CHAPTER 40
COMPANIES ACT, 1972

Arrangement of Sections

PART I

PRELIMINARY

1. Short title and commencement.

2. Interpretation.

PART II

INCORPORATION OF COMPANIES, Memoranda AND ARTICLES OF
ASSOCIATION AND MATTERS INCIDENTAL THERETO

Memorandum of association

3. Mode of forming incorporated company.

4. Requirements with respect to memorandum.

5. Subscription of the memorandum.

6. Payment for shares by a consideration other than cash.

Articles of association

7. Subscription of articles of association.

8. Statutory regulations.

9. Printing and signature of articles.

Registration

10. Registration of memorandum and articles.

11. Effect of registration.

12. Power of company to hold lands.

13. Conclusiveness of certificate of incorporation.

14. Power to dispense with “Limited” in name of charitable and other companies.

General provisions with respect to memorandum and articles

15. Effect of memorandum and articles.

16. Copies of memorandum and articles to be given to members.

17. Issued copies of memorandum to embody alterations.

Alteration of the memorandum and articles

18. Alteration of memorandum.

19. Alteration of rights and obligations attached to classes of shares.

20. Alteration of articles.

21. Applications to the court to cancel alteration of memorandum or articles.

22. Registration of alteration of memorandum or articles.

Members and shareholders of companies

23. Definition of members and shareholders.

Proprietary companies

24. Definition of a proprietary company.

25. Proprietary companies may not issue prospectuses etc. to the public.

26. Prohibition on derivative interests.

27. Right of pre-emption.

28. Expulsion of a member of a proprietary company.

29. Preservation of proportion of issued shares held by directors.

30. Voting agreements.

31. **s etc., may not be issued.

32. Permitted agreements in respect of proprietary companies.

Capacity, contracts, authorisation etc.

33. Capacity to contract etc.

34. Power of directors to act on company’s behalf.

35. Form of contracts.

36. Bills of exchange etc.

37. Authentication of documents.

38. Notice of matters by the company.

39. Protection of persons dealing with directors and agents.

PART III

SHARE CAPITAL AND DEBENTURES

Prospectuses and allotments

40. Registration of prospectuses and prohibition orders.

41. Contents of prospectuses.

42. Opening of subscription lists.

43. Minimum subscription.

44. Application for quotation on a stock exchange.

45. Action for rescission.

46. Claims for compensation.

47. Documents to be delivered to Registrar with copy of prospectus.

48. Offers for sale of shares and debentures.

49. Registration statements.

50. Fraudulent inducements to invest in shares or debentures.

51. Return of allotments.

Commissions, financial assistance for the acquisition of shares and debentures, and
acquisitions of shares of a company by itself

52. Power to pay commission.

53. Prohibition of financial assistance by company for acquisition of shares or debentures of the company and its holding company etc.

54. Acquisition by a company of shares of itself or its holding company.

Payment for shares

55. Payment of the issue price of shares; capital reserve.

56. Enforcement of payment for shares.

57. Payment for shares issued for a consideration other than cash.

58. Subscribers of the memorandum.

Alteration and redemption of share capital

59. Alteration of share capital.

60. Redeemable shares.

61. Re-issue of shares.

62. Registration of alterations of share capital and of the surrender, redemption and re-issue of shares.

Reduction of share capital

63. Special resolution for reduction of share capital.

64. Application to the court for confirmation of reduction of share capital.

65. Order confirming reduction of share capital.

66. Registration of order confirming reduction of share capital.

67. Liability of shareholders after a reduction of share capital.

68. Penalty for concealment of name of creditors etc.

Debentures

69. Cases in which a debenture trust deed must be executed.

70. Contents of debenture trust deeds.

71. Contents of debentures.

72. Disqualification for appointment as trustee of debenture trust deed.

73. Realisation of debenture holders’ security.

74. Disqualification for appointment as a receiver or manager.

75. Applications to the court.

76. Liability of receivers.

77. Notification of appointment of receiver or manager.

78. Power of court to fix remuneration of receiver or manager.

79. Statement of the company’s affairs.

80. Contents of statement of affairs etc.

81. Enforcement of receivers’ duty to make returns.

82. Rights of debenture holders.

Transactions affecting shares and debentures

83. Nature of shares.

84. Transfer of shares and debentures.

84A. Companies listed on the stock exchange.

85. Restrictions on transfers.

86. Certifications of transfers.

87. Issue of share certificates and debentures.

88. Registration of transfers.

89. Effect of registration and share certificates etc.

90.

91. Personation of shareholder or debenture holder.

PART IV

REGISTRATION OF CHARGES

92. Registration of mortgages.

93. Procedure on registration.

94. Priority of mortgages and charges.

95. Registration of appointment of receiver, or crystallisation of a floating charge.

96. Registration of discharge of registered mortgage, etc.

97. Applications to the court.

98. Registration of mortgages on assets of overseas companies and existing companies.

99. False information to the Registrar.

PART V

MANAGEMENT AND ADMINISTRATION

Registered office and name

100. Registered office.

101. Publication of company’s name.

Registers of members and debenture holders

102. Register of members.

103. Index of names of members.

104. [Repealed].

105. Inspection of register of members.

106. Power to close register.

107. Rectification of register.

108. Register to be evidence.

109. Register of debenture holders.

Notice of derivative interests in shares and debentures

110. Derivative interests.

Registers of directors’ holdings, of substantial shareholders’ holdings and of options to subscribe

111. Register of directors’ holdings.

112. Register of substantial shareholders’ holdings.

113. Register of subscription options.

Annual returns

114. Annual returns to be made by a company.

115. Documents to be annexed to annual return.

116. Provisions as to proprietary companies.

117. Offences in connection with annual returns.

Voting rights

118. Conferment of proportionate voting rights.

Meetings and proceedings

119. Annual general meeting.

120. Extraordinary general meetings and requisitions of meetings.

121. Ordinary and special resolutions.

122. Majorities for ordinary and special resolutions; business to be transacted by ordinary and special resolutions.

123. Notice of meetings.

124. Power of court to order meeting.

125. Contents of notice calling a meeting.

126. Circulation of proposed resolutions etc.

127. Persons to whom notice of meetings is to be given.

128. Proxies.

129. Rights of holders of **s and ***s.

130. Postal voting.

131. Method of taking votes.

132. Declaration of the result of voting.

133. Unanimous written declaration to have same effect as a resolution.

134. Resolutions passed at adjourned meetings.

135. Delivery of copies of certain resolutions to the Registrar.

136. Application to court to declare that resolution is valid or invalid.

137. Minutes.

138. Inspection of minutes.

Accounts

139. Books of account.

140. Profit and loss account and balance sheet.

141. Dispensation with annual general meeting.

142. Provisions as to contents and form of annual accounts.

143. Group accounts.

144. Form and contents of group accounts.

145. Financial year of holding company and subsidiary.

146. Particulars of directors’ emoluments etc.

147. Particulars of waiver of emoluments.

148. Particulars of loans to officers of company.

149. Particulars of subsidiaries.

150. Particulars of associated companies in which company holds shares.

151. Particulars of company’s holding company.

152. Duty to give information for purpose of sections 146 to 151.

Directors’ reports

153. Duty to lay directors’ annual report.

154. Particulars of different classes of business of company and its directors.

Audit

155. Appointment of auditors.

156. Proposals not to re-appoint retiring auditor.

157. Qualifications for appointment as auditor.

158. Auditors’ report.

Signing and circulation of accounts and reports

159. Signing and circulation of accounts, etc.

Profits and dividends

160. Disposal of profits.

161. Dividends to be paid only out of profits and reserves; computation of profits.

Directors

162. Number of directors.

163. Appointment of directors.

164. Disqualifications for appointment as a director.

165. Disqualification of a person from being a director by order of the court.

166. Directors appointed by memorandum or articles or named in a prospectus or registration statement.

167. Qualification shares.

168. Removal of directors.

169. Register of directors and secretaries.

170. Particulars of directors to be included in company’s publications.

171. Duties of directors.

172. Loans to directors.

173. Directors’ duties in connection with allotment of shares and debentures.

174. Directors’ remuneration.

175. Compensation for loss of office by a director on transfer of company’s undertaking.

176. Compensation for loss of office by a director on transfer of shares in the company.

177. Provisions supplementary to sections 174, 175 and 176.

178. Managing directors.

Secretaries

179. Appointment of secretary etc.

180. Persons acting as director and secretary.

Proceedings against officers for breach of duty

181. Provisions exempting officers from liability.

182. Relief from liability by order of the court.

Inspections and investigations

183. Appointment of inspector to investigate the affairs of a company.

184. Preliminary inspection of company’s books and papers.

185. Issue of search warrant.

186. Information and documents obtained under sections 184 and 185 to be confidential.

187. Investigation of related companies.

188. Production of evidence and documents to inspectors.

189. Inspectors’ reports.

190. Proceedings on inspectors’ report.

191. Expenses of investigation.

192. Investigation of beneficial ownership and control of company.

193. Power of Registrar to require information as to interests in shares or debentures.

194. Power of Registrar to impose restrictions on shares or debentures under investigation.

195. Duties of lawyers and banks.

Compromises and arrangements

196. Power of court to sanction compromises and arrangements.

197. Information to be sent to persons affected by compromise or arrangement.

198. Reconstructions and amalgamations.

Offers to acquire shares and debentures

199. Takeover bids.

200. Compulsory acquisition of shares.

Minorities

201. Protection of minority shareholders.

PART VI

WINDING UP

Preliminary
Modes of winding up

202. Application of Insolvency Act 2013.

203-304. [Repealed].

305. Power of Registrar to strike name of defunct company off the register.

306. Property of dissolved company to be bona vacantia.

307. Disclaimer by Crown.

308. [Repealed].

PART VII

OVERSEAS COMPANIES

309. Overseas companies to which Part VII applies.

310. Registration of particulars of overseas companies.

311. Personality and capacity of overseas companies.

312. Registration of alterations in registered particulars.

313. Managing agent.

314. Annual accounts of overseas companies.

315. Publication of name etc., of overseas companies.

316. Service of process and notices on overseas companies.

317. Prospectuses and debentures of overseas companies.

318. Winding up of overseas companies.

319. Offences by directors etc. of overseas companies and investigations.

320. Orders to cease carrying on business.

321. Interpretation of Part VII.

PART VIII

EXISTING COMPANIES

322. Application of Act to existing companies.

323. Adoption of memorandum and articles by existing companies.

324. Registration of existing companies as proprietary companies.

325. Transitional provisions as to annual general meetings and directors.

326. Managing directors.

327. Classes of shares.

328. Transitional orders.

PART IX

REGISTRATION OFFICE AND FEES

329. Registrar of companies, etc.

330. Fees and delivery of documents.

331. Inspection of documents kept by Registrar.

332. Enforcement of duty of companies to deliver returns etc.

PART X

MISCELLANEOUS

Prohibition of partnerships with more than ten members

333. Prohibition on partnerships of more than ten persons.

Offences

334. Offences in connection with applications, returns, etc.

335. Improper use of word “Limited”.

336. Meaning of “default fine” and “in default”.

337. Production and inspection of books where offence suspected.

Legal proceedings

338. Costs in actions by limited companies.

339. Saving for privileged communications.

Regulations and rules of court

340. Rules of Court.

341. Amendment of First and Seventh Schedules.

342. Regulations.

342A. Electronic Transactions.

Repeal and modified application of enactments

343. Repeals and savings.

344. Modified application of enactments.

FIRST SCHEDULE

SECOND SCHEDULE

THIRD SCHEDULE

FOURTH SCHEDULE

FIFTH SCHEDULE

SIXTH SCHEDULE

SEVENTH SCHEDULE

EIGHTH SCHEDULE

13 of 1973,

7 of 1979,

17 of 1991,

14 of 1993,

14 of 2011,

10 of 2012,

5 of 2013.

SI 83 of 1972,

86 of 1972,

65 of 1974,

99 of 1974.

[Date of commencement: 1st July 1972 [Ss 183-191]; 10th July 1972 [Ss 1-94,100-110, 114-138, 155-182, 309-313, 315-317, 319-344]; 1st January 1974 [Ss 95-99, 111-113, 139-154, 196-307, 314 and 318].]

[Note:

(1) All sections in force except sections 192-195.

(2) Section 2(a) of Act 14 of 2011 w.e.f. 27 December 2011 repealed the phrases “bearer share”, “bearer share certificate” and “bearer debenture” wherever they appeared in the Act. These phrases have accordingly been replaced with one, two and three asterisks respectively.]

PART I

PRELIMINARY

1. Short title and commencement.

(1) This Act may be cited as the Companies Act, 1972.

(2) Subject to any express provision to the contrary, this Act shall come into operation on such day as the Minister may, by notice in the Gazette, appoint, and different days may be appointed for different provisions of this Act or for the same provision in relation to different cases or classes of case.

2. Interpretation.

(1) In this Act—

“accounts” includes the group accounts of a company or corporation;

“annual accounts” and “annual accounts and reports” have the meanings assigned to them respectively by section 141(5);

“annual general meeting” means the general meeting held for any year under section 119;

“annual return” means the return required to be made under section 114;

“articles” means the articles of association of a company, as originally framed or as altered by special resolution, including, so far as they apply to the company, the regulations contained in Part II or, in the case of a proprietary company, Part IV of the First Schedule to this Act, and in the case of an existing company, means the regulations contained in the notarial deed, contract, statutes, articles of association or other instrument under which the company was constituted in so far as such regulations would not, in the case of a company formed under this Act, be required to be set out in its memorandum of association;

“assets” means any property in which a company has any interest or over which it has any rights;

“associated company” has the meaning assigned to it by section 111(3);

“***” means a debenture the principal or interest of which is by its terms payable to the bearer of the debenture for the time being, and includes a renounceable or transferable letter of allotment or acceptance in respect of debentures;

“**” means a certificate by the terms of which the bearer of the certificate for the time being is entitled to the shares specified in it, and includes a renounceable or transferable letter of allotment or acceptance in respect of shares;

“book and paper” and “book or paper”, include accounts, deeds, writings, and documents;

“capital reserve” means the total of the amounts referred to in section 55(5);

“chairman” means the person who presides at a meeting or during part of a meeting;

“company” means a company formed and registered under this Act or an existing company;

“contributory” has the meaning assigned to it under the Insolvency Act 2013;

[Am by s 2(a)(i) of Act 5 of 2013 w.e.f. 22 July 2013.]

“convertible debenture” has the meaning assigned to it by section 173(5);

“court” means the Supreme Court of Seychelles, except in connection with criminal proceedings for contraventions of this Act, when it means the court before which such proceedings may be brought;

“creditors’ voluntary winding up” has the meaning assigned to it under the Insolvency Act 2013;

[Am by s 2(a)(ii) of Act 5 of 2013 w.e.f. 22 July 2013.]

