Business and Corporation Registration Act

P.R.O. LAW CONSOLIDATION
Law Status:	In-Force
Last Consolidated:	2018-01-15

Be it decreed by His Royal Majesty, King August Charles II, by and with the advice and consent of the Government and Peoples of Gotzborg, in this Chamber of Deputies here assembled, and by the authority of the same, as follows:

Preliminary

Short Title

1. This Act may be cited as the Business and Corporation Registration Act.

Repealed Law

2. The Registration of Business Ventures Regulation (2012) is hereby repealed.

3. The repeal above notwithstanding, any act or thing done, and any business or corporation registered, under that Regulation remains a valid action or registration.

4. The authority, as defined in Article 59, shall undertake such transitional actions as required to bring the existing registrations of business ventures into compliance with this law.

Commencement

5. This Act shall commence on a date to be fixed by Royal Decree.

Definitions and Interpretation

6. The Royal Chancellor may delegate the various powers, duties and responsibilities of this Act in such manner as he deems fit. Subject to such delegation, in this Act and any related regulation, decree, order or instrument of the Kingdom a reference to a person or organisation shall be taken as a reference to the person or the organisation delegated by the Royal Chancellor for the referred matter; and if no such delegation has been made, the reference shall be taken as a reference to the Vice-Minister for Commerce and Industry.

7. In this Act and any related regulation, decree, order or instrument - :

"applicant" means the person or entity which makes an application for registration under this law;
"Aktiengesellschaft" or "AG" means a corporation the ownership of which is divided into shares, having three or more owners and governed by a Board of Directors appointed by the owners, and for which the liability of the owners is limited;
"associate" means a person or entity which is named in an application for registration as an owner in addition to the applicant;
“the authority” means the delegated authority responsible for administration of the matter referenced;
"Bond" means a certificate of indebtedness guaranteed by the assets of a business entity, issued by that business entity and for which that business entity is liable for interest and redemption of the face value at specified times;
“client” and “customer” both mean a person who or entity which has engaged with a business entity for supply, delivery or other provision of goods or services;
"corporation" means an entity which is either an Aktiengesellschaft, or a Gesellschaft mit beschränkter Haftung, or a corporation registered and established as a corporation by Royal Charter;
"dissolution" means the permanent cessation of an entity, after which that entity does not exist;
"entity" or "business entity" means an agency, business, corporation, organisation or other non-personal form which has a separate legal character by means of being both named and registered;
"Gesellschaft mit beschränkter Haftung" or "GmbH" means a corporation limited by shares, having not more than five owners and governed by a Board of Directors consisting of the owners and only the owners, and for which the liability of the owners is limited;
"liability" means the legal obligation of a person or entity to satisfy the debts of an entity upon its dissolution;
“owner” means a person who has part or full ownership of a business entity in the form relevant to the type of business entity;
"Partnership" means a business that is owned and governed equally by not more than three owners the liability of whom is not limited;
"person" means a natural person;
"Royal Charter" means a form of registration made by decree of His Royal Majesty the King of Gotzborg;
"shares" means certificates of partial ownership of a corporation;
"securities exchange" means an entity the business of which is to facilitate sale and purchase of bonds, shares and other negotiable instruments;
"Sole Proprietorship" means a business that is registered as a named entity but is owned and governed by a single person whose liability is not limited.

Business Activity, Entities and Types

Business Activity

8. Business activity, for the purposes of this law, is activity that involves an economic transaction and is of an organised and repeatable nature.

9. Activity does not need to be designed or intended for profit to be classified as business activity.

10. An economic transaction between two natural persons which is ad hoc, or non-repeatable, or which occurs solely because of a relationship between the two persons, is not business activity.

11. Although the employment relationship involves economic transactions and is organised and repeatable, the activity between an employer and employee is not regulated by this law and the actions of an employee are not business activity for the purposes of this law.

12. A person breaches this law if they engage in business activity outside a registered business entity; but a person does not breach this law if their engagement is solely as a customer or client.

