January 1997 Newsletter

Highlights

• A note from Bakul Kothari on the Director’s role
• Liquidating a company - the correct procedure
• Clients’ question

The Grant Gazette

The role of Company Directors

A company’s governing body is its Board of Directors. The Board is charged with determining the company’s strategic objectives and policies, appointing and controlling operational management and is accountable for its activities. Strategic objectives, determining policy and management are words that appeal to us, implying as they do status and perhaps power and privilege, but it is the word "accountable" that strikes a sobering chord and moderates enthusiasm.

A Director is accountable for his actions and for those of the Board. There are no limits to the damages for which a Director may be held liable if he is in breach of any of his duties, whether to a company or a third party. That word "accountable" must be taken seriously.

There appears to be no single definition of a Director’s duties but the law imposes three main duties upon Directors to their company, i.e. its shareholders :

1.  
2. A Director is expected to have and to exercise the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that Director in relation to the company.
3.  
4. The Director has a fiduciary duty. This means that he must show the highest loyalty to the company and act in good faith in its interest. The Director must take into account the interests of the employees, those of the customers and other parties with whom the company is contracting and of the general public in matters such as health and safety and product liability.
5.  
6. The third main duty is the duty to act within his powers as a Director. He must not carry out any act outside the capacity of the company, nor should he do anything exceeding the powers conferred upon him by the company’s Articles or by the law.

To summarise the above the Director is required, in conjunction with his fellow Directors, to be aware of and exercise effective control over the policies and operations of the company within the powers granted in the Memorandum and Articles and in full compliance with the law. If he fails to do so, any breach of this obligation may give rise to personal liability even though no impropriety may be involved.

We often talk of Executive, Non - executive and nominee Directors but in law there is no distinction, the duties and obligations, and the penalties for failure are all the same. A Director may be able to negotiate his pecuniary reward but not his responsibilities. This will of course explain why we at "Alexander Grant and Associates" wish to be in effective control of companies we administer for our clients.

NEWS FLASH

Alexander Grant & Associates is a correspondent firm of Horwath International which represents an independent group of firms in 80 countries.

In continued pursuit of "Alexander Grant" ‘s policy of staying closely in touch with our clients, associates and professional contracts, we outline below our business travel plans for the next three months. If you would like to arrange a meeting when we are in your area, please let us know.

JANUARY

London - Satnam Virdi

Speciality : Insolvency Strategic Management, small to medium sized Enterprises

FEBRUARY

London - Bakul Kothari

Speciality : Offshore Investments

MARCH

Nairobi - Wycliffe Mutsune

Speciality : Leisure time Industries

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Tax reminder

1996 personal and PAYE returns are due on 28^th February 1997. For any assistance, contact Steven Muturi.

2 The Grant Gazette January 1997

Liquidating a company - the correct procedure

A time may come when a company no longer has any assets or has ceased to trade or where for some other reason there is no need for it to continue to exist. The question arises - what to do with it?

The Companies Act ( Cap 486 ) sets out how such a company should be wound up. This may be :

1. by court order upon petition, or
2. voluntary basis (creditors or shareholders), or,
3. subject to supervision of the court

Of these various methods, a) and c) are likely to be relevant if the company is unable to pay its debts or where a dispute has arisen.

However, this newsletter deals with the shareholders (members) voluntary liquidation.

Whilst the company is in operation, its affairs are in the hands of its Directors, and the first step is for a majority of the Directors to make a statutory declaration of solvency. There are strict rules surrounding the timing and filing of this declaration. The Directors proceed immediately to convene an extraordinary general meeting of the shareholders to vote on the proposal to wind up and appoint a liquidator. On appointment, the liquidator assumes control of the company and all the powers of the Directors cease.

The role of the liquidator is to realise all the assets of the company, pay its debts, and distribute any surplus to the shareholders in proportion to their interests. In due course he must convene (in a prescribed manner) a meeting of the shareholders to present an account of his liquidation for their approval before it is filed with the Registrar of Companies. The company is formally dissolved three months after the final account if filed.

The formal liquidation is a somewhat bureaucratic process but it has the advantage that when it is completed there is no continuing liability on the Directors and officers in respect of their involvement with the company. This is particularly important to us at "Alexander Grant & Associates" where we act in such capacity on behalf of clients.

An alternative method of disposing of a company is by application to the Registrar of Companies. However, there are complex ramifications involved and we should be happy to advise with regard to individual circumstances.

Client’s question :

Question:

What are the uses of offshore companies?

Answer:

Off- shore companies are used extensively for international investment and/or commercial purposes. They generally permit a business activity to be carried on in a tax efficient manner and with a minimum of bureaucratic interference . When used in conjunction with offshore trusts, they can form part of a very effective international financial planning structure.

Philosophy Corner

Money is better than poverty, if only for financial reasons (Woody Allen)

Money isn’t everything; usually it isn’t even enough (Anon)

Get money first; virtue comes afterwards (Horace)

The two most beautiful words in the English language are "Cheque enclosed" (Dorothy Parker)

If you have no money, be polite (Proverb)

No man will take counsel, but every man will take money; therefore money is better than counsel (Jonathan Swift)

ALEXANDER GRANT & ASSOCIATES

VICTOR HOUSE, 4^TH FLOOR, KIMATHI STREET, NAIROBI, KENYA

Telephones : 002542 221306 / 245694 Facsimile : 002542 224314

Although all reasonable care has been taken in the preparation of this news briefing, Alexander Grant & Associates cannot accept any responsibility in law for its contents. Clients are advised to seek independent professional advice before taking action in consequence of anything contained herein.