“debenture” means a written acknowledgement of indebtedness issued by a company in respect of a loan made to it or to any other person (whether before, or at the time of, or subsequently to the issue of the debenture) or in respect of existing indebtedness of the company or any other person, and includes debenture stock, a bond, an obligation (whether under seal or authenticated by a notarial deed or not), loan stock, an unsecured note or any other instrument executed, authenticated, issued or created in consideration of such a loan or existing indebtedness, whether constituting a charge on any of the assets of the company or not, but does not include a bill of exchange, cheque, promissory note, banker’s draft, banker’s cheque or letter of credit, nor an acknowledgement of indebtedness issued in the ordinary course of business for goods or services supplied, nor a deposit certificate, pass book or similar document issued in connection with a deposit or current account at a bank, nor a policy of insurance;

“debenture stock” means a debenture by which a company or trustees of a debenture trust deed acknowledge that the holder of the stock is entitled to participate in the debt owing by the company to the trustees under the debenture trust deed, and includes loan stock;

“debenture trust deed” means a deed executed by a company and trustees appointed by the deed in connection with the issue of debentures, together with any supplemental deed, resolution or scheme of arrangement modifying the terms thereof, and any deed substituted therefor;

“derivative interest” has the meaning assigned to it by section 26(2);

“director” includes any person occupying the position of director by whatever name called, and any person in accordance with whose directions or instructions the directors of a company are accustomed to act, but does not include a holding company or a substantial shareholder merely by virtue of its or his position as such;

“directors’ annual report” has the meaning assigned to it by section 153(1);

“document” includes a summons, notice, order, or other legal process, and a register;

“employee share subscription scheme” has the meaning assigned to it by section 173(6);

“equity capital” means the issued share capital of a company or corporation, except non-participating preference shares and preference shares which do not entitle their holders to unrestricted voting rights as defined by section 118(7);

“existing company” means a limited company (societe anonyme) formed and proclaimed under the provisions of the Commercial Code;

“extraordinary general meeting” has the meaning assigned to it by section 120(1);

“financial year” means in relation to any body corporate, the period in respect of which any profit and loss account of the body corporate is made up, whether that period is a year or not;

“firm” means a partnership (societe en nom collectif), limited partnership (societe en commandite) or civil company (societe civile);

“floating charge” means a security created over a class or classes of assets of a company when the instrument creating the security does not identify the constituent items comprised in the said class or classes, and does not restrict the security to assets of the company at the date the charge is created;

“general floating charge” means a floating charge created over the whole or substantially the whole of the property or assets of a company, and a security expressed to be created over the undertaking, or business, or the assets generally, of a company is a general floating charge;

“goods” means tangible movables and property which, by virtue of articles 520 to 525 inclusive of the Civil Code is deemed to be immoveable, but which under a contract of sale or any other contract is to be severed and converted into tangible movables either immediately or after an interval;

“group accounts” means the consolidated balance sheet and consolidated profit and loss account of a body corporate which is a holding company at the end of the financial year to which they relate, or if the body corporate prepares a consolidated balance sheet and consolidated profit and loss account in respect of itself and less than all its subsidiaries, such consolidated balance sheet and consolidated profit and loss account together with the balance sheets and profit and loss accounts of its subsidiaries not included in the consolidated balance sheet and profit and loss accounts for financial years of the subsidiaries ending on dates within the financial year to which the consolidated profit and loss account relates;

“group of companies” means two or more companies or bodies corporate one of which is the holding company of the other or others;

“holding company” means a company or body corporate which either—

(i) holds more than half of the equity capital of another company or body corporate; or

(ii) by contract, or by the memorandum or articles of another company or body corporate or otherwise is entitled to appoint, or to prevent the appointment of, a managing director or more than half of the directors (other than the managing director) of the other company or body corporate; or

(iii) is the holding company of another company or body corporate which is itself the holding company of the company or body corporate in question;

“interim dividends” has the meaning assigned to it by section 160(5);

“issue price” means the amount agreed to be paid to a company for a share or debenture, and if the consideration for a share does not consist entirely of cash, means the amount agreed to be paid to the company in cash (if any) plus the agreed value of the consideration other than cash;

“loan stock” means debenture stock the holder of which is not entitled to the benefit of any security over the assets of the company or of any other person;

“member” has the meaning assigned to it by section 23(1) and (2);

“members’ voluntary winding up” has the meaning assigned to it under the Insolvency Act 2013;

[Am by s 2(a)(iii) of Act 5 of 2013 w.e.f. 22 July 2013.]

“memorandum” means the memorandum of association of a company, as originally framed or as altered in pursuance of this Act, or in the case of an existing company the provisions of the notarial deed, statutes, articles of association or other instrument under which the company was constituted which, in the case of a company formed under this Act, would be required to be contained in its memorandum association;

“nominal capital” has the meaning assigned to it by section 4(4);

“non-participating preference share” means a preference share which confers on its holder the right to a dividend of a fixed amount, or not exceeding a fixed amount, whether cumulative or not, and the right to repayment of capital in a winding up in priority to another class or other classes of shares, but which confers no other rights in respect of dividend or capital whatsoever;

“officer”, in relation to a body corporate, includes a governor, president, vice-president, director, manager (except a manager appointed by or for the benefit of debenture holders), secretary or treasurer, and in relation to an overseas company includes its managing agent and a local director, manager or executive having the superintendence of its affairs in Seychelles;

“Official Receiver” has the meaning assigned to it under the Insolvency Act 2013;

[Am by s 2(a)(iv) of Act 5 of 2013 w.e.f. 22 July 2013.]

“ordinary resolution” has the meaning assigned to it by section 122(1);

“ordinary share” means a share which is not a preference share;

“overseas company” means an incorporated or unincorporated body formed under the laws of a country other than Seychelles which has as its object the acquisition of gain by it or its members, but does not include a partnership or limited partnership some or all of whose members are liable for its debts without limit and shares in which are not transferable free from any restrictions;

“preference share” means a share which carries the right to payment of a dividend of a fixed amount, or not exceeding a fixed amount, in priority to payment of a dividend on another class or other classes of shares, whether with or without other rights;

“prescribed” means prescribed by regulations made under this Act;

“printed” means produced by ordinary letterpress or lithography or by such other process as the Registrar in his discretion may accept;

“procedural resolution” has the meaning assigned to it by section 125(4);

“promoter” means any person engaged in the formation of a company, or in raising money to enable a company to be formed or to acquire any assets or an existing business, or in negotiating the acquisition of any assets or an existing business by or for a company, and includes any person engaged in doing any of those acts for the benefit of an overseas company, but does not include a person who acts only in a professional capacity on behalf of a promoter;

“property” means land, movables (whether tangible or not), debts, claims, rights of action, licences, concessions, patents, copyright, trademarks, designs, knowledge and information which has been confidentially communicated or which is protected by law similarly to intangible movables, all other chooses in action of any kind whatsoever, and the capital of a company which has not been called or paid up or credited as paid up;

“proprietary company” has the meaning assigned to it by section 24;

“prospectus” means any invitation, whether written, visual or oral, and by whatever means conveyed, to subscribe for shares or debentures, or to purchase shares or debentures which have been allotted to any person with a view to them being offered for sale, and without prejudice to the generality of the foregoing, includes an advertisement published in connection with the placing of shares or debentures on a stock exchange, a letter of rights and a provisional letter of allotment, but does not include a letter of rights, or a letter of allotment or a letter of acceptance, or a provisional or renounceable share certificate or similar document in respect of debentures issued in connection with a capitalisation of profits or reserves;

“prospectus issued to the public” has the meaning assigned to it by section 40(16);

“qualification shares” has the meaning assigned to it by section 166(6);

“registered” means registered in the register of members or debenture holders;

“Registrar” means the Registrar of Companies;

“revenue reserves” has the meaning assigned to it by section 160(5);

“rights issue” has the meaning assigned to it by section 54(5);

“share” means a share in the capital of a company and includes stock;

“shares carrying unrestricted voting rights” has the meaning assigned to it by section 118(8);

“shareholder” has the meaning assigned to it by section 23(3);

“special resolution” has the meaning assigned to it by section 122(2);

“stock” means the interest of a holder of a share in a company which has been converted into stock;

“stock exchange” means any exchange or association of dealers in securities which provides facilities for the sale and purchase of shares or debentures, and publishes at intervals of: not more than one week the prices at which shares or debentures are currently being sold and purchased; “a stock exchange in Seychelles” means a stock exchange carrying on such activities in Seychelles, whether or not also carrying on such activities elsewhere; and “a recognised overseas stock exchange” means any other stock exchange declared by the Governor to be such a stock exchange;

“subsidiary” means a company or body corporate of which another company or body corporate is the holding company;

“substantial shareholder” has the meaning assigned to it by section 112(6);

“transfer” means an instrument of transfer of registered shares or debentures and “to transfer” means to execute and deliver such an instrument, or in the case of a ** or a ***, to deliver it with the intention of passing the title to the shares or debentures represented by it;

“trustee in bankruptcy” means a trustee or assignee in the bankruptcy or insolvency of a person or partnership and includes the official assignee in bankruptcy;

“underwriting contract” has the meaning assigned to it by section 40(16);

“wholly owned subsidiary” has the meaning assigned to it by section 143(4);

“winding up resolution” has the meaning assigned to it under the Insolvency Act 2013.

[Am by s 2(a)(v) of Act 5 of 2013 w.e.f. 22 July 2013.]

(2) A person shall not be deemed to be within the meaning of any provision in this Act a person in accordance with whose directions or instructions the directors of a company are accustomed to act, by reason only that the directors of the company act on advice given by him in a professional capacity.

(3) References in this Act to a body corporate or to a corporation shall be construed as not including a corporation sole, but as including a body corporate or corporation incorporated outside Seychelles; and references to the memorandum or articles shall in the case of a corporation which is not a company be construed to mean the legislation constituting it, its charter, certificate or articles of incorporation, statutes, or other instrument having the same function as the memorandum and articles of a company, and references to its directors shall be construed to mean members of its governing body, by whatever name called.

(4) Notwithstanding anything contained in this section, a body corporate shall not (except for the purposes of Part VII of this Act) be deemed to be the holding company or subsidiary of another body corporate if neither body corporate is a company within the meaning of this section, and a body corporate shall not (except as aforesaid) be deemed to belong to the same group of companies as another body corporate if neither body corporate is a company within the meaning of this section.

(5) Any provision of this Act which overrides a company’s articles shall, except as provided by this Act, apply to articles of existing companies at the coming into operation of this Act, as well as to articles of companies formed under this Act, and shall apply also in relation to a company’s memorandum as it applies in relation to its articles.

(6) Unless the context otherwise requires, references (howsoever expressed) in any provision of this Act to the commencement of this Act shall be read as references to the commencement of that provision.

PART II

INCORPORATION OF COMPANIES, Memoranda AND ARTICLES OF ASSOCIATION AND MATTERS INCIDENTAL THERETO

Memorandum of Association

3. Mode of forming incorporated company.

(1) Any two or more persons associated for any lawful purpose may, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this Act in respect of registration, form an incorporated company with limited liability.

(2) The liability of a member of a company to contribute towards its assets or, in the winding up of the company, toward payment of the debts and liabilities of the company and the costs of the winding up, shall be limited to the amount for the time being not paid up, or credited as paid up, of the nominal value of the shares registered in his name and of the excess (if any) of the issue price of the shares over their nominal value.

(3) No member of a company shall be personally liable to any person claiming any debt, damages, compensation or other sum whatsoever from it by reason only of being a member of the company.

(4) For the purpose of the Commercial Code and all other laws a company shall be deemed to be commercial in character whether its objects or activities are commercial or not.

4. Requirements with respect to memorandum.

(1) The memorandum of every company shall be in the English language and must state—

(a) the name of the company, with “Limited” as the last word of the name and the word “Proprietary” as the penultimate word of the name in the case of a proprietary company;

(b) that the registered office of the company is to be situate in Seychelles;

(c) the objects or the lawful purpose of the company; and

[S 4(1)(c) rep and subs by s 2(b)(i) of Act 5 of 2013 w.e.f. 22 July 2013.]

(d) that the liability of the members of the company is limited.

(2) The objects or lawful purpose of the company to be state shall be the business or businesses which it is formed to carry on, or the purpose or purposes which it is formed to achieve, and it shall not be necessary or permissible to set out in the memorandum or the articles the powers or means by which the company is to attain its objects.

[S 4(2) am by s 2(b)(ii) of Act 5 of 2013 w.e.f. 22 July 2013.]

(3) The memorandum may not contain—

(a) a provision that the company may pursue such objects or do such things as its directors or members shall think fit, or shall think conducive or incidental to the achievement of its objects; or

(b) a provision that the contents of different parts of the clause or clauses of the memorandum setting out the objects of the company shall be construed independently of one other as though each such part stated the sole objects of the company; or

(c) any objects which are not stated with reasonable certainty.

(4) The memorandum must state—

(a) the number of shares which the company may issue and the nominal value of those shares, and whether each of those shares has the same nominal value or different nominal values are attributed to shares of different classes;

(b) the total of the nominal values of all the shares which the company may issue (“the nominal capital of the company”); and

(c) the total of the nominal values of all the shares of each class of shares which the company may issue (“the nominal capital of the company in respect of a class of shares”).

(5) If a company has different classes of shares, the memorandum shall state the rights and obligations of each class (except so far as such rights and obligations are prescribed by this Act or are uniform for all classes of shares), and no rights or obligations attached to shares by the articles, the terms of issue of shares, resolutions of the directors or members of the company or otherwise shall be valid if not set out in the memorandum.

(6) For the purpose of this Act, shares belong to different classes if different rights or obligations attach to them in respect of dividend, repayment of capital, voting at general meetings of the company, or the times at which, or the amounts by which, the issue price of the shares payable in cash is to be paid to the company; but shares do not belong to different classes merely because the holders of some of them are members of the company and the holders of others of them are not, nor because some of them are issued for a consideration other than cash.

(7) The form of the memorandum of a company shall be in accordance with the form set out in Part I of the First Schedule to this Act, or in the case of a proprietary company, in Part III of the said Schedule, or as near thereto as circumstances permit.

5. Subscription of the memorandum.

(1) The subscribers of the memorandum of a company which is not a proprietary company shall write opposite their signature to the memorandum the number of shares in the company which they agree to take, being not less in total than one-tenth of all the shares the company may issue (except shares to be allotted for a consideration other than cash).

(2) The subscribers of the memorandum of a proprietary company shall by subscribing be deemed to agree jointly and severally to take all the shares which the company may issue, but unless the memorandum otherwise provides, they shall as between themselves take such shares in equal proportions.

(3) The memorandum must be signed by each subscriber in the presence of at least one witness who must attest the signature.

6. Payment for shares by a consideration other than cash.

(1) If by an arrangement made before its incorporation any shares of a company are to be paid for by a consideration other than cash, the memorandum shall state the nature of such consideration, its value and the amount by which the shares to be issued in respect of it will be credited as paid up, not exceeding the stated value of such consideration.

(2) If within five years after the incorporation of a company any consideration for which shares have been issued under subsection (1) is sold by the company for less than the amount by which the shares are credited as paid up in respect of it, or if within the said five years the company is wound up or any of its debenture holders become entitled to realise a security comprising the consideration, and the consideration is sold by the liquidator or by the receiver or any other person acting for the benefit of debenture holders for less than the amount by which the shares are so credited as paid up, the first directors of the company and the person who furnished such consideration shall be jointly and severally liable to pay the difference to the company or the liquidator or the receiver, as the case may be, unless they satisfy the court—

(a) that if the consideration had been sold immediately after the incorporation of the company, it would have realised not less than the amount by which the shares are credited as paid up; or

(b) that since the acquisition of the consideration by the company, the company has so used, altered or dealt with it, or its nature or condition has so changed, that the amount for which it has been sold does not bear any reasonable relationship to its value at the date of the incorporation of the company.

(3) If within a year after its incorporation a company issues shares to be paid for by a consideration other than cash, or accepts a consideration other than cash in complete or partial payment for shares which were issued for a consideration in cash, it shall be presumed, unless the contrary is proved, that an arrangement was made before the company was incorporated that the shares were to be paid for by a consideration other than cash, and the directors of the company and the person furnishing the consideration other than cash shall incur the liabilities imposed by the last foregoing subsection.

(4) If judgement is given against two or more persons under subsection (2) or (3) of this section, the court may order that they shall make such contribution between themselves, or that one or more of them shall indemnify the other or others of them, as to the court shall seem just.

(5) No shares shall be issued to be paid for by the performance of services after the date of their issue, or by the person to whom they are issued or any other person contracting to perform such services.

(6) For the purpose of this Act shares are issued for a consideration other than cash unless they are to be paid for wholly by legal tender or by a cheque, banker’s draft or banker’s cheque, or by setting off a debt which is owned by the company and is immediately payable; in such excepted cases the shares are issued for a consideration in cash.

(7) For the purpose of this section debenture holders shall be deemed to become entitled to enforce their security in the circumstances set out in section 8(1) and (2) of the Companies (Debentures and Floating Charges) Act, 1970.

(8) If a memorandum is delivered to the Registrar without subsection (1) of this section being complied with, the first directors of the company who are in default shall be guilty of an offence.

(9) If a person accepts an issue of shares for a consideration other than cash knowing that subsection (1) of this section applies but has not been complied with, he shall be guilty of an offence.

(10) If within a year after the incorporation of a company an issue of shares is made for a consideration other than cash, or a payment for shares is made otherwise than in cash, the directors of the company and the person to whom the issue is made, or who holds the shares at the time the payment is made (as the case may be), shall be guilty of an offence if they know that the issue or payment is made pursuant to an arrangement made before the company was incorporated and that subsection (1) of this section has not been complied with.

(11) If shares are issued in contravention of subsection (5) of this section, the directors of the company who are in default and the person to whom the issue is made shall be guilty of an offence.

(12) An offence under this section shall be punishable by a fine not exceeding ten thousand rupees or imprisonment for not more than two years, or by both such fine and such imprisonment.

(13) Subsections (1) to (4) and (7) to (10) inclusive shall not apply to a proprietary company.

(14) This section shall not apply to an existing company.

Articles of Association

7. Subscription of articles of association.

There may in the case of any company be registered, with the memorandum, articles of association signed by the subscribers of the memorandum and prescribing regulations for the company.

8. Statutory regulations.

If a company is incorporated without articles being registered, or if articles are registered but do not exclude the regulations set out in Part II of the First Schedule to this Act, or in the case of a proprietary company, in Part IV of the said Schedule, those regulations shall, in so far as the registered articles do not exclude or modify them or make express provision for the same matter, be the regulations of the company in the same manner and to the same extent as if they were contained in duly registered articles.

