New Rules on Company Registration
3 March 2008
The government approved changes to the Civil and Commercial Code related to company registration on 23 February 2008. The changes will come into effect on 1 July 2008.
The main changes are as follows:
Section 1097 changes the number of persons needed to start a business from not less than 7 persons formerly to not less than 3 persons at present.
Section 1111/1 allows for company promoters to file a memorandum and register a company in a single day. Previously there was a requirement of a formal notice and a seven day waiting period.
Section 1246/1 permits a registered or limited partnership of not less than 3 persons to change its business entity to that of a limited company on the condition that all partners agree to the change. Once the business entity changes, the assets, debts, rights, and responsibilities transfer from a registered or limited partnership to that of a limited company.
Section 1175 requires that the notice of an Extraordinary Shareholders' Meeting be published at least once in a local newspaper, and not less than 7 days prior to the meeting appointment date. The former Act did not require such publication. The notice must be sent by registered mail to all shareholders listed on the company's register not less than 7 days prior to the meeting appointment date. The exemption to this is in the event of a notice for an Extraordinary Resolution, in which the notice must be given not less than 14 days prior to the meeting appointment date. The notice of an Extraordinary Shareholders' Meeting must specify the location, day, time, and the scope of activities of the meeting for deliberation, and in the event of a notice for an Extraordinary Resolution, the issue to be presented for resolution must be specified.
Commentary: The changes enacted should make the company registration process somewhat more streamlined. However, the changes do not really go to the heart of contentious issues. Three versus seven shareholders is a minor issue because four shareholders can always be obtained to hold one share a piece. A change to the foreign business act to allow for foreign ownership would be more progressive.