Corporate Governance continues to expand globally, and indeed in The Bahamas, as organizations as well as the legislature recognizes the need for greater transparency in companies.
Legislation continues to be developed in order to ensure those with daily control of corporate entities are acting in the interest of all its stakeholders and not just for the sole benefit of any one constituent.
Minority shareholders should be in a position to receive information concerning those with greater beneficial interests in their companies and any dealings those individuals may have concerning material contracts with their companies. This is the direction taken by governance regime globally and The Bahamas is enhancing its laws to make such disclosures a requirement.
Updates to The Bahamas’ Securities Industry Rules were made by way of the Securities Industry (Corporate Governance) (Amendment) Rules, 2020 this April. The amendments requires additional disclosures be made by directors. Additionally, the Chairman and CFO must attest to the accuracy of the financial statements in writing.
In summary the new Rules provides as follows:
- prospective nominees to the Board of a company must disclose prior to appointment:
a. the number and nature of any memberships he may have on other Boards,
b. any employment or compensated commitments with other companies, public issuers or regulated entities; - a nominating committee (if any) must determine whether any prospective nominee can effectively contribute to the performance of the Board where such nominee holds more than one directorship or has other employment or compensated commitments;
- where a prospective nominee is elected or appointed and did disclose membership on other boards, employment or compensated commitments and any of those commitments are terminated he/she must inform the board of this;
- external Auditors under these amendments no longer have to make disclosures of conflicts of interest (see 11 (2));
- directors have a duty to disclose memberships, employment or compensated commitments held as well as details of any appointments to the board committees of and any ownership interests in other companies, public issuers or regulated entities;
- where a director or officer is a director or officer of a company who is party to a material contract or proposed material contract with the contracting company, this must be disclosed by the director or officer of the company.
The insertion of a new paragraph 2A makes it mandatory that when directors vote on any material contract for which a fellow director or officer of the company has advised that he is an officer or director of the proposed contracting company, the vote must be by an expressed resolution and that director or officer must recuse himself and not take part in the voting.
7. The Chairman and CFO must satisfy the board that the financial statements present a true and fair view of the affairs of the company – this must be done in writing; and
8. finally, (as in the previous Rules a and b continues to apply as stated below – however, c is newly introduced) the annual report of the company must disclose:
a. directors’ interests in contracts with the company, its subsidiaries and holding company and the nature and details of the contracts and such interests of the director;
b. any service and material contracts with controlling shareholders.
c. details of any board membership, employment or compensated positions held by directors and any board committees and ownership interests in other companies, public issuers and regulated entities.
A part of a corporate secretary’s role is to assist companies in managing their corporate governance and board obligations.
It is a good idea for corporate secretaries to prepare proper board charters to aid directors and officers in complying with regulatory requirements. Corporate secretaries should work with the company’s executives in developing corporate governance policies that will ensure company wide adherence to regulations and general good governance as a whole.
The Securities Commission of The Bahamas has stated that the amendments made to the Rules are “based on a review of The Bahamas’ Ease of Doing Business rating, with a view to improving minority shareholder protections, strengthening disclosure requirements for directors, nominee directors and officers of public issuers, and addressing shareholder rights generally”.
The author of this article is a Corporate Governance Attorney specializing in assisting public issuers as well those companies whose shares are not publicly sold or listed. Capital Law Associates provides Corporate Secretary services and assists companies in preparing board charters and directors protocols. Additionally, we assist companies with regulatory filings and general counsel services. We can be contacted at [email protected].