9. Printing and signature of articles.

Articles shall be in the English language and must—

(a) be printed;

(b) be divided into paragraphs numbered consecutively; and

(c) be signed by each subscriber of the memorandum of association in the presence of at least one witness who must attest the signature.

Registration

10. Registration of memorandum and articles.

(1) The memorandum and the articles, if any, shall be delivered to the Registrar, and he shall retain and register them.

(2) —

(a) The Registrar shall satisfy himself that the memorandum and articles comply with the forgoing provisions of this Act and the objects or lawful purposes of the company, are lawful.

(b) A company shall not be identical to a name of a previously registered company or a name which is undesirable.

[S 10(2) rep and subs by s 2(c) of Act 5 of 2013 w.e.f.
22 July 2013.]

(3) If the Registrar is not satisfied as to any of the matters mentioned in the foregoing subsection, he shall in writing and within one month so inform the person who presented the memorandum and articles for registration, stating his reasons.

(4) Any person aggrieved by the failure of the Registrar to register the memorandum and articles may appeal to the court within one month after the Registrar has informed the person who presented the memorandum and articles for registration under the foregoing subsection, and upon the hearing of such an appeal the Court shall either direct the Registrar to register the memorandum and articles or dismiss the appeal, and the decision of the Court shall be final.

(5) The Mortgage and Registration Act shall not apply to the memorandum and articles of a company.

11. Effect of registration.

(1) On the registration of the memorandum of a company the Register shall certify under his hand that the company is incorporated and the date of the registration. The certificate issued by the Registrar shall be in the form set out in the Second Schedule to this Act.

(2) On and from the date of incorporation mentioned in the certificate of incorporation, the subscribers of the memorandum, together with such other persons as may from time to time become members of the company, shall be a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession, but with such liability on the part of the members to contribute to the assets of the company as is mentioned in this Act.

(3) The Mortgage and Registration Act shall not apply to a certificate of incorporation issued under this section.

12. Power of company to hold lands.

(1) A company incorporated under this Act shall have power to hold lands in any part of Seychelles.

(2) This section shall take effect subject to the provisions of the Immovable Property (Transfer Restriction) Act, 1963.

13. Conclusiveness of certificate of incorporation.

(1) A certificate of incorporation given by the Registrar in respect of any association shall be conclusive evidence that all the requirements of this Act in respect of registration and of matters precedent and incidental thereto have been complied with, and that the association is a company authorised to be registered and duly registered under this Act.

(2) A signed declaration that all requirements have been complied with, may be provided by an attorney-at-law or notary.

[S 13(2) rep and subs by s 2(a) of Act 10 of 2012 w.e.f. 17 December 2012.]

(3) In the case of a proprietary company the said declaration shall state that the company will on its incorporation fulfil the conditions set out in section 24(1) of this Act.

14. Power to dispense with “Limited” in name of charitable and other companies.

(1) Where it is proved to the satisfaction of the Minister that an association about to be formed as a company is to be formed for promoting commerce, art, science, religion, charity, or any other useful object, and intends to apply its profits or other income in promoting its objects, and to prohibit the payment of any dividend to its members, the Minister may by licence direct that the association may be registered as a company without the addition of the word “Limited” to its name, and the association may be registered accordingly.

(2) A licence by the Minister under this section may be granted on such conditions and subject to such limitations as the Minister thinks fit, and those conditions and limitations shall be binding on the association, and shall, if the Minister so directs, be inserted in the memorandum and articles, or in one of those documents.

(3) The association shall on registration enjoy all the privileges of a company and be subject to all the obligations of a company, except that of using the word “Limited” as part of its name.

(4) A licence under this section may at any time be revoked by the Minister, and upon revocation the Registrar shall enter the word “Limited” at the end of the name of the association upon the register, and the association shall cease to enjoy the exemption granted by this section:

Provided that, before a licence is so revoked, the Minister shall give to the association notice in writing of his intention, and shall afford the association an opportunity of stating its opposition to the revocation.

(5) This section shall not apply to a proprietary company.

General provisions with respect to Memorandum and Articles

15. Effect of memorandum and articles.

(1) Subject to the provisions of this Act, the memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by each member and on behalf of the company, and contained contractual undertakings on the part of each member and the company to observe all the provisions of the memorandum and of the articles.

(2) All money payable by any member to the company under the memorandum or articles shall be a debt due from him to the company.

16. Copies of memorandum and articles to be given to members.

(1) A company shall, on being so required by any member, shareholder or debenture holder of the company send to him a copy of the memorandum and of the articles, if any, subject to payment of a fee of five rupees or such less sum as the company may specify.

(2) If a company makes default in complying with this section, the company and every officer of the company who is in default shall be liable for each offence to a fine of one hundred rupees.

17. Issued copies of memorandum to embody alterations.

(1) Where an alteration is made in the memorandum or articles of a company, every copy of the memorandum or articles issued after the date of the alteration shall be in accordance with the alteration.

(2) If, where any such alteration has been made, the company at any time after the date of the alteration issues any copies of the memorandum or articles which are not in accordance with the alteration, it shall be liable to a fine of one hundred rupees for each copy so issued, and every officer of the company who is in default shall be liable to the like penalty.

Alteration of the Memorandum and Articles

18. Alteration of memorandum.

(1) Subject to the following provisions of this Act, a company may by special resolution alter or add to any of the provisions of its memorandum. Notice of the meeting called to pass the special resolution shall be given to all shareholders and debenture holders of the company and to the trustees of all debenture trust deeds covering debentures issued by the company in like manner as it is, given to members of the company.

(2) No company may alter the provisions of its memorandum that its registered office is to be situate in Seychelles.

(3) The share capital of a company may be altered only in the ways specified in sections 59 and 63.

(4) Notwithstanding anything in the memorandum or articles of a company, no member of the company shall be bound by an alteration made in the memorandum after the date on which he became a member, if and so far as the alteration requires him to take or subscribe for more shares than the number held by him at the date on which the alteration is made, or in any way increases his liability as at that date to contribute to the share capital of, or otherwise to pay money to, the company:

Provided that this subsection shall not apply in any case where the member agrees in writing, either before or after the alteration is made, to be bound thereby.

(5) A company may change its name only if the Registrar has previously approved the proposed new name, and the new name conforms to the requirements of section 4(1) of this Act.

(6) If, through inadvertence or otherwise, a company on its first registration or on its registration by a new name is registered by a name which, in the opinion of the Registrar, is too like the name by which a company in existence has previously been registered, the first-mentioned company may change its name with the consent of the Registrar, and, if he so directs within six months of its being registered by that name, it shall change it within a period of six weeks from the date of the direction or such longer period as the Registrar may think fit to allow.

If a company makes default in complying with a direction under this subsection, it shall be liable to a fine not exceeding one hundred rupees for every day during which the default continues.

(7) Where a company changes its name under this section, the Registrar shall enter the new name on the register in place of the former name, and shall issue a certificate of incorporation altered to meet the circumstances of the case,

(8) A change of name by a company under this section shall not affect any rights or obligations of the company or render defective any legal proceedings by or against the company, and any legal proceedings that might have been continued or commenced against it by its former name may be continued or commenced against it by its new name.

(9) Any alteration of or addition to the objects of a company shall be subject to the rules contained in section 4(2) and (3) of this Act.

(10) No provision of the memorandum required to be contained in it by section 6(1) of this Act shall be altered so, however, that nothing in this subsection shall be construed as prohibiting the deletion of any such provision as aforesaid after the expiration of the period of five years mentioned in section 6(2).

(11) Alterations and additions made to the memorandum may themselves be altered or added to in like manner as though they had originally been contained in the memorandum.

(12) The Mortgage and Registration Act shall not apply to a certificate of incorporation issued under this section.

19. Alteration of rights and obligations attached to classes of shares.

(1) No alteration of or addition to the memorandum shall be made in respect of the rights or obligations attached to shares of any class, if the company’s share capital is divided into different classes of shares, unless, not earlier than one month before the alteration or addition is made, a meeting of the holders of shares of the class in question is held and a resolution consenting to the alteration is passed at the meeting by a majority comprising at least three-quarters of the votes cast.

(2) The provisions of this Act and the articles of the company relating to meetings of a class of shareholders shall apply to a meeting held under the last foregoing subsection, except that the quorum for such a meeting shall be one or more persons present in person or by proxy holding at least one-third of the issued shares of the class in question.

(3) If the company’s articles provide for postal voting at general meetings, postal votes may be given at a meeting held under this section.

(4) The memorandum shall be considered as being altered in respect of the rights or obligations attached to a class of shares if—

(a) the words setting them out are altered; or

(b) the rights are made substantially less advantageous, or the obligations are made substantially more onerous, even though the words stating them are not altered; or

(c) shares carrying voting rights at general meetings are issued on a capitalisation of profits or reserves to the holders of another class of shares, but not to the holders of the class of shares in question; or

(d) shares of the class in question are issued to the holders of shares of another class on a capitalisation of profits or reserves; or

(e) the rights or obligations attached to another class of shares are altered or added to in a manner which will or may result in the rights attached to the class of shares in question being substantially less advantageous or the obligations attached to them being substantially more onerous.

(5) This section shall not apply to—

(a) a class of shares none of which has been issued; or

(b) a class of shares all of which have either been transferred to or redeemed by the company, or are held, by the company or by a nominee for it, and none of which have been re-issued.

20. Alteration of articles.

(1) Subject to the provisions of this Act and to the conditions contained in its memorandum, a company may by special resolution alter its articles.

(2) Any alteration so made in the articles shall, subject to the provisions of this Act, be as valid as if originally contained therein, and be subject in like manner to alteration by special resolution.

(3) Section 18(4) shall apply to the alteration of the articles of a company as it applies to an alteration of its memorandum.

21. Applications to the court to cancel alteration of memorandum or articles.

(1) Within one month after an alteration of the memorandum or articles has been made, the holders of not less than ten percent of the company’s issued shares, or if it has issued shares of different classes, the holders of not less than ten percent of the issued shares of any class, may apply to the court to cancel the alteration.

(2) Within one month after such an alteration has been made the holders of not less than twenty percent of the company’s issued debentures secured by a general floating charge, or if it has issued more than one class of such debentures, the holders of not less than twenty percent of the issued debentures of any such class, may apply to the court to cancel the alteration.

(3) An application may be made under either of the two foregoing subsections on behalf of persons who together are entitled to make the application by such one or more of their number as they may appoint in writing for the purpose before the application is made, and such a written appointment may consist of several documents each signed by one or more such persons.

(4) In determining the number of shares or debentures whose holders may make an application under subsection (1) or (2), no account shall be taken of shares or debentures issued after the alteration of the memorandum or articles is made, and no holder of any such shares or debentures may make or concur in making such an application, or be authorised to make, or authorise any other person to make, such an application by virtue of his holding of any such shares or debentures.

(5) No shareholder who voted in person or by proxy in favour of an alteration of the company’s memorandum or articles, or in favour of the approval of the class of shareholders to which he belongs being given to the alteration, may make an application under subsection (1), or concur in making such an application or be authorised to make, or authorise any other person to make, such an application.

(6) In determining the number of debentures whose holders may make an application under subsection (2), regard shall be had to the respective principal amounts of the debentures, or if they are redeemable at a premium, to their respective principal amounts plus the highest premium which may be payable on their redemption at any time after the alteration of the memorandum or articles is made; debentures shall be deemed to belong to different classes if any of the conditions specified in section 69(3) apply.

(7) An alteration of a company’s memorandum or articles shall not take effect until the expiration of one month after it is made, and if an application is made to the court under subsection (1) or (2) during that time, it shall not take effect until the court has confirmed it on each such application.

(8) On the hearing of an application under subsection (1) or (2) the court shall cancel the alteration if the applicants satisfy it that the alteration was not authorised by this Act, or did not satisfy the conditions or requirements imposed by this Act at the time the alteration was made.

(9) On the hearing of an application under subsection (1), the court may cancel the alteration if the applicants satisfy it either—

(a) that the alteration will operate unfairly or unreasonably to the detriment of the applicants without an adequate compensating advantage being conferred on them; or

(b) that the alteration is in respect of the objects of the company, and that the nature, extent or mode of conducting the business which the company has hitherto carried on, or the nature or mode of achieving the purposes which the company has hitherto pursued, will in consequence be so substantially changed that it is not reasonable that the applicants should be constrained to remain shareholders of the company.

(10) On the hearing of an application under subsection (2) of this section the court may cancel an alteration if the applicants satisfy it either—

(a) that the alteration will or may result in a breach of the company’s obligations under the debentures held by the applicants or under the debenture trust deed (if any) covering such debentures; or

(b) that the alteration is in respect of the objects of the company, and that the nature, extent or mode of conducting the business which the company has hitherto carried on, or the nature or mode of achieving the purposes which the company has hitherto pursued, will in consequence be so substantially changed that the security for the debentures held by the applicants will be substantially and detrimentally affected.

(11) If the court is satisfied that the alteration is objectionable for any of the reasons set out in subsections (9) or (10), it may, instead of cancelling the alteration, confirm it subject to the condition that the company shall acquire the shares or debentures of the applicants in right of which the application is made on payment of the fair market value of such shares or debentures as ascertained by the court, or, if the application is made by the holders of redeemable shares or debentures which the company has the right or is under an obligation to redeem not later than five years after the date of the alteration, on payment of the fair market value of such shares or debentures as ascertained by the court, or the nominal value or principal amount of such shares or debentures plus the highest premium which may be payable on their redemption at any time after the alteration to the memorandum or articles is made, whichever is the greater.

(12) If the court confirms the alteration subject to the condition mentioned in subsection (11), the alteration shall not be effective until the sum fixed by the court has been paid to the applicants, and if the said sum is not paid within six months after the date of the court’s decision, the alteration shall be deemed to have been cancelled by the court.

(13) If no application to cancel an alteration of the memorandum or articles is made within one month after it is made, or if all such applications are rejected by the court, the validity of the alteration shall not thereafter be questioned in any legal proceedings whatsoever.

(14) This section shall not apply to any alteration made to a company’s memorandum under section 59 or 63.

(15) Nothing in this section shall affect the right of any person to make an application to the court under section 136.

22. Registration of alteration of memorandum or articles.

(1) A company which has altered its memorandum or articles shall give notice of the date, form and effect of the alteration to the Registrar—

(a) if no application is made to the court under section 21, within fifteen days after the expiration of the period for making an application there-under; or

(b) if such an application is made, or if two or more such applications are made, within fifteen days after the drawing up of the order embodying the decision of the court on the last of such applications to be heard, and in that case the notice given to the Registrar shall be accompanied by office copies of the orders made by the court on all such applications.

(2) If a company makes default in delivering to the Registrar any document required by this section to be delivered to him, the company and every officer of the company who is in default shall be liable to a fine not exceeding one hundred rupees for every day during the first month that the default continues, two hundred and fifty rupees for every day during the next two months that default continues, and five hundred rupees for every day that default continues thereafter.

(3) This section shall not apply to any alteration of a company’s memorandum made under section 59 or 63.

Members and shareholders
of companies

23. Definition of members and shareholders.

(1) The subscribers of the memorandum of a company shall be deemed to have agreed to become members of the company, and on its registration shall be entered as members in its register of members.

(2) Every other person who agrees to become a member of a company, and whose name is entered in its register of members, shall be a member of the company.

(3) The following persons shall be shareholders of the company—

(a) a person who is a member of the company under subsection (2);

(b) a subscriber of the memorandum to whom shares have been issued;

(c) the heir or other persons entitled to the shares of a deceased shareholder under his will or on his intestacy, and the trustee in bankruptcy of a bankrupt shareholder;

(d) a person who is on his own behalf in possession of a **, whether by himself or by an agent acting for him.

(4) In this Act references to holders of shares mean the persons who are shareholders in respect of them, and references to holding shares shall be construed accordingly.

(5) In this Act shares shall be considered as having been issued if any person is a shareholder in respect of them.

Proprietary Companies

24. Definition of a proprietary company.

(1) A company is a proprietary company if—

(a) the penultimate word of its name is “Proprietary”;

(b) it has not more than fifty members, excluding persons who are in the employment of the company (other than directors) and persons who were in the employment of the company (otherwise than as directors) when they became members of the company and have continued to be members of it without interruption since they ceased to be employed by it;

(c) all its shareholders are members of the company, so however that the heir or other person entitled to the shares of a deceased member under his will or on his intestacy, the trustee in bankruptcy of a bankrupt member and a person in whose favour a transfer of shares has been executed shall not be taken into account for this purpose;

(d) the company has no preference shares issued and outstanding;

(e) at least three-quarters of the issued shares of the company are held by its directors, or if less than three quarters of its issued shares are so held, the company has not more than twenty members;

(f) all directors of the company are members of it;

(g) none of the members or directors of the company is a corporation, and the company has no holding company.

