Companies Act 2013

Companies Act 2013: Fana Fana Legal Guide

Introduction

The Companies Act 2013 provides the principal statutory framework governing the incorporation, management, financing, reporting, restructuring and winding-up of companies in The Gambia. Fana Fana Chambers provides this series of practical legal insights to assist directors, shareholders, investors, lenders and businesses in understanding key aspects of the legislation and its practical application. The guide focuses on the practical operation of the Act, key compliance obligations, shareholder protections, financing mechanisms and insolvency procedures.

Starting a Business

Incorporation

Sections 5 to 23

The Act permits any two or more eligible persons to form a company by complying with the registration requirements prescribed by the Act. A subscriber cannot participate in the formation of a company if he or she is under eighteen years of age (subject to statutory exceptions), an undischarged bankrupt, of unsound mind, or otherwise disqualified under the Act. Sections 5 and 6 therefore establish who may lawfully participate in incorporation.

A company is incorporated by filing:

• A memorandum of association.

• Articles of association.

• Notice of the registered office.

• Consents of the first directors.

• Any additional documentation required by the Registrar. (s.21)

• Upon registration, the Registrar issues a certificate of incorporation and the company becomes a separate legal entity capable of owning property, entering contracts, suing and being sued in its own name. (ss.22-23)

Practical Considerations

Directors should ensure that the memorandum accurately describes the company's status, liability structure, authorised capital and any restrictions on corporate powers because these provisions continue to have legal effect after incorporation. (s.13)

Company Types

Sections 7, 10, 11 and 12

The Act recognises three principal forms of company:

Company Limited by Shares

Members' liability is limited to any unpaid amount on shares held by them. (s.7(1)(a))

Company Limited by Guarantee

Typically used for charities, educational institutions, professional associations and non-profit organisations. Members contribute a predetermined amount if the company is wound up. (s.7(1)(b), s.12)

Unlimited Company

Members have unlimited liability for the debts and obligations of the company. (s.7(1)(c))

Each company may be established either as a private company or a public company. (s.7(2))

Private Companies

Sections 8 and 9

A private company must:

• State in its memorandum that it is a private company. (s.8(1))

• Restrict the transfer of shares through its articles. (s.8(2))

• Have no more than fifty members excluding certain employees. (s.8(3))

• Not invite the public to subscribe for shares or debentures. (s.8(5))

• Consequences of non-compliance

Where a company ceases to comply with the requirements of section 8, it loses the privileges and exemptions accorded to private companies and may be treated as a public company. The court may grant relief where the breach arose accidentally or through inadvertence. (s.9)

Foreign Companies

Sections 586 to 595

Foreign companies carrying on business in The Gambia must register prescribed documents with the Registrar and comply with reporting requirements relating to constitutional documents, local place of business and accounts. (ss.588-591)

They must also disclose their country of incorporation and corporate status on business documents and comply with service requirements. (ss.592-594)

Penalties

Section 595 specifically provides penalties for non-compliance by foreign companies.

Running a Company

Directors

Sections 235 to 293

Directors form the central management organ of the company.

Their powers include:

• Managing company business.

• Making strategic decisions.

• Delegating functions.

• Exercising borrowing powers.

• Issuing shares where authorised.

Statutory Duties

Directors must:

• Exercise reasonable care, diligence and skill. (s.275)

• Avoid conflicts of interest. (ss.276-280)

• Avoid secret profits. (s.276)

• Disclose interests in transactions. (ss.278-279)

• Act in good faith in the company's interests.

Liability

A director may incur personal liability for:

• Breach of fiduciary duty. (s.284)

• Improper issue of shares. (s.285)

• Other unlawful acts and omissions. (s.286)

• Participation in fraudulent conduct.

Company Secretary

Sections 237, 238 and 264

Every company must appoint a secretary. The secretary performs important governance and compliance functions, including:

• Maintaining statutory registers.

• Preparing resolutions.

• Coordinating regulatory filings.

• Assisting with meetings and corporate administration.

• The secretary's acts may bind the company where performed within the usual scope of authority. (s.238)

Meetings

Sections 202 to 234

The Act distinguishes between:

• Statutory meetings.

• Annual General Meetings.

• Extraordinary General Meetings.

Meetings must comply with statutory requirements concerning:

• Notice. (ss.208-213)

• Quorum. (s.223)

• Voting procedures. (ss.215-217)

• Minutes. (s.232)

Penalties

Section 203 specifically addresses non-compliance regarding statutory meetings and provides penalties for default.

Resolutions

Sections 224 to 229

Ordinary Resolution

An ordinary resolution is passed by a simple majority of votes cast by shareholders. (Interpretation section, definition of "ordinary resolution")

Special Resolution

A special resolution generally requires:

• At least twenty-one days' notice.

