirements must
fulfilled. For example the Memorandum and
Articles of Association must be properly
completed as well as the other information
required in Section 3 above.
·
A Local Company must
have 2 or more shareholders if private and 7
if public. An Exempted Company needs 2 and
an International Company only needs 1.
·
Local and Exempted
Companies (other than a private Company)
must have at least 2 Directors, one of which
must be resident in Vanuatu. Private
Companies must have at least one Director.
·
A Company must not
carry out business before its Certificate of
Incorporation has been signed and issued.
The date of signing is its “Date of
Incorporation”, but pre-incorporation
activities of an International Company can
be ratified after incorporation.
·
A shareholder normally
has a right to a share of the Company
profits, and a share of its dividends.
Shareholders also most commonly have a right
to vote in Company matters and a share in
the Company’s residual assets if it is
liquidated.
·
Partially paid shares
can be forfeited if not paid up when called.
·
All shares, apart from
Bearer Shares, require the Company, through
it’s directors, to issue a Transfer of
Shares Certificate.
·
Each Company must have
a Registered Office and (other than an
International Company) a Company Secretary.
Each International Company must have a
Registered Agent. Certain documents cannot
be signed by a single person holding both
positions (i.e. Director and Company
Secretary).
·
In respect of the
Registered Office address the Registrar will
insist on obtaining and checking a Land
Title where he thinks there may be some
difficulty with the address.
SPECIAL NOTE ON LIQUIDATIONS – DEBTS OWED TO GOVERNMENT
·
A “Liquidation” is where the assets of a
Company are “Liquidated” - i.e. turned into
“Liquid” assets such as cash or bank
balances in order to pay outstanding
creditors as fully as the proceeds from
liquidating the assets will allow.
“Liquidated assets” may be transferred to
creditors in kind (no sale and conversion to
cash) and if there is a surplus after paying
creditors, all assets are distributed to
shareholders who are entitled to receive
distributions (which may not be all
shareholders).
·
The types of fees owed by Companies to the
Government (including the Commission) are
“Preferential Unsecured Debts” if incurred
within a year of the Liquidation. This means
that they are settled first as a priority
over other unsecured creditors of a
Company’s debts.
COMPANY AND TRUSTS SERVICE PROVIDERS
These entities and individuals assist
investors with company trading and
registration requirements for a fee. They
range from Local Companies, Trust Companies,
Lawyers, and Accountants to private
individuals. A list of the current providers
can be found in the CTSP Directory.
Not all providers
are members of the Financial Centre
Association of Vanuatu.
VFSC