The new Companies Act 2014 is a significant step for Gibraltar's burgeoning businesses (Shutterstock)
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Landmark new laws for Gibraltar’s businesses, 84 years in the making

Gibraltar’s company laws have been lagging behind 21st century business practices, say Ian Felice and Gemma Vasquez. But times are changing with the brand new Companies Act 2014, introduced this month

What is company law? In short, it’s the area of law concerned with businesses and how they operate. Businesses come in all shapes and sizes, and the laws that govern them cover everything from how they’re formed, to how they draw up accounts or declare insolvency. In short, company law enables businesses to get on with doing their work legally and equitably in the most up-to-date, modern fashion.

Gibraltar has been a member of the EU since 1973, and has seen rapid private sector growth in recent years. The latest budget figures reflect a continued growth in the economy of around 10.3 per cent per annum. Against such a backdrop, you will probably be surprised to learn that Gibraltar has not updated its company law since its last Companies Act of 1930 – more than 80 years ago. By comparison, in that space of time the UK has seen three significant company law reforms: in 1948, 1985 and 2006. To put it bluntly, Gibraltar was missing a beat. The financial services industry has long felt that the law should be updated in line with the requirements of modern practice.

That’s why, in 2010, the exciting task of modernising Gibraltar’s company law began. The project was industry-led; an initiative of The Association of Trust and Company Managers which was drafted by a team at Hassans law firm. Just two years later, the new Act came into force on the first of this month. It is a proof that Gibraltar is a modern jurisdiction that has stepped up to join the rest of the world. The Companies Act 2014 constitutes a major overhaul of the law governing Gibraltar companies, and brings it into line with the Gibraltar’s reputation as a modern, leading finance centre.

So what does it actually look like? The Act comprises a raft of amendments, intended to streamline and improve Gibraltar company law in line with the needs of the industry’s various bodies, including Companies House, the Gibraltar Society of Accountants, the Gibraltar Funds & Investments Association, as well as individual legal practitioners and the financial services industry more broadly. The Companies Act 2014 also incorporates certain provisions equivalent to those in the 2006 Companies Act of England and Wales (the “UK Act”), as well as EU Directives. It also codifies certain procedures which were already occurring as a matter of practice. 

Here are just a few of the most significant and interesting changes:

Execution of documents 

A significant practical change is the manner in which documents and deeds may be executed, which under the Companies Act 2014 is largely the same as the position in the UK and less onerous than previously was the case. The 1930 Companies Act is ambiguous as to whether a deed may be executed by a director in the presence of a witness. It is now specifically provided that a deed, or other document requiring execution by a company, may be executed by a director and a witness or by two authorised signatories (a definition for which is provided in the Companies Act 2014).

Financial assistance

The Companies Act 2014 adopts what were referred to as the “whitewash” provisions in the UK in relation to financial assistance. The new provisions reflect the position under the 1985 Companies Act of England and Wales, with the definition of financial assistance having been tightened. This means that the practice of creating a holding company with which to provide financial assistance to its parent company is no longer possible.

The only manner in which financial assistance is possible under the Companies Act 2014 is through the “whitewash” provisions. A private company can give financial assistance under the Companies Act 2014 if its net assets are not thereby reduced, or, to the extent that they are reduced, if the assistance is provided out of distributable profits.

Unfair prejudice

Under the Companies Act 2014, a member of a company may apply to the court where such member feels that the company’s affairs are being, have been conducted, or are proposed to be conducted in a manner that is unfairly prejudicial to the interests of members. It is important to note that this action is brought on the behalf of the member itself and not on behalf of the company. If the court finds the application to be successful, it can order the company to refrain from doing any act complained of, authorise civil proceedings, or make a compulsory share purchase order

E-filing

Perhaps the most obvious example of the modernisation of the 1930 Companies Act is the inclusion of “e-filing” and the ability for companies to publish certain information on websites. Communications from a company to its shareholders, and vice versa, may also be made electronically, with the intention that all such contact be both quicker and more straightforward. The registrar has the ability to impose requirements as to the form, authentication and manner of delivery of documents to the registrar

The new Companies Act is a significant change, and its effects are already being felt. This is an important step for Gibraltar’s businesses, marking it out as a mature and modern marketplace.

Ian Felice and Gemma Vasquez are partners at Hassans Gibraltar, an international law firm 

http://www.gibraltarlaw.com/ 

Photo: Getty
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Looking to the future

In our last regular article on Gibraltar for a while, Gibraltar Chronicle editor Brian Reyes looks to the economic and political outlook for the short and medium term.

At the beginning of March, over 150 members of the local business community gathered in the World Trade Center construction site for a ‘topping out’ ceremony. As the last beam was placed on the structure, guests heard speeches about Gibraltar’s resilient economy, its potential for international growth and the need to offer global businesses the necessary working environment to remain competitive.

The EU referendum and the prospect of a so-called Brexit are dominating the headlines, and much of the coverage is gloomy. But in the background, Gibraltar’s private sector continues to drive projects which, in the long term, will help attract international investors to the Rock.

