Changes Introduced by the Companies Act, 2019 (Act 992): Modifications of Companies Act, 1963 (Act 179)
Introduction:
This is the first in a two-part series on the changes introduced by Act 992, focusing on how it modifies provisions under Act 179. Key changes include renaming a company’s governing document from "regulations" to "constitution," revising age qualifications, and reducing the processes involved in the formation of a company, among other modifications.
1. Modification of the Name of the Governing Document of a Company from “Regulations” to “Constitution”:
Under Act 179, the document that regulated the activities, management, powers, and rights, among others, of the company and the persons that constitute it was known as the regulations of the company.
Under Act 992, however, this name or description has been changed to the constitution of the company.
2. Reduction of the Age of Persons Considered Infants:
Under both Act 179 and Act 992, infants are disqualified from occupying certain positions or taking certain actions. For instance, under these Acts, infants are disqualified from:
The essential question is, who is an infant? Per the First Schedule of Act 179 , an infant is
… any natural person under the age of twenty-one years or such other age as may from time to time be declared by any enactment to be full age for legal purposes.
However, per the First Schedule of Act 992, an infant is
a natural person under the age of eighteen years or any other age that is declared by an enactment to be of full age for legal purposes.
Thus, while Act 179 defines an infant as anyone below the age of 21 years, Act 992 reduces this age to 18 years.
This reduction is particularly important when examining the right of a person to apply for the incorporation of a company. A person who applies for the incorporation of a company is a subscriber. In Section 14(b)(iii) of Act 179, the Registrar is given the power to not incorporate the company if any of its subscribers is an infant, thus below 21 years. However, under Section 12 of Act 992, it is expressly provided that “Subject to this Act, a person of the age of eighteen years and above may apply for the incorporation of a company under this Act.”
3. Removal of the Requirement to Obtain a Certificate of Incorporation and a Certificate for the Commence of Business:
Under Act 179, before a body commences business as a company, it ought to be:
1. Duly incorporated under Act 179.
2. Obtain a certificate for the commencement of business. See sections 27 and 28 of Act 179.
The above processes have been conveniently described as a two-step process for forming a company.
Under Act 992, however, a company no longer needs to obtain a certificate to commence business and can commence business immediately after incorporation.
4. Removal of the Requirement to Deliver a Copy of the Constitution or Regulation to the Registrar before Incorporation:
Under Act 179, a company was only incorporated after its regulations or constitution had been delivered to the Registrar and duly registered. In Section 14(a) of Act 179, it was provided that:
(a) There shall be delivered to the Registrar for registration a copy of the proposed Regulations of the company complying with sections 16 to 18 of this Code;
Upon the registration of the Regulations of the company by the Registrar, Section 14(c) of Act 179 then provides that “the Registrar shall certify under his seal that the company is incorporated and, in the case of a limited company, that the liability of its members is limited.” The net effect of these provisions was that a company can only be incorporated after its Regulations are registered.
Under Act 992, however, a company can still be incorporated even if it does not deliver its constitution to the Registrar for registration. Section 25 of Act 992 makes provisions on the effect of a company without a registered constitution. Summarily, the section provides that if a company is incorporated without a registered constitution, its constitution, by default, is the constitution in the Second, Third, and Fourth Schedule if it is a private company limited by shares, a public company limited by shares, or a company limited by guarantee, respectively.
5. Removal of the Requirement to State the Nature or Business or Objects of the Company:
Under Act 179, the Regulations of the company being incorporated had to include the nature of the business the company intends to carry on, or its objects. This was provided in Section 16(2)(b), which reads:
(2) The Regulations of a company shall state,
(b) the nature of the business or businesses which the company is authorised to carry on, or if the company is not formed for the purpose of carrying on a business, the nature of the object or objects for which it is established;
By virtue of Section 16(2)(b) (supra) requiring the inclusion of the nature of the business which the company is authorised to carry on in its regulations, and by virtue of Section 14(c) requiring that incorporation occurs after the registration of the regulations, it can then be said that under Act 179, a company had to state the nature of its business before it is incorporated.
However, under Act 992, there is no such requirement to state the nature of the business the company is authorised to carry on. In Section 19 of Act 992 , it is provided that the registered constitution of a company may set out the nature of business a company is to carry on. This provision, however, does not make it mandatory for the registered constitution to state the nature of business. Further, the fact that a company can now decide to not submit a registered constitution and simply adopt any of the default constitutions means that a company can exist or be incorporated without stating its nature of business, as the default constitutions in the Second, Third, and Fourth Schedule do not contain provisions on the nature of business a company is authorised to carry on.
Conclusion:
In this note, we discussed the various ways in which Act 992 has modified the provisions of Act 179. First, it renamed the governing document of a company from “regulations” to "constitution." Second, it reduced the age of capacity from twenty-one to eighteen. Third, a company can now commence business under Act 992 without having to obtain a certificate to commence business. Fourth, a company is no longer mandated to deliver a constitution to the registrar prior to incorporation. Finally, there is no longer a need for a company to state its authorised business. In the next note, we will discuss entirely new additions introduced by Act 992.