The Caribbean Court of Justice (CCJ) on Friday ruled that Trust Company (Guyana) Limited is required to register with the Guyana Securities Council (GSC) where it issues a security owned by more than 50 persons.
The CCJ dismissed the appeal of Trust Company and affirmed the orders of the Guyana Court of Appeal. The CCJ heard the appeal on 20 April 2021.
According to the CCJ’s summary of the decision, on 5 March 2010, the GSC wrote to Trust Company informing it that, as it had more than fifty shareholders, it was a public company and was required to register with the GSC as a reporting issuer. Trust Company acknowledged that in 2009 there were sixty shareholders registered in the company’s books but it refused to register.
Trust Company then filed an action before the High Court of Guyana seeking declaratory relief that shareholding in excess of fifty persons did not per se make it a public company under the provisions of the Act, that it was a private and not a public company, and that it was not obliged to register with the GSC.
The trial judge found that Trust Company was a public company as it had in excess of fifty shareholders and was therefore required to register with the GSC. Trust Company appealed the High Court decision and the Court of Appeal then dismissed the appeal and affirmed the trial judge’s decision.
The CCJ said that the main issue raised in the appeal was whether Trust Company is a reporting issuer under the Act. It said that the determination of this issue involved the consideration of two questions of statutory interpretation: (1) whether Trust Company is a public company within the provisions of the Act; and (2) if the answer to the first question is in the affirmative, whether Trust Company is caught by s 56(1) of the Act and is required to register with the GSC as a reporting issuer.
The CCJ said that Trust Company admitted that shares are a form of security but it argued that a company can only be designated a public company if it issues a single share, which is then owned by more than fifty persons, and as it had not issued such a share that it was a private company. Trust Company urged the Court to undertake a contextual interpretation of the Act and asserted that the trigger for the regulatory scheme of the Act was the relevant transaction captured by the statutory scheme, and merely the number of shareholders. Trust Company also argued for the first time that s 56(1) was a transitional provision and the requirement to register only applied to public companies which existed on the start date of Part V, that is the 22 July 2002.
The GSC, the CCJ said, argued that Trust Company’s transactional approach ignored the express wording of the Act to wit that the Act contemplates that beneficial ownership of a security by a group in excess of fifty persons carries the consequence of altering the characterization of a company from private to public. The GSC agreed that in interpreting the term “public company”, the Court should examine the context of the Act but rejected the argument that the protection offered by the Act was limited to transactions only.
On the first issue, whether Trust Company was a public company under the Act, Guyana’s apex court, in a judgment authored by Justice Maureen Rajnauth-Lee was of the view that the legislature utilised two mechanisms for defining a public company. The first considers the company’s direct dealings with the public, irrespective of the size of the public uptake; this is found in s 3(2)(f)(i).
This mechanism however only addresses the company’s dealings with the public as it concerns shares and debentures. The second mechanism, the CCJ said, takes a broad brush “numbers game” approach to satisfy the test whether the company is a public company. It looks only at the number of persons who are beneficial owners of a “security” issued by the company, and that mechanism is to be found in s3(2)(f)(ii). This mechanism seeks to encompass dealings which extend beyond transactions involving shares and debentures, and uses as its threshold, the number of persons holding ownership in the securities.
The CCJ considered that the reference in s 3(2)(f)(ii) to a “security” must naturally and ordinarily include the plural “securities”.
Alarming
The CCJ said that the Court of Appeal correctly observed that it would be alarming if a company in Guyana could hide behind the use of the singular term “security” in s 3(2)(f)(ii) to avoid being designated as a public company.
“Such an approach would shatter the legislative policy which has, as its ultimate goal, the protection of persons who risk their capital and investment and who would otherwise be subject to the whims and fancies of the unscrupulous.
The Court therefore concluded that, having regard to the entire context of the Act and the main objectives of the Act as expressed by the Long Title, which include the regulation of the securities industry and the protection of the investing public, Parliament did not intend to exclude the plural “securities” or “shares” when the term “public company” was construed in s 3(2)(f)(ii). The suggestion that a company can only be designated a public company under the terms of s 3(2)(f)(ii)if it issues a single security or share, which is then owned by more than fifty persons, is a strained construction, which runs counter to the purpose of the legislation, and must be rejected”, the CCJ said.
The Court then addressed the second issue, whether Trust Company is caught by s 56(1) of the Act and obliged to file a statement with the GSC as a reporting issuer. Since it involved a matter of pure law, and was inextricably linked to the issues of statutory interpretation already before the Court, the Court allowed to be argued the submission of Trust Company that s 56(1) is a transitional provision even though this was a new point taken. However, the CCJ said it was not convinced by the submission.
Plain language
“The Court decided that the plain language of s 56(1) is that all public companies are deemed to be reporting issuers from the date of the commencement of Part V, that is, from 22 July 2002. The Court noted that s 56(1) does not say `as at the commencement of the Part’, but `from the
commencement of the Part’. The Court did not think that the ninety days’ prescription for the filing of the registration statement found in s 56(1) could trump the clear intention of the legislature that all public companies became reporting issuers from the commencement of Part V. Whether, therefore, the public company existed at the time the legislation came into effect or after the legislation came into effect, a public company is deemed to be a reporting issuer from 22 July 2002. This is the only common sense and logical interpretation of s 56(1)”, the CCJ said.
The Court also said that the interpretation suggested by Trust Company would be contrary to the policy, clear purpose and entire scheme of the Act. The policy of the Act is described in the wide definition of “public company” set out in s 3(2)(f). In addition, this definition sought to go beyond the definition of “public company” contained in the Companies Act of Guyana. Having decided that the definition of “public company” should be enlarged in order to provide the widest possible protection to the investing public, the Court posited the question: Why would Parliament abandon its policy by the use of a transitional provision in s 56(1), and make s 56(1) applicable only to those public companies which existed as at 22 July 2002.
“The Court decided that this would produce an absurd result which was unlikely to have been intended by the legislature in Guyana”, the CCJ said.
Further, the Court was of the view that to interpret s 56(1) as a transitional provision would have a ramification which was “illogical and irrational”. It would mean that Parliament intended, that s 56(6) which lays out the statutory procedure whereby a public company is no longer saddled with the obligations of a reporting issuer, would only apply to those “public companies” which existed at the commencement date. The CCJ said that it did not agree that Parliament would have intended such a narrow application of s 56(6).
“There is nothing in the entire scheme of the legislation to suggest that this was the intention of the legislature”, the CCJ said.
The CCJ was of the view that this was an appropriate case to eliminate the ambiguity by interpreting the subsection to read, ‘from the date of commencement of this Part, all public companies shall become reporting issuers, and shall, within ninety days of so becoming, file with the Council a registration statement in the prescribed form.’
Accordingly, the CCJ said that a company which becomes a public company after 22 July 2002 must register as a reporting issuer within 90 days from the date on which it became a public company.
The appeal was therefore dismissed and the orders of the Court of Appeal affirmed.
The Appellant is to pay the Respondent costs agreed in the sum of $150,000.
Timothy M Jonas SC and Teni Housty appeared for Trust Company while C A Nigel Hughes and Stephen Roberts appeared for the Guyana Securities Council.