Earlier that same day, Gibraltar’s Development and Planning Commission heard submissions from well-known British architect Jonathan Manser, who leads the design team behind Eurocity, another major development that has its eye on Gibraltar and a prosperous future.

There are other schemes too, some still on the drawing board, some already under way. The MidTown Development, a mix of offices and top-end flats, is funded by a local consortium on a prime site in the heart of town. On the east of the Rock, the ambitious Bluewater project promises a mix of luxury and affordable homes alongside a marina. There are plans too for a former Ministry of Defence site named after Admiral Rooke, while in the Old Town, developers and individual home owners are breathing life into this run down but charming warren of steep, narrow alleyways.

Elsewhere, work is progressing on key infrastructure that will be essential for Gibraltar’s future, in or out of the EU.

Experts are finalising the environmental impact assessment for a facility that will store liquefied natural gas for Gibraltar’s new power station, already under construction. Work should resume too on the airport tunnel project, vital to freeing up Gibraltar’s clogged roads. A new sewage treatment plant, although still some way off, is also in the pipeline, a critical and long-overdue element of Gibraltar’s infrastructure.

There are new attractions for tourists - the opening of the Upper Rock rope bridge and sky platform is eagerly awaited by locals too - and important developments in culture and education, where the University of Gibraltar is building strong academic links across the community and beyond.

And against the background of uncertainty over the UK’s - and by extension Gibraltar’s - membership of the EU, the Gibraltar Government is leaving nothing to chance. A team of economists is analysing the different possible permutations of membership of the EU, EFTA or the EEA, including the potential effects on the Rock’s export economy of membership of the Common Customs Union. 

Despite the combative nature of Gibraltarian politics, there is unity on this question. Both the Gibraltar Government of Gibraltar and the Opposition agree that the UK and Gibraltar should remain in the EU and that Brexit could undermine the Rock’s economic model, creating uncertainty that Spain will undoubtedly seek to exploit. They add that the UK must factor Gibraltar into any post-Brexit negotiation with the EU.

Gibraltar’s long-term economic future will also be placed under scrutiny locally this year by the 2025 Committee, which brings together the public and private sectors and unions to draw up 10-year strategies for the different sectors of the economy, identifying challenges and opportunities in areas as diverse as e-gaming and shipping. A key element of this will be to find new opportunities for business in emerging markets in Asia, the Americas, the Middle East and Africa.

In parallel, a cross-party select committee of the Gibraltar Parliament will analyse various aspects of the 2006 Constitution ahead of a constitutional conference with the United Kingdom on a date yet to be determined. Along with the UK’s referendum on EU membership, the constitutional review will dominate much of parliamentary and political activity during 2016 and likely into 2017. If any changes are proposed as a result of the review, they will first have to be put to a referendum before they can be adopted.

Gibraltar is keeping a wary eye too on Spain, which has yet to swear in a government following an inconclusive general election last December. The future of cross-border relations will depend not just on whether the UK remains within the EU, but on the outcome of the post-election wrangling in Spain.

But even as Spanish politicians try to hammer out a coalition pact in a bid to avoid a return to the polls in June, there is grassroots contact across the border.

The Cross Frontier Group, which brings together business and union interests from Gibraltar and the Campo de Gibraltar, is forging ahead with a proposal to access EU funding for cross-border initiatives. Separately, the government continues to maintain contact with Spanish politicians ranging from PSOE senators to the mayor of La Linea, Juan Franco.

The hope is that, having cleared the EU referendum hurdle, Gibraltar will be able to develop positive dialogue with Spain, irrespective of who is in government. There is much to be gained through practical cooperation in areas as diverse as commerce, culture and sport.

There is, inevitably, a degree of caution. Spain’s acting Foreign Minister, José Manuel García-Margallo, has signalled that if Britain left the EU - and if his party remained in power - he would seek to revive the joint sovereignty proposal robustly rejected by Gibraltar in 2002. 

It would be a move doomed to failure because Gibraltar will have nothing to do with such a a proposal, and neither will the UK. Their shared view is that nothing can be decided on Gibraltar’s future without the agreement of the Gibraltarians.

When he was sworn in as Gibraltar’s new Governor last January, Lieutenant General Edward Davis reaffirmed the UK’s double-lock commitment to the people of Gibraltar, underscoring their inalienable right to self-determination and the UK’s commitment to secure their consent in all matters that pertain to the sovereignty of Gibraltar.  

In doing so, he was reflecting the words of one of his predecessors, General Sir William Jackson.

“Gibraltar is neither Spain’s to claim nor Britain’s to give,” Sir William wrote, in a sentence that resonates to this day and sums up the situation succinctly.

“It is the rock of the Gibraltarians.”

This will be the last item on the New Statesman’s Gibraltar hub for at least a while. We’ve thoroughly enjoyed bringing you insights and hopefully greater understanding of the issues affecting the Rock as well as its politics, culture, geology and a great deal else. We would like to thank our sponsors the Gibraltar government, our many writers and above all our readers.

Charlotte Simmonds, editor, March 2014-March 2015

Guy Clapperton, editor March 2015-March 2016

Brian Reyes is the editor of the Gibraltar Chronicle.