Implications of registering a company
What are the obligations on incorporation of a company?
In its 2019-2020 Budget presentation, among other things, the Government of Jamaica abolished the $60,000 Minimum Business Tax in relation to all companies and increased the threshold for which businesses become liable to pay General Consumption Tax (GCT) from $3 million to $10 million.
It is expected that this will encourage more persons to incorporate companies to offer various types of services and products. However, careful consideration needs to be given to the responsibilities and obligations that come with incorporating a company.
A registered company is an ‘artificial’ person separate and distinct from the persons [typically the owners] who brought it into being. As a consequence, a company can acquire and own assets, sue and be sued in its own name, and enter into contracts.
The relevant legislation in Jamaica is the Companies Act, 2004 and the Companies (Amendment) Act, 2017. Upon registration, a Certificate of Incorporation is issued and the company is assigned a number as well as a Tax Registration Number (TRN). Typically, a private company that is registered for profit will be required to do filings both at the Companies Office of Jamaica and at the tax office.
Filings on the Tax Administration website
The announcements made by the minister of finance in the recent Budget presentation relate only to some of the requirements in relation to companies at Tax Administration Jamaica. Although the Minimum Business Tax in relation to companies has been abolished, companies are still required to file online – employers’ monthly payroll deductions (Form SO1) which is required for NIS, NHT, HEART/Trust NTA deductions, education tax and PAYE. Other tax obligations are detailed online at www.jamaicatax.gov.jm.
Filings at the Companies Office of Jamaica
The recent announcements by the minister of finance, however, have not affected the obligations of a company under the Companies Act of Jamaica. Once a company has been incorporated, it has the responsibility to ensure that it complies with its governing legislation and regulations, including the filing of notices and annual returns with the Companies Office of Jamaica.
Annual returns are due on the anniversary of the date of incorporation. The cost for filing the annual returns is $5,000 using Form 19A. The company is given a grace period of 28 days from the anniversary of the date of incorporation to file. Failure to file during this period will attract a late fee of $100 per day from the end of the 28 days after the anniversary date. The company is also required to maintain the register concerning the ownership of shares and officers in the company by filing Notices of Change of Directors, Secretary, etc. Any changes in relation to the directors and registered office of the company are required to be filed at the Companies Office within 14 days of the change taking place; and for changes in relation to company secretary, notice of the change must be filed within 15 days of the change taking place. The cost for filing notices is $3,000 and if they are filed out of time, the late filing will attract a standard late fee of $2,000. These late fees are put in place to ensure that the company is in good standing at all times.
Regrettably, even after incorporation, many persons remain unaware or forget the statutory requirements and obligations in relation to a registered company to their peril. This is the reason that the Companies Act 2004 empowers the Companies Office of Jamaica to strike from the register of limited companies, any company where there is reasonable cause to believe that the company is not carrying on business or is in operation.
Failure to file the annual returns over successive years can result in the company being struck from the register of limited companies. This may not be an issue where the company is no longer trading and owns no assets. Where the company owns assets which are registered in the company’s name, like land, the company will have to be restored to the register in order that there can be dealing in the title for the land.
Remedy where Company is struck off?
Where a company is struck off the register while it owns property or is carrying on business, it may, within 20 years of being struck off, make an application for restoration. After 20 years, the property vests in the Crown.
The first step to restoration is for an officer or owner of the company to make an application in Form 28A to restore the company. The application must be accompanied by a declaration in support of the application for restoration (Form 28B) to the Companies Office and the filing costs of $15,000. The following are considerations for the Registrar at this point:
1. The company was, at the time, of being struck off, carrying on business or was in operation; or
2. There is just cause for the company to be restored to the register.
A company seeking restoration will be required to bear the cost of restoration as well as file all outstanding documents, which can add up to a significant amount. In some instances, to know exactly what is outstanding for the company, an application under the Access to Information Act may be required. Application forms for access to official document (form 1) and application Form for Amendment/Annotation of Personal Record (Form 3) to the Companies Office of Jamaica to view the records of the delisted company will need to be submitted by an officer of the company or shareholder.
Once the application for restoration is filed and approved, a hearing is held by the Companies Office of Jamaica to determine whether or not the company should be restored. The applicant and/or his attorney will be summoned to attend the hearing. Hearings are held on the last Tuesday of every month. Successful applicants will then be required to file all the outstanding documents and pay the requisite fees on each.
Hurdles you will you have to overcome?
The hurdle most applicants face at this juncture is that they are unable to find some of the officers of the company, or the directors are deceased. This creates a difficulty when filing the outstanding restoration application as well as annual returns, as you have to account for the beneficial owners on the annual returns. You will also need to file a Notice of Change of Director to account for the death of a deceased director. In some instances, a statutory declaration may be required to explain what has happened to the officers of the company.
How to prevent your company from being struck off in the first place?
The most important thing is to ensure that the company is kept up to date, which must include filing of annual returns on time and updating the register whenever there are changes in the company. To do otherwise is to incur costs and to risk the company being struck off. To assist you in satisfying obligations that can be tedious and burdensome while you are busy running your business, consider engaging an attorney-at-law or companies which provide corporate secretarial services.
Krishna-kay Lawrence can be reached at firstname.lastname@example.org