Business Entity Types Generally

13. There are five types of business entity in the Kingdom -

Sole Proprietorship.
Partnership.
Gesellschaft mit beschränkter Haftung corporation.
Aktiengesellschaft corporation.
Royal Charter corporation.

14. Regardless of type, a business entity -

is registered; and
has a name; and
has an owner or owners; and
except for a Sole Proprietorship, has legal character to act independently of its owners, to own and dispose of property, to enter into contracts, and to do any other thing that a natural person is capable of doing including being the owner of another business entity.

Sole Proprietorship

15. A Sole Proprietorship is a business entity which has a single owner and does not have a separate legal character from its owner.

16. Ownership of a Sole Proprietorship enables the owner to legally use the name of the business entity in the conduct of business.

17. Ownership of a Sole Proprietorship may not be transferred unless and until the entity is changed to a different type.

18. In the case of the dissolution of a Sole Proprietorship, the owner thereof becomes personally and wholly liable for the outstanding debts of the business entity.

19. A Sole Proprietorship enters into dissolution automatically upon the death or permanent incapacity of the owner. In such case, the heirs and successors of the owner become jointly personally and proportionately liable for the outstanding debts of the business entity.

Partnership

20. A Partnership is a business entity with either two or three owners, each having an equal share of ownership and a direct and equal share of management control.

21. In exception to all other provisions of this law, a business entity may not be an owner in a Partnership.

22. A Partnership has a separate legal character to its owners.

23. Ownership of a Partnership may be changed by written agreement between all partners and people involved -

from three owners to two owners, or
from two owners to three owners, or
by replacement of one, but not two or more, owners, or
from two owners to one owner, but see below.

24. If a Partnership changes to one owner, it must lodge an application for Change of Business Type to Sole Proprietorship.

25. In the case of dissolution of a Partnership, each of the owners becomes jointly personally and proportionately liable for the outstanding debts of the business entity.

26. In the case of the death or incapacity of one owner in a Partnership, the share of ownership of that person shall pass proportionately to the remaining owner or owners; but if only one owner remains, see section E above.

Gesellschaft mit beschränkter Haftung

27. A Gesellschaft mit beschränkter Haftung ("GmbH") business entity is a corporation the ownership of which is divided into shares, and for which the number of shareholder owners shall not exceed five.

28. An application for registration as a Gesellschaft mit beschränkter Haftung business entity must include the abbreviation GmbH as a suffix to the proposed business name.

29. A GmbH is managed and controlled by Directors, who shall be the shareholders, and the Directors shall form a Board with a Chairman selected from amongst their number.

30. Transfer of ownership of shares in a GmbH corporation is only permitted with the consent of a majority of shareholders.

31. A GmbH corporation may apply for Change of Business Type to Aktiengesellschaft, to allow more shareholders, or to a Partnership if and only if the proportion of shareholding between the owners is equal.

32. In the case of dissolution of a GmbH corporation, the responsibility for the debts of the business entity is limited as provided hereunder for shareholder owners.

33. In the case of the death or incapacity of one shareholder owner in a GmbH, the ownership of that person's shares passes to their heirs and successors. If this causes the GmbH corporation to have more than five shareholders, and the shareholders are unable or unwilling to consent to a transfer which would rectify that situation, then the GmbH corporation must apply for a Change of Business Type to Aktiengesellschaft.

Aktiengesellschaft

34. An Aktiengesellschaft ("AG") business entity is a corporation the ownership of which is divided into shares, and for which the number of shareholder owners shall not be less than three.

35. An application for registration as an Aktiengesellschaft business entity must include the abbreviation AG as a suffix to the proposed business name.

36. An AG is managed and controlled by Directors, who shall be elected by the shareholders, and the Directors shall form a Board with a Chairman selected from amongst their number.

