The Namibian Companies Act, Act 28 of 2004 (“the Act”) contains a number of provisions that will directly impact all companies, directors and officers. Most of the amendments made, however, relate to a modernisation of the Act with wording amendments, from South West Africa to Namibia, to remove gender bias, to include Namibian legislation like the Anti-Corruption Act of 2003, to standardise company secretarial documents to the official language and to update penalties and fees applicable. A summary of the more significant changes are highlighted below.
Companies Act, 2004 187 KB PDFEffective Date
The effective date of the Act is 1 November 2010. The amended Schedule 4 to the Act is applicable to companies with financial year ends commencing on or after 1 November 2010.
Definitions
A subsidiary is now defined by control and not a majority shareholding percentage
The penalty for insider trading under the Act is N$500 000 and/or two years in prison.
An association may be incorporated as a company limited by guarantee. Section 21 companies in existence before 1 November 2010 are deemed to comply with the requirements of the new section 21 of the Act. Apart from a name change, however, from “Associations not for gain” to “Non-profit associations”, the only other amendment is that the name of the company is to include the suffix “Non-profit association incorporated under section 21”. These entities are exempt from the name suffix requirement of “Limited by Guarantee” and do not have annual duties. An section 21 company established before 1 November 2010 may use the suffix “Incorporated Association not for Gain”. Foreign branches and non-profit associations can register as section 21 companies, provided they comply with the requirements of section 21.
Only public accountants and auditors, attorneys, notaries and conveyances, professional engineers, quantity surveyors, pharmacists and stockbrokers have been exempted from registering as a company where the members exceed 20. After 1 November 2010, applications will have to be made to the Minister for new associations or partnerships (other than those exempted already) with members exceeding 20.
Notice of intention to convert a company is now 15 days, in the Gazette, before the date of the meeting, previously three days.
The principle of ultra vires, being that no act of a company will be void by reason that the company or directors acted without the necessary power, has been removed from the Act. It has been replaced with sections 40 and 41 of the Act which relate to dealings between a company and other persons as well as no constructive knowledge.
Section 40 deals with representations made to persons dealing with the company (about directors) while section 41 states that a person is not presumed to have knowledge of the contents of documents lodged with the Registrar, or available for inspection at the registered office, for example the memorandum of association.
A company now has the powers of a natural person of full capacity, in so far as possible for a juristic person, which was previously limited to the main object stated in its memorandum of association. The objects may be stated, but it is not required, and these would be seen as an internal restriction only. A non-profit association must state its objects in accordance with section 21.
Companies incorporated before 1 November 2010 may amend their memorandum by special resolution to remove objects if so desired.
Financial assistance may now be given (previously an offence) for the acquisition of shares in a company, or its holding company, if prior approval by special resolution is obtained and if the company will remain liquid and solvent after the acquisition.
If a company lends money to its holding company or a subsidiary of its holding company, but not to a subsidiary of itself, it must makedisclosures of the loan and security in the annual financial statements.
This is not a new requirement given the existing IAS 24 Related Party disclosure requirements of International Financial Reporting Standards, but what is different is that the directors and officers (including past directors and officers) of the company will be guilty of an offenceand liable to a fine or imprisonment if the disclosure is not made. The exception (to the requirements of the section) of obtaining the written consent of all members remains available in the new Act.
Sections relating to names and defensive names have been amended to ensure names are in the official language, that the period of registration or renewal of a defensive name is two years (previously one year) and that every company must display its registration number alongside its name in all notices, official publications, money orders and stationery used. The sections relating to undesirable names has been amended to give the Registrar more authority.
If the memorandum or articles of association of a company are not in English, the company has until 31 October 2012 to substitute them, byauthority of special resolution, and no fee is payable for such substitution with the Registrar.
Interest of up to 10% p.a. (previously 6% p.a.) may be charged on, and accounted for together with, shares issued for the purpose of raising money to offset the cost of construction of works, buildings or plant, which cannot be profitable for a lengthy period.
The most significant change to the Companies Act is the amendment of sections relating to the reduction of share capital. The only requirements are that a company may now reduce its own share capital, by special resolution if permitted by its memorandum and articles of association, and if after the reduction, the company will remain liquid and solvent. The special resolution may be in the form of a general approval that will be valid until the company’s next annual general meeting. A general approval can be revoked at any general meeting before the annual general meeting. Shares repurchased must be cancelled.
A new section in the Act permits a subsidiary company, if authorised by its articles, to hold shares in its holding company to a maximum of 10% of the total number of issued shares of the holding company. This would be done by special resolution and the requirement of liquidity and solvency apply. No voting rights attach to these shares. If the subsidiary is a whollyowned subsidiary, a special resolution is not required.
The directors of the company and its holding company are jointly and severally liable to restore the share capital of the company if the requirements of liquidity and solvency are not met.
The Act now includes provision for uncertificated securities, being those instruments on a Stock Exchange for example, which do not have a tangible certificate. These are to be maintained in an electronic register per class of security and certain rules around the inspection, maintenance and transfer thereof and fees applicable thereto have been listed.
Legislation to create a Central Securities Depositor is still however required in Namibia, effectively meaning that tangible share certificates are still to be issued for Namibian registered companies.