(2) If a company is formed as a proprietary company but fails at any time to satisfy all the conditions set out in the foregoing subsection, it shall immediately cease to be a proprietary company, and shall cease to have or use the word “Proprietary” as part of its name.

(3) If a proprietary company which has ceased to be such a company, or a company which was not formed as a proprietary company, at any time satisfies all the conditions set out in subsection (1) (with the exception of the condition in paragraph (a) of that subsection), it may apply to the Registrar to be treated as a proprietary company, and if the Registrar considers that the company satisfies the said conditions at the date of the application, he shall issue a certificate of incorporation to it in the name it had immediately before the application with the addition of the word “Proprietary” as the penultimate word thereof, and thereupon the company shall become a proprietary company:

Provided that an application may not be made under this subsection if there is subsisting any derivative interest created out of the company’s shares or debentures, other than a derivative interest excepted by section 26(1) or (3).

(4) Subsection (2) of this section shall apply to a company which has become a proprietary company under the last foregoing subsection as from the date of its application to be treated as a proprietary company, but without prejudice to the company again becoming a proprietary company under the last foregoing subsection.

(5) A proprietary company shall cease to be such a company—

(a) if the heir or other person entitled to the shares of a deceased member under his will or on his intestacy, or the trustee in bankruptcy of a bankrupt member, or persons deriving title under them respectively, do not become members of the company within nine months after the death of the deceased member or the adjudication in bankruptcy of the bankrupt member, as the case may be; or

(b) if the person in whose favour a transfer of shares has been executed, or if two or more such transfers have been executed in respect of the same shares, the person in whose favour the latest transfer has been made, has not become a member of the company within two months after the execution of the transfer or the first of such transfers (as the case may be), unless the transfer or all the transfers (as the case may be) have been cancelled.

(6) If a company ceases to be a proprietary company under the last foregoing subsection, subsections (3) and (4) shall apply to it, but the Registrar shall not be bound to issue a certificate of incorporation under subsection (3) if he considers that transfers of shares in the company have been made on numerous occasions and have not been registered within the said period of two months in order to conceal from the public the identity of the persons who are or have been substantial shareholders of the company.

(7) An application under subsection (3) shall be supported by a signed declaration by all the directors of the company that the company satisfies the requirements of that subsection at the date of the declaration, and the Registrar may accept such a declaration as sufficient evidence of the facts stated.

(8) The cessation of the right to have the word “Proprietary” as part of the name of a company, or the acquisition of that word as part of its name, by virtue of this section shall not be deemed to be a change in the name of the company for the purposes of sections 18 and 22(1) of this Act, but section 18(8) of this Act shall nevertheless apply, and the company shall within fifteen days of such cessation give notice to the Registrar of that fact, the date when the cessation occurred, and the reason for its occurrence.

(9) A company and any director of the company who is in default shall be guilty of an offence if the company—

(a) uses the word “Proprietary” as part of its name when it is not entitled to do so; or

(b) applies to the Registrar to be treated as a proprietary company when the conditions mentioned in subsection (1) are not satisfied; or

(c) fails to give notice to the Registrar that the word “Proprietary” has ceased to be part of its name in compliance with subsection (8).

(10) An offence under this section shall be punishable on conviction by a fine not exceeding ten thousand rupees.

(11) The Mortgage and Registration Act shall not apply to a certificate of incorporation issued under this section.

25. Proprietary companies may not issue prospectuses etc. to the public.

(1) A proprietary company shall not issue to the public a prospectus or invitation to make deposits with it.

(2) If a proprietary company contravenes the foregoing subsection, it shall immediately cease to be a proprietary company and shall cease to have or use the word “Proprietary” as part of its name, and section 24(3), (4), (7), (8) and (9) of this Act shall apply as though the company had ceased to be a proprietary company under that section.

(3) If a company which has contravened subsection (1) of this section applies to the Registrar to be treated as a proprietary company at any time after the contravention, the Registrar shall not accede to the application unless he is satisfied that the contravention was inadvertent or in consequence of a mistake of fact made in good faith.

(4) A proprietary company which contravenes subsection (1) of this section and its directors who are in default shall be guilty of an offence punishable on conviction by a fine not exceeding ten thousand rupees.

26. Prohibition on derivative interests.

(1) No derivative interest shall be created in shares or debentures of a proprietary company, except—

(a) the interest of a purchaser under a contract of sale which is completed by the vendor executing an instrument of transfer within six months after the date of the contract;

(b) the interests of the heir or other person entitled to the shares or debentures of a deceased holder under his will or on his intestacy; and

(c) the title or interest of the trustee in bankruptcy of a bankrupt member or debenture holder and the interests of his creditors upon his bankruptcy,

(2) For the purpose of this Act “derivative interest” means an unregistered transfer, trust, usufruct, mortgage, charge or other security, contract (or option) to purchase or exchange, right of pre-emption, the interest of a person in shares or debentures which are registered in the name of a nominee on his behalf, and the interest of a person to whom the holder of the shares or debentures has agreed or arranged to pay or transfer the whole or part of the dividends, interest, repayments of capital, principal or premiums, or to transfer or make available distributions of shares, debentures or assets received by him in respect of the shares or debentures in question.

(3) If a derivative interest other than an interest excepted from subsection (1) is created or arises in respect of shares or debentures issued by a proprietary company, the company shall immediately cease to be a proprietary company and shall cease to have or use the word “Proprietary” as part of its name, and section 24(3), (4), (7), (8) and (9) shall apply as though the company had ceased to be a proprietary company under that section.

27. Right of pre-emption.

(1) The continuing members of a proprietary company shall be entitled to purchase the shares of an outgoing member.

(2) An outgoing member is a member who—

(a) has died or been adjudged bankrupt;

(b) has resigned a directorship of the company;

(c) has contracted to sell any of his shares; or

(d) has created a derivative interest in his shares;

and the continuing members are all other members of the company.

(3) Upon the occurrence of any of the events specified in subsection (2) of this section, the outgoing member or the heir or other person entitled to his shares on his death under his will or on his intestacy shall notify the secretary of the company of the date and nature of the event, and within seven days after such notification, or if the secretary has not been notified within that time, within seven days after he discovers that the event has occurred, the secretary shall notify the continuing members of the number of shares held by the outgoing member, by the continuing members and by the continuing members who are directors respectively.

(4) Within three months after the secretary notifies the continuing members of the matters specified in the foregoing subsection, or if he fails to notify any continuing member of those matters within the time limited by that subsection, within four months of the occurrence of the relevant event under subsection (2), any continuing member may by writing addressed to the secretary offer to purchase all or any of the shares of the outgoing member at a price specified therein, but if he fails to make such an offer within the time aforesaid his rights under subsection (1) of this section shall lapse.

(5) The continuing members who have offered the highest price or the highest sequence of prices for shares equal in the aggregate to the number of shares held by the outgoing member (in this section called “the highest bidders”) shall, subject to the next following subsection, be bound and entitled to acquire those shares at the price or prices offered by them respectively, and on paying such price to the secretary, each of them may execute a transfer of the shares which he is entitled to acquire in the name and on behalf of the outgoing member or the heir or other person entitled to the shares on his death or his trustee in bankruptcy (as the case may be).

(6) Within seven days after the expiration of the period of three months or four months limited by subsection (4) of this section, the secretary shall notify the outgoing member, or his heir or the other person entitled to his shares on his death, or his trustee in bankruptcy (as the case may be) of the offers received by him from the highest bidders (specifying the number of shares which they have respectively offered to purchase and the prices which they have respectively offered for those shares). The outgoing member, or his heir or the other person entitled to his shares on his death, or his trustee in bankruptcy (as the case may be) may within fifteen days thereafter notify the secretary and auditor of the company of his or their unwillingness to transfer the shares of the outgoing member to the highest bidders. In that event the auditor of the company shall within one month after receiving such notification make an estimate of the fair value of the said shares, and if his estimate of their value exceeds the price or prices offered by any one or more of the highest bidders, subsection (5) shall take effect with the substitution of the value estimated by the auditor for any price bid by a highest bidder which it exceeds. If the auditor’s estimate of the value of the said shares does not exceed the price offered by any of the highest bidders, subsection (5) shall take effect as though the outgoing member, or his heir or the other person entitled to his shares on his death, or his trustee in. bankruptcy, had not notified the secretary and the auditor of their unwillingness to transfer the said shares to the highest bidders.

(7) An estimate under the last foregoing subsection shall be made in writing and copies of it shall be sent by the auditor simultaneously to the secretary, the highest bidders and the outgoing member, or his heir or the other person entitled to his shares on his death, or his trustee in bankruptcy (as the case may be). In making his estimate the auditor shall take into account the net value of the company’s assets (after deducting its liabilities and contingent and prospective liabilities), its earnings in each of its most recent five complete financial years and its current financial year, the expansion or contraction of the company’s undertaking during those five years and the prospect that such expansion or contraction will continue in the future, but the auditor shall not take into account the facts that a purchaser of the shares would acquire them subject to the rights of other members of the company under this section, or that the shares do or do not enable the outgoing member to control the voting at general meetings of the company, or that the shares are not readily saleable.

(8) If the continuing members offer to acquire less than all the shares of the outgoing member, this section shall apply in respect of the number of shares they offer to acquire, and references in this section to all the continuing members who offer to acquire the shares shall be substituted for references to the highest bidders.

(9) If two or more highest bidders have offered to acquire shares at the same price, and the number of shares available for them under subsection (5) of this section is less than the total number of shares they have offered to acquire, this section shall apply as if they had offered to acquire the number of shares available for them, and those shares shall be distributed among them in proportion to the number of shares they have respectively offered to acquire.

(10) The secretary shall hold any money received under subsection (5) of this section as agent on behalf of the outgoing member or the persons entitled to his shares on his death or his trustee in bankruptcy (as the case may be).

(11) An offence is committed by—

(a) an outgoing member who does not notify the secretary in accordance with subsection (3);

(b) a secretary who does not notify the continuing members in accordance with subsection (3), or the outgoing member, or his heir or the other person entitled to his shares on his death, or his trustee in bankruptcy in accordance with subsection (6);

(c) an auditor who does not send written copies of his estimate to the secretary, the highest bidders and the outgoing member or his heir or the other person entitled to his shares on his death, or his trustee in bankruptcy, within the period limited by subsection (6).

(12) An offence under this section shall be punishable on conviction by a fine not exceeding one thousand rupees.

(13) If the secretary of a company to which this section applies on the death of an outgoing member is unaware of the identity of his heir or of all or some of the persons entitled to his shares on his death under his will or on his intestacy, the secretary may instead of giving notification required by this section to those persons give notifications instead to the Curator of Vacant Estates, and such notifications given to the Curator shall be deemed to be the notifications required by this section.

28. Expulsion of a member of a proprietary company.

(1) Any member of a proprietary company may apply to the court for an order that another member shall be expelled from membership of the company.

(2) An application may be made under this section on any of the following grounds, namely—

(a) that the member whose expulsion is sought—

(i) has been guilty of serious or persistent breaches of the provisions of the memorandum or articles of the company; or

(ii) has been guilty of conduct seriously detrimental to the interests of the company or its members as a whole; or

(iii) has an interest or holds a position in another company, corporation, firm or undertaking which is likely to cause him to act to the detriment of the company and to result in substantial harm to it; or

(b) that the member whose expulsion is sought is a director of the company and—

(i) has been guilty of serious breaches of duty as such a director; or

(ii) has been guilty of serious breaches of duty as a director of another company or corporation, or as a partner in a firm; or

(iii) has been convicted of a criminal offence involving dishonesty.

(3) If the court in its discretion accedes to the application, the member whose expulsion is sought shall forthwith cease to be a member, and section 27 of this Act shall thereupon apply as though he had become an outgoing member.

(4) If offers to acquire all the shares of an expelled member are not made within the time limited by section 27(4), the continuing members of the company shall be deemed to have offered to take the shares not bid for at a price equal to their fair value as estimated by the company’s auditor under section 27(6) and (7), and the auditor shall make an estimate in like manner as if the outgoing member had notified the secretary under section 27(6) that he was unwilling to transfer the said shares.

29. Preservation of proportion of issued shares held by directors.

(1) If as the result of either section 27 or 28 of this Act, continuing members become entitled to acquire so many shares that if transfers of those shares were registered the directors who are continuing members would cease to hold three-quarters of the issued shares of the company, section 27(5) shall operate so that those directors shall be substituted for the highest bidders who are not directors in respect of such number of shares of the outgoing member as are required to ensure that the directors who are continuing members will hold three-quarters of the issued shares.

(2) The shares to be acquired by directors under subsection (1) of this section shall, as between themselves, be distributed between them in proportion to their existing holdings, and the shares shall be taken from those which the highest bidders who have offered the lowest price or the lowest sequence of prices would otherwise have acquired.

(3) The price to be paid by the directors for shares acquires under subsection (1) shall be the price which they respectively have offered as highest bidders under section 27(5), or if any of them has not offered such a price, the higher of the price which they have offered and the fair value of the shares as estimated by the company’s auditor under section 27(6) and (7), and the auditor shall in that case make an estimate in like manner as if the outgoing member had notified the secretary under section 27(6) that he was unwilling to transfer the said shares.

(4) This section shall not apply if the number of the continuing members of the company does not exceed twenty.

30. Voting agreements.

No agreement by a member of a proprietary company with another person, whether a member or not, whereby the other person may require the member to vote, or not to vote, or to vote in a particular manner at any meeting of the company, or whereby the member agrees to vote in a particular manner, or not to vote, at any such meeting, shall be valid.

31. **s etc., may not be issued.

No proprietary company may issue **s, ***s, or convertible debentures, and any purported issue of such securities shall be void.

32. Permitted agreements in respect of proprietary companies.

(1) Notwithstanding anything contained in sections 27 and 30, two or more members of a proprietary company may lawfully agree that—

(a) any one or more of them shall be entitled to require the other or others of them to cast the votes in respect of his or their shares for the re-election of each of the first-mentioned members as a director of the company, or for the payment to each of the first-mentioned members as such directors of agreed remuneration; or

(b) on the death or resignation of one or more of them, he or they may nominate one or more other persons (whether members of the company or not) to succeed him or them as a director or directors of the company, and the other parties to the agreement will (if necessary) cast the votes in respect of their shares in the company for the election of each of those persons as a director; or

(c) any right of pre-emption which may become exercisable over the shares of any one or more members shall be exercised so that an agreed price, or not less than an agreed price, is paid in respect of those shares; or

(d) on the death or resignation of a directorship of one or more of them, the other or others will not exercise any right of pre-emption over his or their shares, or will not exercise a right of pre-emption if certain agreed conditions are fulfilled, or unless certain agreed conditions are not fulfilled.

(2) For the purposes of this section price shall be deemed to be an agreed price, and remuneration shall be deemed to be agreed remuneration, if it is either fixed by the agreement or is ascertainable by applying a method of calculation prescribed by it.

(3) If the performance or fulfilment of a contract which is valid under this section would, in the circumstances existing at the time of performance or fulfilment, cause the company of which the parties are members to cease to be a proprietary company, the agreement shall be enforceable only if—

(a) the articles of the company do not require its members to abstain from any act whereby the company may cease to be a proprietary company; or

(b) the agreement is authorised or approved by an ordinary resolution passed by a general meeting of the company.

Capacity, contracts, authorisation etc.

33. Capacity to contract etc.

(1) A company shall, subject to the provisions of section 12, have the same capacity to enter into contracts, incur liabilities, and acquire, hold and dispose of property as an individual of full age who is not under any disability or interdicted, and may sue and be sued in its corporate name.

(2) The capacity of a company shall not be limited by any provision of its memorandum or articles as to its objects or powers, or as to the powers of its directors or of meetings of its members to act in its name or on its behalf.

(3) Nothing in this section shall relieve a director or officer of a company from liability to the company for a breach of the provisions of its memorandum or articles, or for entering into transactions unconnected with the promotion or carrying on of the company’s business as stated in the memorandum, or the achievement of the purposes there stated, and nothing in this section shall restrict the right of a shareholder to apply to the court under section 136, or to present a petition under section 201, or to present a petition for the winding up of the company.

34. Power of directors to act on company’s behalf.

(1) The directors of a company shall have power to do all acts on its behalf which are necessary for or incidental to the promotion and carrying on of its business as stated in its memorandum, or the achievement of the purposes there stated, and all persons dealing with the company, whether shareholders or not, may act accordingly.

(2) Each director of a proprietary company and each managing director of any other company shall have power to do the acts mentioned in subsection (1) without the concurrence of any other director.

(3) Without prejudice to the generality of the foregoing, the directors of a company, each director of a proprietary company and each managing director of any other company shall, subject to any contrary provisions of the memorandum or articles, have power to do the acts specified in the Third Schedule to this Act on behalf of the company.