37. Transfer of ownership of shares in an AG corporation is at the discretion of the share owner.

38. An AG corporation may apply for Change of Business Type to Gesellschaft mit beschränkter Haftung, if and only if the number of shareholders is five or less, or to a Partnership if and only if the number of shareholders is three and the proportion of shareholding between the owners is equal.

39. In the case of dissolution of an AG corporation, the responsibility for the debts of the business entity is limited as provided hereunder for shareholder owners.

40. In the case of the death or incapacity of one shareholder owner in an AG, the ownership of that person's shares passes to their heirs and successors.

Shareholder Ownership Generally

41. This article applies to Gesellschaft mit beschränkter Haftung corporations and to Aktiengesellschaft corporations. The term "corporation" herein means those types of business entity.

42. Upon registration and commencement of a corporation, the number of shares in the corporation (issued and unissued) and the par value of each share shall be as declared in the application for registration.

43. In this law, "par value" means the starting value of a share at the time of its issue. The price of a share at a later change of ownership is irrelevant to the par value.

44. Each corporation shall maintain a shareholder register, which shall record the name of each shareholder, the number of shares owned, and the paid-up status of each share.

45. If a corporation sells unissued shares, it may accept a price less than or greater than the par value. If the price is less than the par value, the share is not fully paid-up unless and until the owner of the share pays the difference to the corporation. If the price is equal to or greater than the par value, the share is full paid-up.

46. If a corporation vests an unissued share at its own expense, without requiring payment, the paid-up status of the share is at the discretion of the corporation.

47. If a corporation has debts, the liability of each shareholder to contribute to the payment of those debts is limited to the unpaid amount of the par value of the share.

48. In this and any other law, a reference to "shareholder ownership" and to any rights or powers vesting in the owner of a share is to be taken in the context of proportionality. Each shareholder has one vote for each share that they own, and a majority vote is a vote supported by a majority of shares.

49. Transfer of ownership of a share is not recognised unless and until recorded in the shareholder register of a corporation. It is the duty of a shareholder to inform the corporation promptly if and when he divests any part of his shareholding.

50. The paid-up status of a share does not change upon its transfer, unless the corporation itself buys back the share, in which case it becomes an unissued share.

51. A corporation may issue different classes of shares, and attach different rights to different classes of shares. However, the class of shares declared in the application for registration of the corporation shall be deemed the only class to confer ownership or the right to participate in an election of a Director.

52. If a corporation is a member of a securities exchange, Article 37 and Article 49 do not apply. Transfer of ownership of a share in such a corporation shall be only through the regulated procedures of that securities exchange, and the change of ownership shall be recorded by that securities exchange, and the duty of informing the corporation of the change is upon the securities exchange.

Royal Charter Corporation

53. A Royal Charter corporation is a business entity registered at the discretion and by the decree of His Royal Majesty.

54. Unless otherwise decreed, a Royal Charter corporation has the powers, prerogatives and characteristics of a Gesellschaft mit beschränkter Haftung corporation, except that provisions concerning shareholder ownership shall not apply.

55. His Majesty's decree establishing a Royal Charter corporation shall specify the ownership of the corporation, which shall not be transferable except by further Royal decree.

Applications and Registration

Right of Application

56. A person or entity in the Kingdom, unless excluded by a provision below, has the right to be an applicant to register a business entity.

57. The following are excluded from being an applicant:

A person without a legal right to be in the Kingdom.
A foreign entity owned or controlled by a person without a legal right to be in the Kingdom.
A person or entity under sentence for a criminal offence.
A person or entity which is bankrupt.

58. A person or entity is excluded from being an associate if they are excluded from being an applicant.

Process of Application

59. An applicant must make an application to register a business entity -

to the Royal Government authority ("the authority") duly delegated to receive and register applications; and
in the form prescribed by the said authority by Regulation, Order or procedural rules; and
accompanied by the application fee; and
accompanied by any additional documents, certificates or declarations prescribed by the said authority in respect of certain applications.

