A Guide to Investing in Trinidad and Tobago (2011) - Ministry of ...

Owning Shares
At common law a company could not own or purchase
its own shares, as this would constitute a reduction
in capital. Under the Companies Act, 1995,
a company is permitted to purchase or otherwise
acquire shares issued by it unless (subject to certain
exceptions) there are reasonable grounds for believing
that:
• The company is unable, or would, after that payment,
be unable to pay its liabilities as they become
due; or
• The realizable value of the company’s assets
would, after that payment, be less than the aggregate
of its liabilities and stated capital of all
classes.
In addition, redeemable shares may be purchased or
redeemed by a company at prices not exceeding the
redemption price as stated in or calculated according
to the formula in the articles unless there are reasonable
grounds for believing that:
• The company is unable or would, after that payment,
be unable to pay its liabilities as they become
due; or
• The realizable value of the company’s assets
would, after that payment, be less than the aggregate
of:
- Its liabilities
- The amount that would be required to pay
the holders of shares that have a right to be
paid, on a redemption or in a winding up, ratably
with or before the holders of the shares
to be purchased or redeemed
Directors` And Officers` Liabilities
Directors’ Duties
The Companies Act describes the overriding fiduciary
duty of directors as being a duty of care, diligence and
skill, to act honestly and in good faith and in the best
interests of the company. A breach of this duty usually
involves the director doing something that he should
not have done at all. The Act also requires a director
to exercise the degree of prudence and skill that a
normally prudent person would exercise in comparable
circumstances. Individual members of the Board
of Directors are liable for any damages sustained by
the company as a result of their personal breach of
duty whilst carrying out their functions.
The Companies Act enforces duties owed by directors
through specific statutory provisions. For instance, directors
may be made jointly and severally liable for:
• Authorising the issue of shares for a consideration
other than money if the consideration received
is less than fair.
• Permitting certain transactions (such as financial
assistance, share redemptions, dividends or indemnities)
when there are grounds for believing
that the company is insolvent.
• “Oppressive conduct” by a company, its affiliates
or directors.
To whom are the directors’ duties owed?
The Companies Act substantially increases the range
of persons to whom directors are made accountable.
While most directors’ duties are owed to the company
itself, the Act provides for a “derivative action”
that allows shareholders and others to sue directors
on behalf of the company. In some situations, directors
are made directly liable to persons other than the
company. For example, in relation to insider trading,
a director may be liable both to persons who suffer
a direct loss and to the company for any benefit received
by him. The liability faced by directors where
they are found to have been engaged in “oppressive
conduct” probably includes liability to shareholders,
creditors and others.
Directors’ duties and liabilities in situations of
possible company insolvency
Directors always operate under their overriding fiduciary
duty to act honestly and in good faith and their
duty to exercise skill, diligence and care. However,
specific duties and potential liabilities arise in the context
of any possible insolvency. In particular, whenever
questions arise about the solvency of a company, it is
necessary to ensure that the company does not:
• Unfairly incur new debts and obligations which it
would not be able to meet.
• Engage in transactions which further prejudice
its ability to meet its obligations.
As under the old Act, the court can impose personal
liability on directors, officers and others for continuing
to trade fraudulently or in reckless disregard of whether
the company is able to meet its liabilities. The Act
also prohibits specified transactions where a company
does not satisfy various prescribed solvency tests.
Directors who authorise any such transaction are exposed
to personal liability.
Directors need to be able to:
• Recognise those transactions which are prohibited
unless the relevant solvency test is met.
A Guide to Investing in Trinidad and Tobago (2011) 65