(4) Nothing in this section shall relieve a director or officer of a company from liability to the company for a breach of the provisions of memorandum or articles, or for entering into transactions unconnected with the promotion or carrying on of the company’s business as stated in the memorandum, or the achievement of the purposes there stated; and nothing in this section shall restrict the right of a shareholder to apply to the court under section 136, or to present a petition under section 201, or to present a petition for the winding up of the company.

35. Form of contracts.

(1) Contracts on behalf of a company may be made as follows—

(a) a contract which, if made between private persons, would be by law required to be in writing, or to be evidenced by writing, or to be signed by the parties to be charged therewith, or by the parties or any party thereto, may be made on behalf of the company in writing signed by any person acting under its authority, express or implied;

(b) a contract which if made between private persons would by law be valid although not reduced into writing, may be made orally on behalf of the company by any persons acting under its authority, express or implied.

(2) A contract made according to this section shall be effectual in law in point of form, and shall bind the company and all other parties thereto.

(3) A contract made according to this section may be varied or discharged in the same manner in which it is authorised by this section to be made.

36. Bills of exchange etc.

(1) A bill of exchange, cheque or promissory note shall be deemed to have been drawn, made, accepted or endorsed on behalf of a company if drawn; made, accepted or endorsed in the name of, or by or on behalf or on account of, the company by any person acting under its authority.

(2) Nothing in this section shall affect section 26(2) of the Bills of Exchange Act, 1959.

37. Authentication of documents.

A document or proceeding requiring authentication by a company may be signed by a director, secretary, or other authorised officer of the company on its behalf.

38. Notice of matters by the company.

A company shall be considered as having notice of any matter if notice of it is given to, or received or obtained by, any director, except a director who obtains such notice for the purpose, or in the course, of committing a breach of duty as a director, or a fraud or wrong upon the company.

39. Protection of persons dealing with directors and agents.

(1) A person who deals with the directors of a company, or a director of a proprietary company, or a managing director of any other company, shall not be affected by any irregularity of procedure in connection with the authorisation of the transaction by a general meeting or other meeting of shareholders, or by the directors or any committee of directors, or the non-fulfilment of any condition imposed by the memorandum or articles in connection with the transaction.

(2) A person who deals with another person who is represented by the directors, or by a director of a proprietary company, or by a managing director of any other company, as having authority to act on the company’s behalf in connection with any transaction, may treat the company as bound by the acts of that person done within his apparent authority, even though he has not been authorised by the company to do those acts on its behalf.

(3) This section shall not entitle anyone to recover a debt from a company, or to enforce any liability against it, or to treat a transaction as binding on it, if in connection with the same matter he has been guilty of a fraud upon the company, or has participated or acquiesced in a fraud committed upon it.

PART III

SHARE CAPITAL AND DEBENTURES

Prospectuses and allotments

40. Registration of prospectuses and prohibition orders.

(1) No prospectus shall be issued in the name or on account of a company before it is incorporated.

(2) A prospectus issued by or on behalf of a company shall be reduced to writing and shall be dated, and, subject to subsection (6)(b), that date shall, unless the contrary is proved, be taken as the date of the first issue of the prospectus.

(3) A copy of every prospectus, signed by every director of the company and every person who is named in the prospectus as a proposed director of the company, or by his agent authorised in writing, shall be delivered to the Registrar for registration not less than twenty-eight days before the date when it is first issued.

(4) Any person to whom a prospectus has been issued, a copy of which has not been delivered for registration under the last foregoing subsection, may deliver to the Registrar a copy of it authenticated by his signature or the signature of his agent, or if it was not communicated to him in writing, a document so authenticated, setting out the information in respect of the company and the shares or debentures in question which was communicated to him in connection with the prospectus.

(5) If the Registrar is satisfied that any statement, promise or forecast contained in a prospectus is false, deceptive or misleading, or that any prospectus does not contain any statement, report or account required to be contained in it by this Act, he shall by an order (in this Act called a “prohibition order”) served on the company prohibit it from issuing the prospectus, or if the prospectus has already been issued, from issuing further copies of it and from allotting any of the shares offered for subscription by it:

Provided that if a copy of the prospectus has been delivered to the Registrar under subsection (3), he may not serve a prohibition order on the company later than twenty-six days after the copy was delivered to him.

(6) A prohibition order shall identify the part or parts of the prospectus to which the Registrar objects, and shall state the Registrar’s reasons for making the order.

(7) If the Registrar is satisfied that a prospectus, a copy of which has been delivered to him under subsection (3), is not objectionable on any of the grounds mentioned in subsection (5), he may by a written notice authorise the company to issue the prospectus before the expiration of the period of twenty-eight days mentioned in subsection (3), and this section shall then apply as though the said period of twenty-eight days had expired.

(8) The Registrar may accept any amendment offered by the company to a prospectus, and in particular may accept an amendment stating the price at which the shares or debentures are offered for subscription, or the price below which bids or tenders for the shares or debentures will not be accepted. The Registrar may revoke a prohibition order on accepting an amendment, but if the prospectus has already been issued, he shall do so only if he has satisfied himself that all persons to whom the prospectus has been issued have been adequately notified by individual notice, newspaper advertisements or otherwise, of the contents of, and reason for, the amendment.

(9) A company which is aggrieved by a prohibition order, or by the refusal of the Registrar to revoke a prohibition order, may appeal to the court within one month after the order is served on it, or the refusal is notified to it (as the case may be), and the court shall on the hearing of the appeal have the same powers as the Registrar, and its decision shall be final.

(10) The Registrar may require any director or officer of the company to make and deliver to him a signed declaration deposing to any facts which the Registrar considers relevant to the exercise of his powers under this section, or as a condition of giving an authorisation under subsection (7), or accepting an amendment to a prospectus, or revoking a prohibition order.

(11) Every prospectus issued to the public shall contain the following statement in clearly legible print at the head or commencement of it—

“A copy of this prospectus signed by every director and proposed director of the company has been delivered to the Registrar of Companies pursuant to the Companies Act, 1971, but the registration of the copy of this prospectus by the Registrar does not imply any representation by the Government that the securities offered by this prospectus are a desirable investment, or that the contents of this prospectus are true or complete”.

If two or more documents are issued to the same person in respect of the same offer of shares or debentures for subscription, and both or all of the documents are prospectuses, it suffices that the first one of them to be issued to that person contains the statement required by this subsection.

(12) An offence is committed if a company—

(a) issues a prospectus without delivering a copy thereof to the Registrar; or

(b) issues a prospectus before the period specified in subsection (3) has expired, unless the Registrar has given an authorisation under subsection (7); or

(c) issues a prospectus, or allots shares or debentures thereunder, after a prohibition order in relation to the prospectus has been served on it, unless the order has been revoked; or

(d) issues a prospectus to the public which does not contain the statement required by subsection (11) in clearly legible print at the head or commencement thereof; or

(e) issues a prospectus to which amendments have been offered and have been accepted by the Registrar, but does not incorporate all those amendments therein.

(13) If an offence is committed under the last foregoing subsection, every director of the company and every person who is named in the prospectus as a proposed director of the company shall be guilty of an offence, unless he satisfies die court that he did not participate or acquiesce in the commission of the offence, or that he made a mistake of fact in good faith and that if the facts had been as he believed them to be, no offence would have been committed.

(14) An offence under this section shall be punishable by a fine not exceeding ten thousand rupees or imprisonment for not more than two years, or by both such fine and imprisonment.

(15) A prosecution for an offence under this section may not be brought against a company which issues a prospectus offering its own shares or debentures for subscription.

(16) For the purpose of this Act—

(a) a prospectus is issued to the public if it is issued to more than twenty-five persons;

(b) a prospectus is first issued when it is first published as a newspaper advertisement, or when a copy of it is first delivered or shown to any person (other than a person invited to enter into an underwriting contract) with a view to inducing him to subscribe for the shares or debentures offered by it for subscription, whichever is the earlier;

(c) shares or debentures are offered by a company for subscription if they are offered for allotment in consideration of cash, or in consideration of the transfer or surrender of other shares or debentures, whether issued by the same company or not, and whether any supplemental payment of cash is to be made by or to the company or not; and

(d) an underwriting contract is a contract by which a person agrees to subscribe for shares or debentures with a view to offering all or any of them for sale, or to subscribe for such of the shares or debentures offered for subscription by a prospectus as are not subscribed for by the persons to whom the prospectus is addressed; and the expressions “underwriter” and “to underwrite” shall be construed accordingly.

41. Contents of prospectuses.

(1) Every prospectus issued by or on behalf of a company shall contain the statements specified in Part I of the Fourth Schedule to this Act, and every prospectus issued to the public by or on behalf of a company shall additionally contain the statements and the reports and accounts specified in Part II of the Fourth Schedule.

(2) Part III of the Fourth Schedule shall govern the interpretation of Parts I and II thereof.

(3) The Registrar may propose that amendments be made to any prospectus, whether a copy of it has been delivered to him or not, in order that it shall state clearly, accurately and concisely any of the matters required to be stated in it, or in any report or account, or abstract of a report or account, required to be contained in it, or in order that it shall present such statements, reports and accounts in a fair manner, giving proper weight to favourable and unfavourable aspects, and in a sequence which will make them most easily understood by the persons to whom the prospectus is addressed.

(4) If a company refuses to make any amendment proposed by the Registrar under the last foregoing subsection within seven days after the proposal is communicated to it, the Registrar may make a prohibition order under section 40(5) as though the prospectus did not comply with subsection (1) of this section, and subsections (6), (8), (9), (10) and (12) of section 40 shall apply accordingly:

Provided that if the company has delivered a copy of a prospectus to the Registrar under section 40(3), the Registrar shall not make a prohibition order under this subsection unless he has communicated a proposal under the last foregoing subsection to the company not later than fourteen days after the copy of the prospectus was delivered to him.

(5) A condition requiring or binding an applicant for shares in or debentures of a company to waive compliance with any requirement of this section, or purporting to affect him with notice of any contract, document, or matter not specifically referred to in the prospectus, shall be void.

(6) It shall not be lawful to issue any form of application for shares in or debentures of a company to any person other than a person invited to enter into an under writing contract, unless the form is issued with a prospectus which complies with the requirements of this section.

(7) If an application is made to a stock exchange in Seychelles or to a recognised overseas stock exchange for the shares or debentures offered for subscription by a prospectus to be quoted or dealt in thereon, and the making of the application is notified to the Registrar by the company or its broker (being a member of that stock exchange) not later than seven days after a copy of the prospectus was delivered to the Registrar under section 40(2), the contents of the prospectus shall be deemed to satisfy the requirements of subsection (1) of this section if they comply with the rules and requirements of that stock exchange.

(8) A notification under the last foregoing subsection shall be accompanied by a certificate by the directors of the company and the company’s broker (being a member of the stock exchange in question) that to the best of their knowledge, information and belief the prospectus, a copy of which has been delivered to the Registrar, does comply with the rules and requirements of the stock exchange, and the last foregoing section shall not apply to the prospectus unless such a certificate is delivered to the Registrar.

(9) An offence is committed if a company—

(a) issues a prospectus which does not satisfy, or is not deemed to satisfy, the requirements of subsection (1) of this section; or

(b) issues a form of application for shares or debentures in contravention of subsection (6); or

(c) notifies the Registrar itself or through its broker that an application has been made to a stock exchange in Seychelles or a recognised overseas stock exchange for shares or debentures to be quoted or dealt in thereon when no such application has been made; or

(d) delivers a certificate to the Registrar under subsection (8) which the person giving the certificate knows or has reason to believe to be false.

(10) If an offence is committed under the last foregoing subsection, every director of the company and every person who is named in the prospectus as a proposed director of the company shall be guilty of that offence, unless he satisfies the court that he did not participate or acquiesce in the commission of the offence, or that he made a mistake of fact in good faith and that if the facts had been as he believed them to be, no offence would have been committed.

(11) A prosecution may not be brought under this section against a company which issues a prospectus offering its own shares or debentures for subscription.

(12) A person acting, or purporting to act, as broker to a company shall be guilty of an offence if—

(a) he notifies the Registrar that an application has been made to a stock exchange in Seychelles or to a recognised overseas stock exchange for shares and debentures to be quoted or dealt in thereon, and either—

(i) he is not a member of that stock exchange; or

(ii) no such application has been made; or

(b) he makes or delivers to the Registrar a certificate under subsection (8), and either—

(i) he is not a member of the stock exchange to which the certificate relates; or

(ii) he knows or has reason to believe that the certificate is false.

(13) An offence under this section shall be punishable by a fine not exceeding ten thousand rupees or imprisonment for not more than two years, or by both such fine and imprisonment.

(14) The Governor in Council may by regulations supplement, amend or rescind any of the provisions of the Fourth Schedule to this Act, and it shall then take effect subject to the modifications made by such regulations.

42. Opening of subscription lists.

(1) No allotment shall be made of any shares in or debentures of a company in pursuance of a prospectus, and no proceedings shall be taken on applications made in pursuance of a prospectus, until the beginning of the third day after that on which the prospectus is first issued, or the third day after the earliest date on which the prospectus may first be issued lawfully under section 40 (whichever is the later), or such later time (if any) as may be specified in the prospectus. The beginning of the said third day or such later time as aforesaid is hereinafter in this Act referred to as “the time of the opening of the subscription lists”.

(2) Any allotment made in contravention of this subsection shall be void, but without prejudice to the validity of any allotment of the same shares or debentures later made to the same applicant.

(3) An application for shares in or debentures of a company which is made in pursuance of a prospectus shall not be revocable until after the expiration of the third day after the time of the opening of the subscription lists, or the giving before the expiration of the said third day, by some person responsible under section 46 for the prospectus, of a public notice having the effect under that section of excluding or limiting the responsibility of the person giving it.

(4) If a company contravenes subsection (1) its directors who are in default shall be guilty of an offence punishable by a fine not exceeding one thousand rupees.

43. Minimum subscription.

(1) Unless all the shares or debentures offered for subscription by a prospectus issued to the public are underwritten, the prospectus shall state the minimum amount of money required to be raised by the company by issuing the said shares or debentures before it will make any allotments of such shares or debentures (in this Act called “the minimum subscription”).

(2) If the minimum subscription is not subscribed within fourteen days after the prospectus is first issued, all allotments of shares or debentures already made thereunder shall be void, and no further allotments shall be made.

(3) Until the minimum subscription has been subscribed, all money received by or on behalf of the company from applicants for any of the shares or debentures shall upon receipt be deposited with a bank, which shall hold it as an agent on behalf of the applicants.

(4) Unless the minimum subscription is subscribed within fourteen days after the prospectus is first issued, the bank with whom money has been deposited under subsection (3), or if money has not been deposited under the said subsection, the company or the person who received it on the company’s behalf, shall forthwith return the money to the applicants from whom it was received, and if the money is not returned within seven days after the expiration of the said fourteen days, the bank with whom the money has been deposited, the company, its directors and any person who received money which has not been deposited with a bank shall be jointly and severally liable to repay it to the said applicants with interest thereon calculated from the expiration of the said fourteen days at the rate of ten percentum per annum.

(5) If within fourteen days after a prospectus is first issued, a person responsible for the prospectus under section 46 gives a public notice having the effect under that section of limiting or excluding the responsibility of the person giving it, this section shall take effect as if the said fourteen days expired on the day when the said public notice is given.

(6) Any condition requiring or binding any applicant for shares or debentures to waive compliance with any requirement of this section shall be void.

(7) An offence is committed if—

(a) a company issues a prospectus which should state a minimum subscription but does not do so; or

(b) a company or person acting on its behalf does not deposit money received from applicants in accordance with subsection (3) forthwith upon it being received; or

(c) a company allots shares or debentures before or after the expiration of fourteen days from the first issue of the prospectus under which they are allotted, if the minimum subscription is not subscribed within the said fourteen days; or

(d) a bank, or a company, or a person acting on the company’s behalf does not return money received from applicants in compliance with subsection (4).

(8) If an offence is committed under the last foregoing subsection, every director of the company and every person who is named in the prospectus as a proposed director of the company shall be guilty of that offence, unless he satisfies the court that he did not participate or acquiesce in the commission of the offence, or that he made a mistake of fact in good faith and that if the facts had been as he believed them to be, no offence would have been committed.

(9) If an offence is committed under paragraph (d) of subsection (7), the bank or person acting on the company’s behalf shall also be guilty of that offence.

(10) A prosecution may not be brought under this section against a company which issues a prospectus offering its own shares or debentures for subscription.

(11) An offence under this section shall be punishable by a fine not exceeding ten thousand rupees or by imprisonment for not more than two years, or by both such fine and imprisonment.

