The Senate last Thursday passed the Companies Act which employs stringent measures to make directors and other persons entrusted with the proper operations of companies more accountable with the entities.

“The law recognises that a company is an abstract entity which cannot act only through individuals,” Attorney-General Senator A J Nicholson argued. “The law also recognises that the right to limited liability carries with it certain responsibilities and that the advantages should be matched by arrangements for accountability.”

He said that persons who were entrusted with responsibility for the proper operations of companies should approach their task with a high degree of care and skill.

According to Nicholson, the 1965 Act had served its purpose in its historical context, but the challenges of the law must now face new realities, given the change in business environment in which there were a new breed of investors and shareholders, enticed by a new vision of corporate democracy and expanding share ownership.

“We are obliged, therefore, to examine the breadth and capacity of the present law to meet the challenging and changing role of small enterprises, the impact of information technology and fact of the international marketplace,” he said.

With the new reality of corporate definition, persons who controlled the operations of companies were not necessarily the majority owners of shares, said Senator Nicholson.

The attorney-general said a company law, such as this, which had been reformed to suit the 21st Century, was a key element of promoting enterprise and raising productivity. In stressing the need for more emphasis on the responsibility of directors, he pointed out that the 1965 Act did not specify the duty of care that was owed by directors.

Opposition senator, Shirely Williams, contended that the Bill was a disincentive to companies that wished to invest, and that the law should not only seek to protect employees, but investors as well. She also said that the provisions in the Act, as they related to solvency, were not in the best interest of the companies.

Addressing further concerns by Opposition senators regarding stamp duty and insolvency, Information Minister and Leader of Government Business Senator Burchell Whiteman assured that there would be specific legislation on those matters, as it was thought unwise to include those issues in this legislation and then have to further refine the Act to address matters arising.

Although the 396-clause Bill was passed without amendment, Senator Whiteman noted that future amendments were inevitable. However, immediate additional changes could not be accommodated.

– JIS