‘Fiji is in dire need of a new law
which reflects the more sophisticated
corporate world which exists today,’
says Companies Decree expert
Bruce Cowley speaking to local Directors during the Fiji Directors briefing at the Holiday Inn. Photo: RONALD KUMAR
By ROSI DOVIVERATA
Local company directors will have to adhere to a range of new requirements under the new 2013 Companies Decree. The old Companies Act which dates back to 1985, imposed no such duties on them.
Bruce Cowley, of the leading Australian corporate law firm Minter Ellison, who was engaged by the Government to help draft the new Companies Decree, has been in Suva for briefings on the new requirements.
He said directors will be required to meet higher levels of accountability and transparency in relation to their conduct.
The introduction of the new law should also lead to less red tape and greater flexibility for companies in line with international trends. However, the new laws will also introduce greater requirements around disclosure, transparency and expectations on those who manage companies.
Director Duties
“There are a range of detailed duties, including the duty to act with care, skill and diligence, the duty to promote the success of the company and the duty to act ‘independently’.
“These new duties equate with ‘world standard’,” he said.
However he said the laws are fair and provide defences to potential liability. For example, if in making a decision, the directors can satisfy the court that they have made a reasonable business judgement or if they reasonably relied on advice from others.
Breaching the Law
For those who breach the law, they can be subject to fines or being subject to an order prohibiting them from holding office as a director or from managing a company for a period of time.
But Mr Cowley stressed that if they breach the law recklessly or intentionally dishonestly, imprisonment will follow.
Flexibility in company structure
Another major change evident in the decree is the provision for greater flexibility in the way companies are structured. For example, a private company will in future only need to have one shareholder – currently private companies must have two and public companies seven.
“It will make life easier for larger company groups which, at the moment, must have a number of outside shareholders in subsidiary companies,” Mr Cowley said.
Safeguards for creditors
New rules will also be introduced which will, subject to a number of safeguards for the interests of creditors, allow companies to manage their capital better, by allowing for share buy backs and reductions of capital.
Overwhelming response
At the very beginning of the process of drafting the new law, Mr Cowley undertook a series of public consultations with 28 representative business groups. He said every single one of them endorsed the idea of introducing ‘world standard’ directors duties.
“On that basis I believe that company directors firmly embrace the changes. There is very wide spread support among the Fiji director community for the changes.”
The new Companies Decree
The new Companies Decree is an altogether new law, replacing the old 1985 Act – which was a simplified version of the 1961 Australian Companies Acts. Its content was over 50 years old.
“A lot has happened in that period and Fiji was in dire need of a new law which reflected the much more sophisticated corporate world which exists today.
“Accordingly, everything about the law is new, reflecting developments in other countries whose company laws, like Fiji, share a British heritage,” said Mr Cowley.
“I like to think the new law means that Fiji will have a contemporary law, drafted specifically with the local market in mind, rather than inheriting a law from another jurisdiction which did not necessarily have regard to issues relevant to Fiji and the Fiji business community.”
A Fiji Directors briefing held last week atthe Holiday Inn Suva, brought together at least 200 local directors and company executives to hear about the new laws.