(12) For the purpose of this section—

(a) shares or debentures are underwritten if before the prospectus is first issued binding contracts to subscribe for them, or to subscribe for such of them as are not subscribed for by the persons to whom the prospectus is addressed, have been entered into with the company by a member of a stock exchange in Seychelles or of a recognised overseas stock exchange, or by such other persons as the Minister shall approve in the case of the particular prospectus by which the shares or debentures are offered for subscription, and a copy of each such contract has been delivered to the Registrar; and

(b) the minimum subscription is subscribed if applications are received by the company, or by a person acting on its behalf, for shares or debentures whose issue price in the aggregate equals or exceeds the minimum subscription, and the amount payable on application for such shares or debentures is received in legal tender, or in the form of cheques or banker’s drafts or banker’s cheques which the company or that person has no reason to believe will be dishonoured on presentation.

(13) This section does not apply to a prospectus issued by a company which offers shares or debentures for subscription solely in consideration of the transfer or surrender of other shares or debentures, whether issued by the company or not.

44. Application for quotation on a stock exchange.

(1) If a prospectus states that an application has been or will be made to a stock exchange for the shares or debentures offered by it for subscription to be quoted or dealt in thereon, and the application is not granted within fourteen days after the prospectus is first issued, or such further period, not exceeding fourteen days, as the stock exchange notifies the company it requires in order to consider the application, all allotments of shares or debentures made under the prospectus shall be void, and no further allotments shall be made.

(2) Until the application made to the stock exchange is granted, all money received by or on behalf of the company from applicants for any of the shares or debentures shall upon receipt be deposited with a bank which shall hold it as an agent on behalf of the applicants.

(3) Unless the application made to the stock exchange is granted within fourteen days or twenty-eight days (as the case may be) after the prospectus is first issued, the bank with whom the money has been deposited under subsection (2), or if money has not been deposited under the said subsection, the company or the person who received it on the company’s behalf, shall forthwith return the money to the applicants from whom it was received, and if the money is not returned within seven days after the expiration of the said fourteen days or twenty-eight days (as the case may be), the bank with whom the money has been deposited, the company, its directors and any person who received money which has not been deposited with a bank, shall be jointly and severally liable to repay it to the said applicants with interest thereon calculated from the expiration of the said fourteen days or twenty-eight days (as the case may be) at the rate of ten per centum per annum.

(4) If within fourteen days or twenty-eight days (as the case may be) after a prospectus is first issued, a person responsible for the prospectus under section 46 of this Act gives a public notice having the effect under that section of limiting or excluding the responsibility of the person giving it, this section shall take effect as if the said fourteen days or twenty-eight days (as the case may be) expired on the day when the said public notice is given.

(5) Any condition requiring or binding any applicant for shares or debentures to waive compliance with any requirement of this section shall be void.

(6) This section shall apply to shares or debentures for which an underwriter agrees to subscribe as if he had applied for them under the prospectus.

(7) An offence is committed if—

(a) a company issues a prospectus which states that an application has been made, or is proposed or intended to be made, for the shares or debentures offered for subscription to be quoted or dealt in a stock exchange, unless the application is made before or within three days after the prospectus is first issued; or

(b) a company or person acting on its behalf does not deposit money received from applicants in accordance with subsection (2) forthwith upon it being received; or

(c) a company allots shares or debentures after the expiration of fourteen days or twenty-eight days (as the case may be) from the first issue of the prospectus under which they are allotted, if the application to the stock exchange for the shares or debentures to be quoted or dealt in on it which was mentioned in the prospectus has not been granted within the said fourteen or twenty- eight days (as the case may be); or

(d) a company allots shares or debentures under a prospectus after the refusal of a stock exchange to grant the quotation or permission to deal in the shares or debentures which was mentioned in the prospectus under which the shares or debentures were allotted; or

(e) a bank, or a company, or a person acting on the company’s behalf does not return money received from applicants in compliance with subsection (3).

(8) If an offence is committed under the last foregoing subsection, every director of the company and every person named in the prospectus as a proposed director of the company shall be guilty of that offence, unless he satisfies the court that he did not participate or acquiesce in the commission of the offence, or that he made a mistake of fact in good faith and that if the facts had been as he believed them to be, no offence would have been committed.

(9) If an offence is committed under paragraph (d) of subsection (7), the bank or person acting on the company’s behalf shall also be guilty of that offence.

(10) A prosecution under this section shall not be brought against a company which issues a prospectus offering its own shares or debentures for subscription.

(11) An offence under this section shall be punishable by a fine not exceeding ten thousand rupees or by imprisonment for not more than two years, or by both such fine and imprisonment.

45. Action for rescission.

(1) A shareholder or debenture holder may bring action against a company which has allotted shares or debentures under a prospectus, for the rescission of all allotments made under the prospectus and the repayment to the holders of the shares or debentures of the whole or part of the issue price which has been paid in respect of them, if either—

(a) the prospectus contained a material statement, promise or forecast which was false, deceptive or misleading; or

(b) the prospectus did not contain a statement, report or account required to be contained in it by section 41 and the Fourth Schedule to this Act.

(2) In this section “shareholder” means a holder of any of the shares allotted under the prospectus, whether the original allottee or a person deriving title under him; and “debenture holder” means a holder of any of the debentures allotted under the prospectus, whether the original allottee or a person deriving title under him.

(3) For the purpose of this section a prospectus shall be considered as containing a material statement, promise or forecast if the statement, promise or forecast was made in such a manner, or context, or in such circumstances, as to be likely to influence a reasonable man in deciding whether to invest in the shares or debentures offered for subscription; and a statement, report or account shall be considered as omitted from a prospectus if it was omitted entirely, or if it did not contain all the information required by this Act. In an action brought under this section it shall not be necessary for the plaintiff to prove that he, or the person to whom the shares or debentures he holds were allotted, was in fact influenced by the statement, promise or forecast which he alleges to be false, deceptive or misleading, or by the omission of any report, statement, or account required to be contained in the prospectus.

(4) No action shall be brought under this section more than six months after the first issue of the prospectus under which shares or debentures were allotted to the plaintiff or the person from whom he derives title.

(5) If judgement is given in favour of a plaintiff under this section, the allotment of all shares or debentures under the same prospectus, whether allotted to the plaintiff or the person from whom he derives title or to other persons, shall be void, and judgement shall be entered in favour of all such persons (described by the collective title of “holders of shares or preference shares or ordinary shares or debentures issued under a prospectus dated..............”) for the payment by the company to them severally of the amount of the issue price paid up in respect of the shares or debentures which they respectively hold:

Provided that if any holder of shares or debentures at the date judgement is entered as aforesaid signifies to the company in writing (whether before or after the entry of judgement) that he waives his right to rescind the allotment of shares or debentures which he holds, he shall be deemed not to be included among the persons in whose favour judgement is entered.

(6) The operation of this section shall not be affected by the company being wound up or ceasing to pay its debts as they fall due, and in the winding up of the company a repayment due under the last foregoing subsection shall be treated as a debt of the company payable immediately before the repayment of the shares or debentures of the class in question, that is to say—

(a) in the case of a repayment in respect of shares, immediately before repayment of the capital paid up on shares of the same class, and the payment of any accumulated or unpaid dividends or any premiums in respect of such shares, but after the payment of all debts of the company and the satisfaction of all claims in respect of prior ranking classes of shares; and

(b) in the case of a repayment in respect of debentures, immediately before the repayment of the principal of debentures of the same class and the payment of any unpaid interest or any premiums in respect of such debentures, but after the payment of all debts or liabilities of the company which this Act or section 20 of the Companies (Debentures and Floating Charges) Act, 1970 requires to be paid before such debentures, and after the satisfaction of all rights in respect of prior ranking classes of debentures.

(7) It shall be a defence to an action under this section for the company to prove that the plaintiff was the allottee of the shares or debentures in respect of which the action was brought, and that at the time they were allotted to him he knew that the statement, promise or forecast of which he complains was false, deceptive or misleading, or that he knew of the omission of the matter from the prospectus of which he complains; and it shall also be a defence for the company to prove that such a plaintiff has received a dividend or payment of interest, or has voted at a meeting of members, shareholders or debenture holders (as the case may be) since he discovered that the statement, promise or forecast of which he complains was false, deceptive or misleading, or since he discovered the omission of the matter from the prospectus of which he complains:

Provided that an action shall not be dismissed if there are several plaintiffs, unless the company proves that it has a defence under this subsection against each of them, and in any case in which the company proves that it has a defence against the plaintiff or all the plaintiffs, the court may, instead of dismissing the action, substitute some other shareholder or debenture holder of the same class as a plaintiff, upon his application.

(8) If a company would have a defence under the last foregoing subsection but for the fact that the allottee of the shares or debentures in respect of which the action is brought has transferred them, the company may bring an action against the allottee for an indemnity against any sum which the court orders it to pay to the plaintiff in the action.

(9) The two last foregoing subsections except the proviso to subsection (7) shall apply also in the case of shares and debentures of the same class as those in respect of which a plaintiff obtains and enters judgement against the company under subsection (5), with the substitution in subsection (7) of references to the holder of the shares or debentures for references to the plaintiff, and with the substitution in subsections (7) and (8) of references to a right for the company to have the judgement set aside in respect of the shares or debentures for references to a defence to the action.

(10) This section shall apply to shares and debentures allotted pursuant to an underwriting contract as if they had been allotted under the prospectus.

(11) This section shall apply to shares or debentures issued under a prospectus which offers them for subscription in consideration of the transfer or surrender of other shares or debentures (whether with or without the payment of cash by or to the company), as though the issue price of the shares or debentures offered for subscription were the fair value (as ascertained by the court) of the shares or debentures to be transferred or surrendered, plus the amount of cash (if any) to be paid to the company or less the amount of cash (if any) to be paid by the company.

(12) The rights conferred on shareholders and debenture holders by this section shall be in substitution for all rights to rescission and restitution and to sue the company for damages or compensation under Articles 1109, 1116, 1117, 1131, 1304, 1382, 1383 and 1384 of the Civil Code, and such rights are hereby abolished in connection with prospectuses, but without prejudice to claims for damages or compensation against persons other than the company.

46. Claims for compensation.

(1) The following persons shall be liable to pay compensation to holders of shares or debentures issued under a prospectus for the loss they have sustained by reason of any material statement, promise or forecast therein which is false, deceptive or misleading, or by reason of the omission therefrom of any statement, report or account required to be contained in the prospectus by section 41 and the Fourth Schedule of this Act, that is to say—

(a) every person who was a director of the company at the time the prospectus was first issued;

(b) every person who authorised himself to be named and was named in the prospectus as a director, or as having agreed to become a director either immediately or after an interval of time; and

(c) every person who authorised the issue of the prospectus:

Provided that if a person has given a consent under section 47 of this Act to the inclusion of an opinion or report by him in the prospectus, he shall not by reason of having given such a consent be liable as a person who authorised the issue of the prospectus, except in respect of the contents of or omissions from the opinion or report as it appeared in the prospectus.

(2) A person shall not be liable under subsection (1) of this section if he proves—

(a) that having consented to become a director, he notified the company in writing that he withdrew his consent before the prospectus was first issued, and it was issued without his authority or consent; or

(b) that the prospectus was issued without his authority or consent, and that on becoming aware of its issue and before the allotment of the shares or debentures in respect of which the action is brought, he notified the Registrar in writing that the prospectus was issued without his knowledge or consent and gave reasonable public notice to that effect; or

(c) that after the issue of the prospectus and before the allotment of the shares or debentures in respect of which the action is brought, he first became aware that a statement, promise or forecast therein was false, deceptive or misleading, or that a statement, report or account required to be contained therein had been omitted therefrom, and he forthwith notified the company and the Registrar in writing that he withdrew his consent to the allotment of shares or debentures under the prospectus and of his reasons for doing so, and gave reasonable public notice of the withdrawal of his consent and of his said reasons; or

(d) that—

(i) as regards all parts of the prospectus, other than an opinion or report in respect of which another person has given his consent under section 47, he had reasonable ground to believe, and did believe up to the time of the allotment of the shares or debentures in respect of which the action is brought, that it contained no statement, promise or forecast which was false, deceptive or misleading, and omitted no statement, report or account required to be contained therein; and

(ii) as regards all parts of the prospectus in respect of which another person or other persons have given a consent or consents under section 47, that those parts set out the opinions and reports in the form in which the other persons had consented to their inclusion in the prospectus, and that he had reasonable grounds to believe, and did believe up to the time of the allotment of the shares or debentures in respect of which the action is brought, that the persons giving or making the opinions or reports were competent to make them and that none of them had withdrawn the consent given by him as aforesaid:

Provided that this subsection shall not apply in the case of a person liable, by reason of having given a consent under section 47, as a person who authorised the issue of the prospectus in respect of the contents of or omissions from the opinion or report made by him as it appeared in the prospectus.

(3) A person who, apart from this subsection, would be liable, by reason of having given a consent under section 47, as a person who authorised the issue of the prospectus in respect of a material statement, promise or forecast which was false, deceptive or misleading and was contained in an opinion or report made by him as it appeared in the prospectus, or in respect of the omission from such an opinion or report as it appeared in the prospectus of any matter required to be contained therein, shall not be liable if he proves—

(a) that having given his consent under section 47 as foresaid, he notified the company and the Registrar in writing that he withdrew his consent before a copy of the prospectus was delivered to the Registrar by the company; or

(b) that after delivery of a copy of the prospectus as aforesaid, and before the allotment of the shares or debentures in respect of which the action is brought, he first became aware that it contained a statement, promise or forecast which was false, deceptive or misleading, or that any matter required to be contained therein had been omitted therefrom, and he forthwith notified the company and the Registrar in writing that he withdrew his consent to the allotment of shares or debentures under the prospectus and of his reasons for doing so, and gave reasonable public notice of the, withdrawal of his consent and of his said reasons; or

(c) that he was competent to give or make the opinion or report, and that he had reasonable ground to believe, and did believe up to the time of the allotment of the shares or debentures in respect of which he is sued, that the said opinion or report contained no statement, promise or forecast which was false, deceptive or misleading, and no matter required to be contained therein was omitted therefrom.

(4) Where—

(a) the prospectus contains the name of a person as a director of the company, or as having agreed to become a director thereof, and he has not consented to become a director, or has withdrawn his consent to become a director before the first issue of the prospectus, and has not authorised or consented to the issue thereof; or

(b) the consent of a person is required under section 47 to the issue of the prospectus and he has not given that consent, or has withdrawn it before the first issue of the prospectus;

the directors of the company, except any without whose knowledge or consent the prospectus was issued, and any other person who authorised the issue thereof shall be liable to indemnify the person named as aforesaid or whose consent was required as aforesaid, as the case may be, against all damages, compensation, costs and expenses to which he may be made liable by reason of his name having been inserted in the prospectus, or of the inclusion therein of an opinion or report purporting to be made by him (as the case may be), or in defending himself against any action or legal proceedings brought against him in respect thereof:

Provided that a person shall not be deemed for the purposes of this subsection to have authorised the issue of a prospectus by reason only of his having given the consent required by section 47 to the inclusion therein of an opinion or report purporting to be made by him.

(5) A company which has repaid the whole or part of the issue price of shares or debentures under section 45 shall thereafter be deemed to be the holder of the shares or debentures for the purpose of this section, and may within two years after the date of such repayment bring actions under this section against the persons mentioned in subsection (1), who may avail themselves of the defences mentioned in subsections (2) and (3).

(6) The compensation recoverable under this section shall be the amount of the issue price paid up in respect of the shares or debentures in respect of which an action is brought, together with interest thereon from the dates on which the issue price or instalments of the issue price were paid at such rate as the court shall allow, not exceeding ten per centum per annum.

(7) In this section the expression “holder of shares or debentures” has the same meaning as (the expressions “shareholder” or “debenture holder” (as the case may be) in section 45, and subsections (3), (10) and (11) of section 45 shall apply to this section.

(8) An action under this section may not be brought more than two years after the time when the shares or debentures to which it relates were allotted, but an action brought by a company under subsection (5) may be brought within the time limited by that subsection.

(9) If judgement is given under this section against two or more persons, the court may order that one or more of them shall indemnify the other or others of them against the compensation ordered to be paid and the costs of the action, or that they shall make such contribution between themselves in respect of such compensation and costs as the court shall think just.

(10) Nothing in this section shall impose any vicarious or other liability on the company which issued the prospectus.

(11) If the shares or debentures in respect of which an action is brought under this section have been transferred since they were issued, no defence which would be available if the action were brought by the allottee or any intermediate holder shall be available against the shareholder or debenture holder who brings the action.

(12) In this section “reasonable public notice” means such individual communication or such advertisement, whether in a newspaper or otherwise, as is reasonably calculated to bring notice of the matter in question to the attention of the persons who have applied or may apply for shares or debentures under the prospectus.

(13) The rights to sue for compensation conferred by this section shall be in substitution for all rights to sue persons liable under this section for damages or compensation under Articles 1382 and 1383 of the Civil Code, and such rights are hereby abolished in respect of the liability of those persons for misstatements in or omissions from prospectuses, but without prejudice to the rights of a company entitled to sue under subsection (5) of this section to enforce its rights under any contract of employment, or for services, or any other contract whatsoever.