• A majority of not less than 75% of votes cast. (Definition of "special resolution")

Special resolutions are required for:

• Alterations to the memorandum. (ss.31-34)

• Change of company name. (s.17)

• Reduction of capital. (s.85)

• Re-registration. (ss.36-39)

Corporate Governance

Sections 42-49, 265-293

The Act establishes a governance framework based upon:

• Board responsibility.

• Accountability of officers.

• Procedural regularity.

• Proper delegation.

• Transparency in decision-making.

Particular attention should be given to conflicts of interest, related-party transactions and directors' borrowing powers because these are frequent sources of liability. (ss.276-283)

Protecting Shareholders

Minority Rights

Sections 295 to 297

The Act partially codifies the principle established in Foss v Harbottle by recognising that, although companies normally control litigation concerning corporate wrongs, minority shareholders may seek protection where illegality or abuse occurs. (ss.295-297)

Derivative Actions

Sections 298 to 300

A shareholder may seek permission to bring proceedings on behalf of the company where management fails to act.

The court may:

• Authorise the action.

• Issue procedural directions.

• Determine costs.

• Grant appropriate remedies.

An important protection is that the court may allow proceedings without requiring security for costs. (s.300)

Oppression

Section 301

Where company affairs are conducted oppressively, unfairly prejudicially or unfairly disregard the interests of shareholders, the court may intervene and make remedial orders. (s.301)

This is one of the Act's most significant shareholder-protection provisions.

Corporate Investigations

Sections 306 to 322

The court or Registrar may appoint inspectors to investigate company affairs.

Inspectors possess broad investigative powers, including:

• Requiring production of documents. (s.309)

• Examining company affairs. (s.308)

• Accessing directors' banking information. (s.310)

• Investigating beneficial ownership. (ss.318-321)

Penalty

Obstruction of an inspector may be treated as contempt of court. (s.311)

Corporate Finance

Borrowing

Section 170 and Section 283

Companies possess statutory authority to borrow money, create security interests and issue debentures. Directors must exercise borrowing powers consistently with their fiduciary obligations and constitutional limitations.

Debentures

Sections 150 to 185

The Act regulates:

• Trustees for debenture holders.

• Trust deeds.

• Secured and unsecured debentures.

• Convertible debentures.

• Redemption.

• Enforcement of security.

The framework is designed to protect investors while permitting companies to raise debt finance efficiently.

Charges

Sections 186 to 201

Registrable charges must be filed with the Registrar.

Registration provides:

• Public notice.

• Priority protection.

• Certainty to creditors.

Failure to register may seriously prejudice enforceability and priority of security interests. (ss.186-193)

Directors' Borrowing Powers

Section 283

Directors may borrow on behalf of the company where authorised. However, borrowing undertaken negligently, fraudulently or in breach of fiduciary obligations may expose directors to personal liability under sections 284 to 290.

Financial Compliance

Accounts

Sections 323 to 348

Companies must maintain sufficient accounting records to explain transactions and disclose financial position. (s.323)

Penalties

Sections 325 and 338 impose penalties for failures relating to accounting records and financial statement obligations.

Audit

Sections 349 to 361

Auditors perform an important public-interest function by independently reviewing financial statements.

Auditors are entitled to:

• Access company records.

• Attend meetings.

• Receive explanations from officers.

Offences

Knowingly providing false statements to auditors is an offence under section 361.

Annual Returns

Sections 362 to 370

Every company must submit annual returns containing prescribed information concerning:

• Share capital.

• Shareholders.

• Directors.

• Corporate status.

Penalties

Section 370 prescribes penalties for failure to comply with annual-return filing requirements established in sections 362-368.

Corporate Failure

Winding Up

Sections 393 to 511

Companies may be wound up:

• By the court.

• Voluntarily by members.

• Voluntarily by creditors. (s.393)

Grounds for court winding up include inability to pay debts and other statutory circumstances. (s.400)

Creditors

Sections 463 to 481

Creditors are heavily protected throughout liquidation procedures, particularly in creditors' voluntary winding-up and proof-of-debt processes.

They may participate in meetings, nominate liquidators and prove claims against company assets.

Preferential Claims

Section 481

Certain debts enjoy priority in liquidation and must be paid before ordinary unsecured creditors. Section 481 establishes the statutory framework for preferential payments.

Insolvency

Sections 482 to 495

The Act addresses misconduct during insolvency, including:

• Fraudulent preferences. (s.482)

• Falsification of books. (s.490)

• Fraud by officers in liquidation. (s.491)

• Failure to keep proper accounts. (s.492)

• Fraudulent trading. (s.493)

Consequences

The court may:

• Order damages.

• Require contributions.

• Impose personal liability.

• Support criminal prosecution.

• Disqualify delinquent officers. (ss.494-495)