In an effort to further improve the ease of doing business within the Bahamas, Parliament has enacted the Companies (Amendment) Act, 2020 and the International Business Companies (Amendment) Act, 2020. Not only will these amendments allow for better and easier business practices within the Bahamas by reducing outdated and cumbersome processes, but also will put Bahamian business law in line with global business practices. This article outlines the most notable of these amendments as it relates to the execution of contracts and discusses the implications of such amendments and how they are likely to affect businesses.
Changes Introduced by the Companies (Amendment) Act 2020 in the Bahamas
Under the Companies Act, Ch. 308, it was required that a contract made on behalf of a company, between individuals be in writing under seal. The Companies (Amendment) Act 2020 repealed and replaced this provision. Under the new amendment a contract may be entered into, on behalf of a company by an individual and, where required by law to be in writing and signed, that contract may be entered into by or on behalf of a company in writing and signed by a person acting under the express or implied authority of the company and may be varied or discharged in the same manner.
Furthermore, where a contract entered into by an individual would be valid, although entered into orally and not reduced to writing, that contract may be entered into orally by or on behalf of a company by a person acting under the express or implied authority of the company and not reduced to writing and may be varied or discharged in the same manner. These amendments expressly allow for a contract to be entered into orally, where there is no legal requirement for the contract to be reduced in writing.
Moreover, section 25A now specifies that a document is validly executed by a company as a deed when “signed by a director of the company or by a person acting with the express or implied authority of the company in the presence of a witness who attests to the signature” or “sealed with the seal of the company and witnessed and attested by a director or such other person authorised by the company’s memorandum and articles to witness and attest the application of the company’s seal in the presence of a witness who attests to the signature.”
These amendments mean that the common seal of a company is no longer mandatory. Notwithstanding section 6 of the Amendment Act provides that companies are not required to amend its memorandum and articles of association in order to comply with the provisions, it is suggested for the avoidance of doubt or conflict, that companies wishing to execute documents without the requirement of the company seal removes any reference for such a requirement from its articles of association.
As it relates to foreign companies, section 25B of the Companies (Amendment) Act 2020, now sets out that a deed executed by a foreign company or entity that is intended to be governed by the laws of The Commonwealth of The Bahamas is validly executed where “the deed is executed in a manner permitted by the laws of the territory in which the foreign company or other foreign entity is incorporated, registered or organised; and the intention to be governed by the laws of The Bahamas is stated in or otherwise made apparent on the face of the deed.” This provides foreign companies and entities with more ease and flexibility in doing business in the Bahamas and with Bahamian companies and entities, thereby making the Bahamas a better global participant. These steps that Parliament has taken to further improve the ease of doing business are commendable. There is still much to be done however, the Bahamas is seeing a positive movement towards more effective and efficient business practices.
Also, check our blog post about Nonprofit organizations in the Bahamas.