47. Documents to be delivered to Registrar with copy of prospectus.

(1) When a copy of a prospectus is delivered to the Registrar under section 40, there shall be delivered with it—

(a) the written consent of every person who has given an opinion or made a report which is set out, summarised, abstracted or quoted in the prospectus, to the inclusion in the prospectus of the opinion or report in the form in which it appears therein;

(b) a certificate signed by the directors of the company and proposed directors named in the prospectus that all the consents required by the foregoing paragraph have been delivered to the Registrar and have not been withdrawn, and that the opinions and reports in respect of which consents have been delivered appear in the prospectus in the form in which the persons giving the consents agreed to their inclusion; and

(c) a copy of the whole of every contract, report, account or opinion which is summarised, abstracted, quoted or referred to in the prospectus.

(2) References in this Act to reports, accounts or opinions shall include references to summaries and abstracts thereof and quotations therefrom.

(3) The prospectus shall identify the parts thereof in respect of which consents have been delivered to the Registrar under this section, and the parts thereof which are summaries or abstracts of, or quotations from, contracts, reports, accounts and opinions, and shall state in clearly legible print that such consents and full copies of such contracts, reports, accounts and opinions may be inspected at the Companies Registry and at the company’s registered office or at some other address in Seychelles given for the purpose, and copies thereof may be made by the person inspecting those documents.

(4) An offence is committed if a company—

(a) does not deliver the consents, certificate and copies of contracts, reports and accounts required to be delivered to the Registrar by this section at the same time as the copy of the prospectus to which they relate;

(b) delivers a certificate to the Registrar under this section which is false; or

(c) issues a prospectus which omits any statement required by subsection (3); or

(d) fails to permit any person who has made a request for the purpose to inspect any of the documents mentioned in subsection (3) at its registered office or at the other address (if any) given in the prospectus as the address for inspection, or fails to permit such a person to take copies of the whole or any part of any such document.

(5) If an offence is committed under the last foregoing subsection, every director of the company and every proposed director who has signed the copy of the prospectus delivered to the Registrar, shall be guilty of that offence, unless he satisfies the court that he did not participate or acquiesce in the commission of the offence, or that he made a mistake of fact in good faith and that if the facts had been as he believed them to be, no offence would have been committed.

(6) A prosecution shall not be brought under this section against a company which issues a prospectus offering its own shares or debentures for subscription.

(7) An offence under this section shall be punishable by a fine not exceeding ten thousand rupees.

48. Offers for sale of shares and debentures.

(1) If a company allots or agrees to allot shares or debentures with a view to all or any of them being offered for sale (whether directly or through another person or persons), any document by which the offer for sale is made shall for all purposes be deemed to be a prospectus issued by the company, and the provisions of this Act as to the statements, reports and accounts required to be contained in prospectus, or in respect of omissions from a prospectus, or otherwise relating to prospectuses, shall apply accordingly as if the shares or debentures had been offered for subscription, and as if persons accepting the offer in respect of any shares or debentures had subscribed for them, but without prejudice to the liability of the persons by whom the offer for sale is made in respect of statements, promises or forecasts contained in the document and in respect of omissions therefrom,

(2) For the purposes of this Act, it shall, unless the contrary is proved, be evidence that an issue or allotment, or an agreement to issue or allot shares or debentures was made with a view to the shares or debentures being offered for sale if it is shown—

(a) that an offer of the shares or debentures or of any of them for sale was made within one year after the issue or allotment or agreement to issue or allot; or

(b) that at the date when the offer was made the whole consideration to be received by the company in respect of the shares or debentures had not been so received.

(3) Section 41 as applied by this section shall have effect as if it required a prospectus to state in addition to the matters required by that section to be stated in a prospectus—

(a) the net amount of the consideration received or to be received by the company in respect of the shares or debentures to which the offer relates; and

(b) the place and time at which the contract under which the said shares or debentures have been, or are to be, allotted may be inspected;

and section 40 as applied by this section shall have effect as though the persons making the offer were persons named in a prospectus as directors of a company.

(4) Where a person making an offer to which this section relates is a company or a firm, it shall be sufficient if the document aforesaid is signed on behalf of the company or firm by two directors of the company or not less than half of the partners, as the case may be, and any such director or partner may sign by his agent authorised in writing.

(5) Without prejudice to the generality of subsection (1), this section shall apply if a company allots or agrees to allot shares or debentures with a view to them being sold on a stock exchange by any member or members of the exchange, whether the shares or debentures are allotted or agreed to be allotted to him or them or to other persons.

49. Registration statements.

(1) If a company issues shares or debentures without issuing a prospectus, it shall deliver a statement (in this Act called “a registration statement”) to the Registrar at least twenty-eight days before the issue is made. The registration statement shall contain the statements and copies of the reports and accounts specified in Parts I and II of the Fourth Schedule to this Act, and shall be signed by every director of the company and by every person who is named in it as a proposed director of the company.

(2) If a company issues a prospectus which contains the statements required by Part I of the Fourth Schedule to this Act, but not the statements and copies of the reports and accounts required by Part II of the Fourth Schedule, it shall, at least twenty-eight days before the prospectus is first issued, deliver to the Registrar a registration statement containing the statements and copies of the reports and accounts required by Part II of the Fourth Schedule, and the registration statement shall be signed by every director of the company and by every person who is named in it, or in the prospectus to which it relates, as a proposed director of the company.

(3) Section 40(5) to (10) inclusive, section 41(3) to (5) inclusive and section 45, 46 and 47 of this Act shall apply to a registration statement as they apply to a prospectus, and references in section 46 to a person who authorised the issue of a prospectus shall be construed as references to a person who authorised the delivery of a registration statement to the Registrar. Section 48 of this Act shall apply to a registration statement as it applies to a document by which an offer for sale of shares or debentures is made.

(4) An offence is committed if a company—

(a) issues shares or debentures without delivering a registration statement to the Registrar in compliance with this section; or

(b) issues shares or debentures before the period specified in subsections (1) or (2) has expired, unless the Registrar has given an authorisation under section 40(7); or

(c) issues shares or debentures after a prohibition order made by the Registrar under section 40(5) in relation to the registration statement has been served on it, unless the prohibition order has been revoked; or

(d) issues shares or debentures under a registration statement delivered to the Registrar which does not satisfy the requirements of subsection (1) or (2) of this section, as the case may be.

(5) If an offence is committed under subsection (4), every director of the company and every proposed director who has signed the copy of any prospectus delivered to the Registrar shall be guilty of that offence, unless he satisfies the court that he did not participate or acquiesce in the commission of the offence, or that he made a mistake of fact in good faith and that if the facts had been as he believed them to be, no offence would have been committed.

(6) A prosecution shall not be brought under this section against a company which issues shares or debentures in respect of which a registration statement has been, or should have been, delivered to the Registrar.

(7) An offence under this section shall be punishable by a fine not exceeding ten thousand rupees.

(8) This section shall not apply to a proprietary company, nor to an invitation to subscribe for shares or debentures issued to not more than twenty-five persons, all of whom are either shareholders or debenture holders of the company.

50. Fraudulent inducements to invest in shares or debentures.

(1) Any person who by any statement, promise or forecast which he knows to be false, deceptive or misleading, or by recklessly making any statement, promise or forecast which is false, deceptive or misleading, induces or attempts to induce another person to enter into, or to offer to enter into, an agreement to subscribe for, underwrite, sell, purchase, exchange or surrender shares or debentures, or to create any derivative interest out of shares or debentures, shall be guilty of an offence.

(2) For the purpose of this section a statement, promise or forecast is made recklessly if—

(a) it is made without belief that it is true, or in the case of a promise or forecast, that it is likely to be fulfilled; or

(b) if a reasonable man who had the same knowledge of the surrounding circumstances as the accused, would not have believed that the statement was true, or that the promise or forecast was likely to be fulfilled.

(3) This section shall apply whether the inducement or attempted inducement is contained in a prospectus, a document within section 48 of this Act, or a registration statement, or in any other communication whether written or oral.

(4) An offence under this section shall be punishable by a fine not exceeding one hundred thousand rupees, or three times the value of the consideration obtained, or sought to be obtained, by the accused, whether for himself or another person (whichever is the greater), or by imprisonment for not more than seven years, or by both such fine or imprisonment.

(5) Any person guilty of conspiracy to commit an offence under this section shall be punishable as if he had committed such an offence.

51. Return of allotments.

(1) A company shall within one month after allotting any of its shares or debentures deliver to the Registrar—

(a) a return of allotments, stating the number of the shares or debentures comprised in the allotments, the names, addresses and descriptions of the allottees, the issue price of the shares or debentures and the amount paid up or credited as paid up on each share or debenture; and

(b) in the case of shares or debentures allotted as fully or partly paid up otherwise than in cash, a copy of the contract in writing constituting the title of the allottee to the allotment together with a copy of the contract of sale, exchange or for the other consideration in respect of which that allotment was made, and a return stating the number of shares or debentures so allotted, the extent to which they are credited as paid up, and the consideration for which they have been allotted.

(2) Where such a contract as above mentioned is not reduced to writing, the company shall within one month after the allotment deliver to the Registrar for registration the prescribed particulars of the contract.

(3) If shares or debentures are allotted or agreed to be allotted with a view to all or any of them being offered for sale (whether by the allottee or through another person or persons), this section shall apply as if the shares or debentures had been allotted by the company to the first holders of them who do not take them with, a view to offering them for sale.

(4) If default is made in complying with this section, the company and every officer of the company who is in default shall be liable to a fine not exceeding one hundred for every day during the first month that default continues, two hundred and fifty rupees for every day during the next two months that default continues, and five hundred rupees for every day that default continues thereafter.

(5) Copies of contracts and the prescribed particulars of contracts delivered to the Registrar shall be deemed not to be writings for the purposes of the Mortgage and Registration Act.

Commissions, financial assistance for the acquisition of shares and debentures, and acquisitions of
shares of a company by itself

52. Power to pay commission.

(1) It shall be lawful for a company to pay a commission to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any shares or debentures of the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any shares or debentures of the company, only if—

(a) the payment of the commission is authorised by the articles; and

(b) the commission paid or agreed to be paid does not exceed ten per centum of the price at which the shares or debentures are issued or the amount or rate authorised by the articles, whichever is the less; and

(c) the amount or rate per centum of the commission paid or agreed to be paid is disclosed in the prospectus, or if there is no prospectus, in the registration statement in respect of the shares or debentures; and

(d) the number of shares or debentures which persons have for a commission agreed to underwrite firmly is disclosed in manner aforesaid.

(2) A vendor to a company, or any other person who receives payment in money, shares or debentures from a company, shall have, and shall be deemed always to have had, power to apply any part of the money or shares so received in payment of any commission, the payment of which, if made directly by the company, would have been legal under this section.

(3) Nothing in this section shall affect the difference or margin between the issue or other price paid or to be paid by a person who takes an allotment or transfer, or agrees to take an allotment or transfer, of shares or debentures with a view to offering all or any of them for sale, and the price at which that person sells or agrees to sell the shares or debentures. For the purpose of this subsection the word “price” shall include any valuable consideration, and the words “sale” and “sell” shall include any disposition for valuable consideration.

(4) It shall be unlawful for a company to pay or to agree to pay a commission falling within subsection (1) of this section by the company allotting or agreeing to allot any of its shares or debentures, or by the company conferring a right to subscribe for other shares or debentures to be issued or re-issued by it; and any such allotment, agreement for allotment, or conferment of a right to subscribe for such shares or debentures shall be void.

(5) For the purposes of this Act a person shall be considered as underwriting shares or debentures firmly if he enters into an underwriting contract, and also applies to the company for the shares or debentures to which the contract relates to be allotted to him, whether or not they are also applied for by other persons.

(6) Any contravention of this section by a director or any other officer of the company or by any other person shall be punishable by a fine not exceeding ten thousand rupees.

53. Prohibition of financial assistance by company for acquisition of shares or debentures of the company and its holding company etc.

(1) It shall not be lawful for a company to give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of, or in connection with, a purchase or subscription made, or to be made, by any person of or for any shares or debentures of the company, or of a company which belongs to the same group of companies as the company:

Provided that nothing in this section shall be taken to prohibit—

(a) where the lending of money is part of the ordinary business of a company, the lending of money by the company in the ordinary course of its business, without any obligation or condition being imposed on the borrower that he shall expend the whole or any part of the money lent in subscribing for or purchasing shares or debentures of the company, or of such other company as aforesaid;

(b) the gratuitous provision by the company, in accordance with any scheme authorised by an ordinary resolution passed at a general meeting of the company, of money for the subscription or purchase of fully paid shares of the company or of any other company or body corporate, being a subscription or purchase by trustees of shares or debentures to be held by or for the benefit of employees (including directors holding a salaried employment or office) of the company or of a company which belongs to the same group of companies as the company;

(c) the making by a company of loans to employees (including any director holding a salaried employment or office) of the company or of a company which belongs to the same group of companies as the company with a view to enabling those persons to subscribe for or purchase shares or debentures of any such company;

(d) the provision of money, guarantees, or securities by a company under an employee share subscription scheme to which it is a party.

(2) A contravention of this section by a director, or any other officer of a company, or by any other person shall be an offence punishable by a fine not exceeding ten thousand rupees or by imprisonment for not more than two years, or by both such fine and such imprisonment.

54. Acquisition by a company of shares of itself or its holding company.

(1) A company may not acquire or contract to acquire any shares issued or re-issued by itself or its holding company, or any derivative interest in such shares, whether directly or by means of an agent, nominee or trustee or otherwise.

(2) This section shall not prevent the transfer or surrender of shares to a company—

(a) if the shares are fully paid and no consideration is given or paid for them by the company; or

(b) if the shares are held in the company to which the transfer or surrender is made, and are replaced immediately by other shares (whether carrying the same rights or not) allotted to the persons making the transfer or surrender, being shares having unpaid upon them not less than the amount unpaid on the shares which are transferred or surrendered; or

(c) if the shares are fully paid and are transferred in consideration of a payment made out of the profits or revenue reserves of the company; or

(d) if the shares are fully paid and are transferred to the company as an agent, nominee or trustee under an arrangement in which it has no beneficial interest other than its right to remuneration and to an indemnity for its expenses.

(3) This section shall not apply—

(a) to the issue to a company of shares in its holding company on a capitalisation of the profits or reserves of the holding company, or on a rights issue being made by the holding company; or

(b) to a mortgage or charge in favour of a company on shares issued or re-issued by it or its holding company for any part of the issue price or for any debt owed to the company; or

(c) to a company’s right to remuneration or to an indemnity against its expenses under an arrangement falling within paragraph (d) of subsection (2); or

(d) to the issue of shares on a rights issue being made by the company or its holding company in respect of shares held by the company under an arrangement falling within paragraph (d) of subsection (2).

(4) All shares of a company transferred or surrendered to the company itself under paragraphs (a), (b) or (c) of subsection (2) shall be cancelled and shall become void as from the time of the transfer or surrender, and shall thenceforth be deemed not to be issued shares for the purposes of this Act, but without prejudice to the company’s power to re-issue such shares under sections 55(4) and 61.

(5) In this Act a “rights issue” means an issue of shares under an offer made by a company to its existing shareholders in proportion to the number of shades, or the number of shares of a particular class, which they already hold.

(6) Any contravention of this section by a director or any other officer of the company or by any other person shall be punishable by a fine not exceeding ten thousand rupees.

Payment for shares

55. Payment of the issue price of shares; capital reserve.

(1) Subject to the provisions of this section, the issue price of a share shall not be less than its nominal value.

(2) If a company issues a share at an issue price which exceeds its nominal value the excess, when paid to the company, shall be carried to the credit of the company’s capital reserve. If shares are issued for a consideration other than cash, the excess of the value of the consideration (as determined under section 6 or 57) over the total of the nominal values of the shares so issued, shall be carried to the credit of capital reserve.

(3) Subject to the following provisions of this section, a share may not be issued at a discount, that is to say, on terms that the share shall be credited as paid up to a greater extent than the amount actually paid to the company for it. In the case of shares issued for a consideration other than cash, the shares shall be considered as issued at a discount if the value of the consideration (as determined under section 6 or 57) is less than the total of the nominal values of the shares so issued.

(4) For the purpose of this Part of this Act, the amount for the time being standing to the credit of a company’s capital reserve shall be treated as though it were paid up share capital, but it shall be permissible for a company by an ordinary resolution passed in general meeting to provide for the use of its capital reserve—

(a) in paying up the nominal value or the issue price of unissued, surrendered or redeemed shares which are issued to the existing shareholders as fully paid bonus shares in the same proportions as a dividend might be paid to them in cash out of the company’s profits or revenue reserves; or

(b) in paying up the amount of any discount on shares issued at a discount; and shares issued on terms that their nominal value shall be paid in part by the holders thereof and in part under this paragraph shall not be considered as shares issued at a discount within the prohibition contained in subsection (3).

