New company law changes effective July 2008 BDO News - 26 June 2008
Effective from 1 July 2008, amendments to the provisions of the Civil & Commercial Code governing the formation and administration of limited companies will come into effect.

Company formation

A limited company is formed under the Civil and Commercial Code through a process which starts with the promoters of the company registering a Memorandum of Association (“MOA”), followed by a statutory meeting of promoters and subscribers and finally the formal registration of the company.

The minimum number of promoters required to form a limited company has been reduced from seven to three.

It will now be possible to register a limited company on the same day that its MOA is registered, which will allow companies to be formed in a relatively short period of time.

To take advantage of this new provision, the following must take

place on the same day that the promoters make the MOA:

• the shares to be registered by the company are fully subscribed;
• a meeting to consider the formation of the company (‘statutory meeting”) is attended by all of the company’s promoters and subscribers;
• all of the company’s promoters and subscribers approve the business transacted at the meeting;
• the promoters hand over all business to the directors; and
• the directors call the amounts payable on the shares from subscribers and such amounts are paid.

Number of shareholders

The minimum number of shareholders of a limited company has been reduced from seven to three.

For companies registered before 1 July 2008 with at least seven shareholders, the number of shareholders can be reduced to three by the existing shareholders transferring their shares in compliance with the usual provisions of the Civil and Commercial Code and the company’s Articles of Association– there are no special provisions to comply with to reduce the number to three.

Special resolutions

A limited company must pass a special resolution to approve certain actions, such as amending its MOA or Articles of Association, increasing or reducing capital, dissolving the company or entering into an amalgamation.

The procedures to pass a special resolution have been streamlined and now only require one meeting of shareholders rather than two.

Existing provisions		New provisions
Passing a special resolution
	A special resolution must be passed by two successive general meetings First meeting: majority vote must be not less than 3/4 of the votes	A special resolution can be passed by one general meeting with majority vote of 3/4 of the votes of the shareholders at the meeting with voting rights.
	Second meeting: majority vote must be not less than 2/3 of the votes

Changes to notice provisions

A number of changes to the notice provisions have been introduced, in most cases relaxing the existing requirements for giving notices.

One notable exception is the change to make it mandatory for notices summoning a general meeting to be published at least once in a local newspaper.

Existing provisions		New provisions
Notice summoning a general meeting
	The notice to summon a general meeting can be published at least twice in a local newspaper or sent by post to the shareholders not less than 7 days before the meeting date.		The notice to summon a general meeting must be published at least once in a local newspaper and sent by post with acknowledgment receipt to the shareholders not less than 7 days before the meeting date.
	For a resolution to be deemed a special resolution, additional procedures regarding notices must be complied with.		The above criteria shall also apply to notices summoning a meeting to pass a special resolution but it must be done not less than 14 days before the meeting date and must also contain the substance of the proposed resolution.
Notice of dividend declaration
	Notice of a declared dividend shall be either published at least twice in a local newspaper or given by letter to each shareholder.		Notice of a declared dividend shall be given only by letter to each shareholder
			For share represented by a certificate issued to the bearer, notice of a declared dividend shall be given by letter to each shareholder and published at least once in the local newspaper.
Reduction of capital
	Notice of the proposed capital reduction must be published at least 7 times in a local newspaper and sent to all creditors.		Notice of the proposed capital reduction must be published at least once in a local newspaper and sent to all creditors.
	A creditor has 3 months from the date of the notice to present any objection to the reduction.		A creditor has 30 days from the date of the notice to present any objection to the reduction
Amalgamation
	Notice of the proposed amalgamation must be published at least 7 times in a local newspaper and sent by registered mail to all creditors.		Notice of the proposed amalgamation must be published at least once in a local newspaper and sent to all creditors.
	A creditor has 6 months from the date of the notice to present any objection to the amalgamation.		A creditor has 60 days from the date of the notice to present any objection to the amalgamation.

Articles of Association

Companies formed before 1 July 2008 that have adopted Articles of Association may find that their Articles could still require them to adopt some of the procedures under the existing law for giving notices and passing special resolutions. Companies in this situation can consider amending their Articles of Association to take advantage of the new provisions.