RJ

Chapter 7-5

Business Law Chapter 7 - Part 5 (Companies Law)

Company Responsibility

  • Board of Directors Actions:

    • The Board has full power as long as they follow what's written in the Memorandum of Association.

    • Their actions or those of the General Manager are legally binding for outsiders.

    • If they cause any problems or damages, the company can seek compensation from the Board members.

Public Shareholding Companies (PLC)

  • Formation:

    • A PLC needs at least two founders to be established.

  • Shares:

    • Shares must be able to be listed and sold on the Stock Exchange.

    • Occasionally, the Minister might allow a PLC to be created with just one founder under specific conditions.

Address and Duration

  • Company Name:

    • The company name must show what it does and include "PLC".

  • Duration:

    • The PLC lasts indefinitely unless it's specifically tied to completing a certain task.

Financial Liability

  • Liability Structure:

    • The company's debts do not affect the shareholders' personal debts; they are separate.

  • Shareholder Liability:

    • Shareholders are only responsible for the amount they have invested in the company.

Operations Limited to PLC

  • Exclusive Operations:

    • Certain businesses like banking and insurance can only operate as PLCs.

Registration Process

  • Approval/Rejection:

    • The Minister decides if a company is registered within 30 days after looking at recommendations from the Controller.

  • Challenging Rejection:

    • If a company is rejected, the founders can appeal this decision in a Higher Court.

Capital and Shares

  • Authorized Capital:

    • The minimum amount of money needed to start a PLC is 500,000 Dinars, and at least 100,000 Dinars must be paid in.

  • Share Value:

    • Shares must have a basic value of one Dinar each.

Board of Directors (BoD)

  • Composition:

    • The Board needs to have at least 3 members but no more than 13.

  • Term:

    • They serve for a period of four years from when they are elected, and they cannot be government employees.

Membership Qualification

  • Shares Requirement:

    • There is a specific number of shares that a person must hold to be nominated for the Board.

  • Unconditional Holding:

    • The shares must not have any claims against them (no encumbrances).

Prohibition on Certain Nominations

  • Disqualifications:

    • People who have been convicted of crimes involving dishonesty cannot be nominated for the Board.

Loan Prohibition

  • Loan Restrictions:

    • A PLC is not allowed to give loans to its Chairman or members of the Board, except under specific situations involving banks.

Duties of the BoD

  • Reporting:

    • The Board must provide annual reports within 3 months after the fiscal year ends, detailing the financial status and future predictions.

Financial Disclosure

  • Publication:

    • The Board must publish financial statements within 30 days following a General Assembly meeting, and also provide reports every six months.

BoD Compensation Reporting

  • Transparency in Payments:

    • Detailed reports on how much Board members are paid must be accessible to shareholders.

General Assembly Invitations

  • Notification:

    • Shareholders must be informed at least 14 days before a meeting takes place.

Meeting Publication

  • Meeting Announcement:

    • The date for meetings must be published in local newspapers at least 14 days beforehand.

Membership Limits

  • Concurrent Membership:

    • A person can only serve on up to three Boards of Directors at the same time.

Chairman’s Responsibilities

  • Representation:

    • The Chairman acts as the representative of the PLC and is allowed to delegate some authorities.

  • Committee Membership:

    • They can also hold other titles, like General Manager, under certain conditions.

General Manager Responsibilities

  • Appointment and Oversight:

    • The Board appoints the General Manager, sets their salary, and has the authority to fire them.

Bona Fide Third Parties

  • Relation to Actions:

    • Outside parties are assumed to act honestly without needing to check the limits of the Board’s actions.

Violations Accountability

  • Liability for Violations:

    • The Chairman and the Board are responsible for any illegal actions and can be held jointly liable for damages.

Confidentiality Obligations

  • Data Protection:

    • Sharing confidential information is not allowed and can lead to penalties or job termination.

Liability for Negligence

  • Court Obligations:

    • The Board could be held responsible for leaving the company in debt due to negligence in management.

General Assembly Composition

  • Meeting Mandate:

    • PLCs must hold at least one annual meeting with enough shareholders present to make decisions (quorum).

Powers of General Assembly

  • Duties:

    • These include looking over the Board's reports, approving financial statements, deciding how profits are distributed, and choosing auditors.

Additional Powers

  • Other Functions:

    • They can vote on borrowing money, approval of mortgages, and other important agenda items.

Extraordinary Meetings

  • Conditions for Holding:

    • Extraordinary meetings can be called by the Board or if shareholders with 25% of shares or auditors request one.

Quorum for Extraordinary Meeting

  • Legal Presence Required:

    • More than half of the shares must be present; if a second meeting is needed, it can proceed with at least 40%.

Powers of Extraordinary Assembly

  • Significant Decisions:

    • They can make major changes such as amending company rules, approving mergers, or liquidations.

Decision Making in Extraordinary Meetings

  • Vote Threshold:

    • A majority of 75% of votes is required for decisions made in these meetings.

Discussion and Voting Rights

  • Shareholder Rights:

    • Shareholders who are registered can discuss topics and vote according to their share ownership.

Proxy Voting

  • Proxy Rights:

    • Shareholders can designate someone else to vote on their behalf if they provide written consent.

Proxy Validity

  • Continuity:

    • Proxies are still valid for any postponed meetings.

Invitation of Controllers

  • Mandatory Presence:

    • Controllers and auditors must be asked to attend the meetings; if they don’t, the meeting is invalid.

Binding General Assembly Decisions

  • Jurisdiction:

    • Decisions made in the assembly are binding regardless of whether shareholders show up, as long as they follow the law.

Contesting Decisions

  • Legal Challenges:

    • Courts can address disputes about meeting legality or the decisions made within a three-month period.

Voluntary Reserves

  • Reserve Allocation:

    • Companies can decide to set aside some profits as reserves every year.

Auditor Selection

  • Election of Auditors:

    • Auditors must be elected every year by the General Assembly, either one or multiple.

Auditor Duties

  • Oversight Responsibilities:

    • Auditors are responsible for auditing and checking the company’s financial situation and operations.

Auditor’s Reporting

  • Report Requirements:

    • Auditors must provide a report confirming that the company’s operations and financial dealings are legal and accurate.

Holding Companies Defined

  • Definition:

    • A PLC that manages other companies through owning shares or controlling boards.

Prohibitions for Holding Companies

  • Restrictions:

    • These companies cannot invest in certain types of companies or in themselves.

Representation in Subsidiaries

  • Board Status:

    • They must appoint representatives based on share ownership in their subsidiaries without needing to have broader elections.

Joint Investment Companies

  • Investment Focus:

    • PLCs that are created for investing in various legally regulated securities.

Exempt Companies

  • Offshore PLC:

    • Companies that are registered for activities outside of the Kingdom and are marked as exempt.

Company Transformations

  • Transformation Guidelines:

    • Outlines rules for changing ownership structures among partnerships.

Transformation Procedures

  • Documentation Required:

    • Any changes must be backed with applications and certified financial statements.

Continued Corporate Identity

  • Corporate Identity Maintenance:

    • Changes to the company structure do not change its existing identity or obligations.

Merger Procedures

  • Merging Guidelines:

    • Details the rules for merging with another company while keeping the legal status intact after the merger.

Foreign Companies

  • Operational Definitions:

    • Helps distinguish between foreign companies that are active and those that are not within the Kingdom.

Liquidation Types

  • Liquidation Process:

    • This can happen voluntarily and requires a liquidator to manage the winding up of operations, followed by proper notifications.

Liquidation Order

  • Debt Settlement Priority:

    • After a liquidator is appointed, any debts must be paid off based on their legal importance and in order.