(5) The capital reserve of a company shall consist of the amounts credited to capital reserve under subsection (2), the amounts transferred to it under sections 56(5), 60 and 61 on the re-issue or redemption of any shares, and the amounts transferred to it from the company’s profits and revenue reserves under section 160(3), less the amounts applied out of capital reserve under the foregoing subsection and the amounts by which it has been reduced under sections 62 and 63.

(6) Nothing in this section shall affect the provisions of section 19(4) of this Act.

(7) This section applies to shares issued before or after the coming into force of this Act.

56. Enforcement of payment for shares.

(1) The issue price of shares issued to be paid for in cash shall be paid to the company within five years of payment for shares, after they are issued.

(2) The prospectus or registration statement under which shares are issued may state the amounts of the instalments by which the issue price is to be paid and the dates when such instalments will respectively become due, and the issue price of the shares shall then become due and payable accordingly.

(3) If subsection (2) does not apply to an issue of shares, the company may make calls on the holders of the shares in accordance with its memorandum and articles, and any part of the issue price which has not been called up at the expiration of five years after the issue of the shares shall then become immediately due and payable.

(4) If a shareholder fails to pay an instalment of the issue price or a call in respect of shares held by him within one month after the instalment or call becomes due, the company may serve a written notice on him stating the amount due in respect of his shares and the date on which it became due, and further stating that unless the amount is paid within one month after the notice is served, the shares will be forfeited, but without prejudice to the company’s right to recover any unpaid instalment from the shareholder after forfeiture. If the instalment or call is not paid within the period limited by the notice, the allotment of the shares shall become void, and the shares shall be forfeited without any resolution of the directors or a general meeting being passed.

(5) A company may re-issue shares whose allotment has become void under the foregoing provisions of this section. The re-issued shares shall be credited as paid up to the same extent as they were paid up immediately before the avoidance of the last preceding allotment of them. If the company receives any consideration on such a re-issue (other than payment of any instalments of the issue price or calls which are due and unpaid), the value of the consideration shall be credited to capital reserve. A re-issue of shares shall be treated for all purposes in the same way as an allotment of the shares, and if any instalment of the issue price of the shares or call which becomes due after the avoidance of the previous allotment is not paid, the provisions of this section as to forfeiture and re-issue of the shares and recovery of unpaid instalments or calls shall apply. Re-issued shares shall for all purposes be treated as though they formed part of the issue of shares of the same class, and accordingly they shall carry the same rights, obligations and priorities as shares of that class originally issued, and shall be taken into account in the same way as such shares in determining the percentage of shareholders, or of shareholders of any class, who may apply or appeal to the court or may present a petition to the court under any of the provisions of this Act.

(6) A company shall not be accountable to a shareholder for instalments of the issue price of his shares or calls which have been, paid if the company avoids the allotment of the shares under this section, and the company may recover from the shareholder any instalments of the issue price or calls which are due but unpaid at the date the allotment is avoided.

(7) This section (except subsections (1) to (3) inclusive) shall apply to shares issued before the commencement of this Act.

57. Payment for shares issued for a consideration other than cash.

(1) If shares are issued for a consideration other than cash, the shares shall not be allotted until the assets constituting consideration have been transferred to the company.

(2) Except in cases to which section 6 applies, no allotment of shares for a consideration other than cash shall be made, unless—

(a) the directors of the company have passed a resolution that the allotment shall be made;

(b) the resolution states the nature of the consideration, its value and the extent to which the shares to be issued in respect of it will be credited as paid up by virtue of it; and

(c) the resolution has been approved by an ordinary resolution passed by a general meeting of the company.

(3) For the purposes of this section, assets shall be considered as transferred to the company—

(i) in the case of goods, when the ownership passes to the company or when they are delivered to it;

(ii) in the case of negotiable instruments, when the company becomes entitled to enforce all the rights embodied in them in its own name without the concurrence of any other person; and

(iii) in any other case, when the ownership or lesser rights agreed to be vested in the company are legally vested in it.

(4) Section 6(5) shall apply to issues of shares under this section as it applies to issues under that section.

(5) If upon an allotment of shares for a consideration other than cash in circumstances in which this section applies—

(a) subsection (1) or (2) of this section is not complied with; or

(b) the shares are issued in contravention of subsection (4),

the directors of the company who are in default shall be guilty of an offence.

(6) If a person accepts an allotment of shares knowing that subsection (1) or (2) of this section has not been complied with, or accepts an allotment of shares in contravention of subsection (4), he shall be guilty of an offence.

(7) An offence under this section shall be punishable by a fine not exceeding ten thousand rupees or by imprisonment for not more than two years, or by both such fine and such imprisonment.

58. Subscribers of the memorandum.

(1) Sections 56 and 57 of this Act shall not apply to the subscribers of the memorandum of a company.

(2) The shares for which the subscribers have subscribed the memorandum shall be allotted to them immediately after the incorporation of the company, and they shall pay the nominal value of such shares in cash to the company within one year after the company is incorporated:

Provided that if within one month after its incorporation the company issues a prospectus or prospectuses inviting the public to subscribe for the whole of its nominal capital and in consequence the whole of such capital is subscribed by the public or by the underwriters named in the prospectus, the obligation of the subscribers of the memorandum to take and pay for the shares for which they subscribed the memorandum shall be discharged; and if less than the whole of the nominal capital is subscribed by the public or by such underwriters as aforesaid, the obligation of the subscribers of the memorandum shall extend only to the shares not subscribed by the public or by such underwriters, but so that the subscribers of the memorandum shall not be required to take and pay for more shares than the number for which they subscribed the memorandum.

Alteration and redemption of share capital

59. Alteration of share capital.

(1) A company may by an ordinary resolution alter the contents of its memorandum as follows, that is to say, it may—

(a) increase its share capital by new shares of such nominal value as it thinks expedient; or

(b) consolidate and divide all or any of its shares into shares of larger nominal value; or

(c) convert all or any of its fully paid shares into stock, and reconvert that stock into fully paid shares; or

(d) subdivide its shares, or any of them, into shares of a smaller nominal value than is fixed by the memorandum, so, however, that in the subdivision the proportion between the part of the nominal value paid and the part unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived; or

(e) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its nominal capital by amount of the shares so cancelled.

(2) A cancellation of shares in pursuance of this section shall not be deemed to be a reduction of share capital within the meaning of this Act.

60. Redeemable shares.

(1) Subject to the provisions of this section, a company may issue shares which by the terms of issue will be redeemed, or at the option of the company may be redeemed:

Provided that—

(a) no such shares shall be redeemed except out of profits or revenue reserves of the company which would otherwise be available for the payment of dividends, or out of the proceeds of a fresh issue of shares made for the purpose of the redemption;

(b) no such shares shall be redeemed unless they are fully paid;

(c) the premium (if any) payable on redemption, must be provided out of the profits or the revenue reserves of the company which would otherwise be available for the payment of dividends before the shares are redeemed;

(d) where any such shares are redeemed otherwise than out of the proceeds of a fresh issue of shares, there shall out of the profits or the revenue reserves of the company which would otherwise have been available for dividends, be transferred to capital reserve a sum equal to the nominal value of the shares which are redeemed.

(2) If shares are issued which may be redeemed at the option of the company, the memorandum shall state the terms of the option, and in particular, the earliest date on which the company may redeem the shares and the latest date by which it must redeem them (if any such latest date is provided for), and the manner by which the company will exercise its option, whether by itself selecting shares for redemption, or by drawings or ballot or otherwise.

(3) The redemption of shares under this section by a company shall not be deemed to be a reduction of capital within the meaning of this Act, but shares which have been redeemed shall be deemed not to be issued shares for the purpose of this Act.

(4) If a company has redeemed or is about to redeem any shares out of the proceeds of a fresh issue of shares, it shall have power to issue shares whose total nominal values do not exceed the total nominal value of the shares redeemed or to be redeemed as though those shares had never been issued.

(5) This section shall not apply to a proprietary company.

61. Re-issue of shares.

(1) A company which has taken a transfer or surrender of shares in itself under paragraphs (a), (b) or (c) of section 54(2) of this Act, may re-issue such shares on the same terms (other than as to the issue price) and with the same rights, obligations and priorities as attached to them when they were redeemed by or transferred or surrendered to the company, and with the same amounts credited as paid up thereon as were paid up at the date of the redemption, transfer or surrender.

(2) Section 56(5) of this Act (except the first two sentences thereof) shall apply to the re-issue of shares under this section

(3) This section shall not apply if the terms of issue of the shares provide that they shall not be re-issued.

62. Registration of alterations of share capital and of the surrender, redemption and re-issue of shares.

(1) If a company has—

(a) increased its share capital; or

(b) consolidated and divided its share capital into shares of larger amount than its existing shares; or

(c) converted any shares into stock; or

(d) re-converted stock into shares; or

(e) subdivided its shares or any of them; or

(f) redeemed any shares; or

(g) cancelled any shares, otherwise than in connection with a reduction of share capital under section 63
and 65; or

(h) taken a transfer or surrender of shares under paragraphs (a), (b) or (c) of section 54(2); or

(i) re-issued shares under sections 56(5) or 61;

it shall within fifteen days after so doing give notice thereof to the Registrar.

(2) If default is made in complying with this section, the company and every officer of the company who is in default shall be liable to a fine not exceeding one hundred rupees for every day during the first month that default continues, two hundred and fifty rupees for every day during the next two months that default continues, and five hundred rupees for every day that default continues thereafter.

Reduction of share capital

63. Special resolution for reduction of share capital.

(1) Subject to confirmation by the court, a company may by special resolution reduce its share capital in any way, and in particular, without prejudice to the generality of the foregoing power, may—

(a) extinguish or reduce the liability on any of its shares in respect of share capital not paid up; or

(b) either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost or unrepresented by available assets; or

(c) either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the wants of the company;

and may, in connection with the reduction, alter its memorandum by reducing the amount of its nominal capital and the nominal value of its shares.

(2) On a reduction of share capital a company may, but shall not be required to, reduce its nominal capital.

(3) This section shall apply to the capital reserve of a company as though it were paid up share capital.

(4) A special resolution under this section is in this Act referred to as “a resolution for reducing share capital.”

64. Application to the court for confirmation of reduction of share capital.

(1) Where a company has passed a resolution for reducing share capital, it may apply to the court for an order confirming the reduction.

(2) Where the proposed reduction of share capital involves either a diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, and in any other case if the court so directs, the following provisions shall have effect, subject nevertheless to the next following subsection—

(a) every creditor of the company who at the date fixed by the court is entitled to any debt or claim which, if that date were the commencement of the winding up of the company, would be admissible in proof against the company, shall be entitled to object to the reduction;

(b) the court shall settle a list of creditors so entitled to object, and for that purpose shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims, and may publish notices fixing a period within which creditors not entered on the list are to claim to be so entered or are to be excluded from the right of objecting to the reduction;

(c) where a creditor entered on the list whose debt or claim is not discharged or has not been determined, does not consent to the reduction, the court may, if it thinks fit, dispense with the consent of that creditor on the company securing payment of his debt or claim by appropriating, as the court may direct, the following amount—

(i) if the company admits the full amount of the debt or claim, or, though not admitting it, is willing to provide for it, then the full amount of the debt or claim;

(ii) if the company does not admit and is not willing to provide for the full amount of the debt or claim, or if the amount is contingent or not ascertained, then an amount fixed by the court after the like inquiry and adjudication as if the company were being wound up by the court.

(3) Where a proposed reduction of share capital involves either the diminution of any liability in respect of unpaid share capital, or the payment to any shareholder of any paid-up share capital, the court may, if having regard to any special circumstances of the case it thinks proper so to do, direct that subsection (2) of this section shall not apply as regards any class or any classes of creditors.

(4) The court shall direct that the provisions of subsection (2) shall apply if the proposed reduction of share capital is because the company has lost paid up share capital, or because paid up share capital is unrepresentative by assets, and a creditor or shareholder of the company establishes a prima facie case that there has been no loss or diminution in the value of the company’s assets, or that the loss or diminution is less than the reduction of capital specified in the resolution for reducing share capital.

65. Order confirming reduction of share capital.

(1) The court, if satisfied with respect to every creditor of the company who under the last foregoing section is entitled to object to the reduction, that either his consent to the reduction has been obtained, or his debt or claim has been discharged or has determined, or has been secured, may make an order confirming the reduction on such terms and conditions as it thinks fit.

(2) In deciding whether to confirm a reduction of share capital the court shall take into account—

(a) if the liability to pay unpaid capital in respect of a class of shares is cancelled or reduced, or if the capital in respect of a class of shares is to be repaid wholly or in part, the sufficiency of the assets of the company to provide for the repayment of the capital in respect of all classes of the company’s shares which rank for repayment of capital before that class of shares;

(b) if liability to pay unpaid capital is cancelled or reduced as aforesaid, or if capital is to be repaid as aforesaid, in respect of a class of shares, the sufficiency of the profits which the company is likely to earn in the future to provide for the fixed dividends on all classes of the company’s preference shares which rank for payment of a fixed dividend before that class of shares; and

(c) the desirability of not cancelling the whole of the nominal value of shares, except, on a repayment of paid-up share capital.

(3) If the resolution for the reduction of share capital provides for the repayment of the whole or part of the amounts paid up on a class of preference shares, or on certain shares of a class, the court shall not confirm the reduction unless it is satisfied either—

(a) that the amount to be paid to the shareholders will, if re-invested, yield to them not less than the average annual income they have received in respect of the shares, or in respect of that part of the amount paid up on the shares which is to be repaid (as the case may be), during the five complete financial years of the company immediately preceding the date when the resolution for reducing share capital was passed; or

(b) that the amount to be paid to the shareholders is reasonable having regard to the circumstances in which the shares were issued, the situation of the company, the yield on the issued shares of the company which are not to be repaid (in whole or part) by the terms of the resolution for reducing share capital, and the amount which the shareholders whose shares are to be repaid (in whole or part) would receive if the company were wound up forthwith;

but in no case shall the court confirm the resolution for reduction of capital in respect of preference shares if the amount to be paid to the holders of those shares is less than the amount by which the capital paid up on the shares held by them is to be reduced.

(4) If the resolution for reducing share capital provides for the cancellation of paid up capital which is lost or unrepresented by available assets, the court shall not confirm the reduction unless the loss or deficiency is borne by the holders of shares who would bear it if the company were wound up immediately, in the same order and in the same proportions as in such a winding up.

66. Registration of order confirming reduction of share capital.

(1) The Registrar shall register a resolution for reducing share capital which has been confirmed by the court, on delivery to him of a copy of an order of the court confirming the reduction of capital together with a minute approved by the court showing with respect to the share capital of the company as altered by the order—

(a) the nominal capital of the company;

(b) the issued share capital of the company; and

(c) the number and nominal values of shares issued or re-issued by the company and remaining out-standing, and the number and nominal values of such shares comprised in each different class of shares of the company;

(d) the amount (if any) deemed to be paid up on each such share and the amount remaining to be paid thereon;

(e) the number of unissued, forfeited, transferred and surrendered shares which the company may issue or re-issue and the nominal values of such, shares,

(2) On the registration of the order of the court and minute, and not before, the resolution for reducing share capital as confirmed by the order shall take effect.

(3) Notice of the registration shall be published in such manner as the court may direct.

(4) The Registrar shall certify under his hand the registration of the order and minute, and his certificate shall be conclusive evidence that all the requirements of this Act with respect to reduction of share capital have been complied with, and that the share capital of the company is such as is stated in the minute.

(5) The minute when registered shall be deemed to be substituted for the corresponding part of the memorandum, and shall be valid and alterable as if it had been originally contained therein.

(6) The substitution of any such minute as aforesaid for part of the memorandum of the company shall be deemed to be an alteration of the memorandum within the meaning of section 17 of this Act.

(7) The Mortgage and Registration Act shall not apply to a certificate issued under subsection (4).

67. Liability of shareholders after a reduction of share capital.

When the share capital of a company has been reduced, no share holder of the company, past or present, shall be liable to pay or contribute in respect of any shares held or formerly held by him more than the difference (if any) between the nominal values of the shares shown in the minute registered under the last foregoing section, and the amount paid up on the shares, or the reduced amount (if any) which in consequence of the reduction is deemed to have been paid up on the shares:

Provided that this section shall not affect the liability of any person to pay or contribute any part remaining unpaid of the premium at which the shares were issued.

68. Penalty for concealment of name of creditors etc.

(1) If any director or other officer of a company in connection with any proceedings under sections 64 and 65—

(a) wilfully conceals the name of any creditor of the company; or

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