60. For the purposes of Article 59(ii), the authority may prescribe the form of application but the application must show at least the following information -

Name of the applicant.
Name of each associate.
Proposed name of the business entity.
If any of the applicant or associates are foreign, the micronationality of each such one.
Type of entity to be registered.
In the case of an Aktiengesellschaft, the number of shares allocated to each owner, the number of unissued shares, the par value of each share, and the name of each Director.
In the case of a Gesellschaft mit beschränkter Haftung, the number of shares allocated to each owner and the par value of each share.
The head office city of the business entity.
The proposed main business activity or activities of the entity.

61. The authority shall receive applications, maintain a register of applications received, undertake or commence as the case may be the process for approval of the application, inform the applicant of the result of the application, and record in the register the result of the application and, if approved, the date of registration of the business entity.

62. If, by delegation, different authorities are empowered for any of the tasks prescribed by Article 61, it is the duty of each such authority to liaise fully and openly with each of the other authorities throughout the process.

Registration of a Business Entity

63. An application for registration of a business entity shall be approved if the application satisfies all statutory and regulatory requirements for registration of such a business entity.

64. If an application is not approved by the authority, the applicant may appeal to the Minister of State, Home Office, and the Minister shall have discretion to overrule the authority and order the approval of the application.

65. For each approved application, on the date of the approval the following shall be entered into the Register of Business Entities and thereupon the entity shall commence -

Name of the entity.
All other information specified by Article 60 above.
If the registration is a Change of Business Type, the registered name and registration number of the original entity.
The date of the register entry.
The name of the person making the register entry.

Change of Business Type

66. A registered business entity may apply for a Change of Business Type. Such an application is alike to an application for registration but -

the applicant is the existing business entity; and
the associates of the application are all of the owners of the existing business entity; and
all other parts of the application must conform to the provisions of article 14 above, including the lodgement of the required fee.

Business Names

67. In assessing and processing an application for registration, the authority shall not permit a proposed business name if -

that name or a very similar name is already registered; or
the proposed name contains the word "royal", except in the case of a Royal Charter corporation; or
the proposed name falsely purports a connection with a person, place or activity; or
the proposed name contains words that are profane, vulgar, vilifying or insulting.

Denied Application

68. If an application is denied, any application which is substantially similar to the denied application is excluded for a period of six months from the date of the application.

Appeals

69. A court of competent jurisdiction may hear an appeal against an administrative or Ministerial decision made under this law, on grounds of procedural unfairness or erroneous judgement of prescribed criteria. If the court overturns a decision, the matter judged shall return to the stage of administrative process that it had reached immediately prior to the overturned decision.

Exceptions

Banks

70. If an application for registration of a business entity includes a proposed activity that is regulated by the Currency, Exchange and Banking Act, the authority responsible for business registrations may not approve the application unless and until the processes of registration and licensing under that Act have been complied with. For this purpose, it is to be assumed that the two processes of application and registration shall occur in parallel.

Share Transfer Exception

71. The free exchange of shares in an Aktiengesellschaft corporation is not impeded by Articles 57 and 58 above; provided that it shall be a breach of this law for a corporation, or a securities exchange, to allow a transfer of share ownership which would cause majority control of the corporation to enter the hands of persons or entities that would be excluded from applying for registration.

Dissolution

Dissolution Generally

72. A business entity which has entered into dissolution is deemed to have ceased to exist and as a consequence ceases to have any of the characteristics, powers or prerogatives of article 6 section B of this law.

73. After a decision or order for dissolution of a business entity, but prior to dissolution taking effect –

all outstanding contractual obligations of the business entity must be finalized and ended; and
all debts of the business entity must be satisfied; and
all residual assets of the business entity must be divested in a lawful manner; and
the authority for business registration, being satisfied that the foregoing matters have been complied with, must enter the date of dissolution of that entity in the Register of Business Entities and publish a notice of the dissolution in the public forums of the Kingdom.

Voluntary Dissolution

74. A business entity may choose to close by dissolution with the consent of not less than two-thirds of its owners.

75. In the case of any business entity with more than one owner, the process of decision making for dissolution must give full and free opportunity for all owners to participate, and the record of the meeting or other process by which the decision was made must be documented, certified by a competent official of the business, and lodged with the authority.

76. Further to the above, a proposal for dissolution of an Aktiengesellschaft corporation must be considered at a public meeting.

77. In exception to the above, a Royal Charter corporation may be dissolved only by a decree of His Royal Majesty.

Dissolution by Order

78. A court of competent jurisdiction may order the dissolution of a business entity if –

the business entity is insolvent and incapable of servicing its debts; or
the business entity is convicted of a criminal offence for which the court deems that dissolution is the appropriate punishment; or
the business entity is dysfunctional by reason of incompetent or uncooperative management.

79. An application to the court for an order under section A above may only be brought by a person or entity having a material interest in the matter, or by the Royal Government.

80. Where a business entity is ordered to close by dissolution, the Royal Bank of Commerce (RBC) must appoint an official to complete the processes required by Article 75 above. That official is vested with complete power over the affairs and finances of the business entity.

Insolvent Dissolution

81. It is the duty of a business entity upon dissolution to inform the RBC if it cannot satisfy its debts. In such a situation, or in a situation described by article 25 section C above and involving an insolvent business entity, the RBC shall appoint an official to manage the finances of the business entity and that official –

is vested with complete power over the finances of the business entity; and
shall obtain from the owners of the business entity, in proportion to their respective share of ownership, such funds as will meet the debt obligations or exhaust the liability of the owners; and
if the funds obtained are sufficient, satisfy the debts; and
if the funds obtained are not sufficient, satisfy the debts in order of precedence and proportionately to the amount of each debt; and
advise the RBC of the completion of these duties.

Precedence of claim

82. For the purposes of dissolution, the order of precedence for claims over the assets of a business entity shall comply with the following:

If a business entity has issued a Bond, and the Bond upon issue was secured against the assets of the business entity, then the owner of that Bond shall have first and priority claim over the assets of the business entity upon its dissolution. Such claim shall extend to the face value of the Bond plus any interest due and payable, less any part of the face value of the Bond which has previously been redeemed.
If the residual assets of the business entity are insufficient to satisfy all claims under Article 82(i) above, the official having control of the matter shall as far and as fairly as possible distribute the realised residual assets amongst those claimants in proportion to their claims.
If a business entity has accepted unsecured debt of any kind, including but not limited to unsecured Bonds and notes, loans, deposits and prepayments, those creditors of the business entity shall if any assets of the business entity remain have next claim after all claimants under Article 82(ii) above have been satisfied. The order of precedence amongst claimants under this section shall be the order in which the debt was originated, with the oldest debt having priority.
If the residual assets of the business entity are insufficient to satisfy all claims under Article 82(iii) above, the official having control of the matter shall as far and as fairly as possible distribute the realised residual assets amongst those claimants in proportion to their claims.

84. The discretionary judgement of and execution of the above duties by an official appointed by the RBC shall not be examined in any court.

Fees and Penalties

Application Fees

85. The fees for application for registration of a business entity, and for application for Change of Business Type, may be established by Regulation. Fees levied under this article shall not be refunded regardless of the outcome nor legitimacy of an application.

Renewal Fees

86. A registered business entity shall, on the anniversary of its commencement each year, pay a renewal fee which may be established by Regulation. Fees levied under this article shall not be refunded regardless of the dissolution of a business entity after payment but before its next anniversary.

Penalty for Unlawful Activity

87. A person or entity which engages in business activity in breach of this law shall be liable to a penalty equal to the application fee for a Sole Proprietorship, for each day that such a breach occurs.

Penalty for Other Breach

88. A person or entity which breaches this law, other than as provided by article 87, shall be liable to a penalty equal to the highest application fee current, for each separate and individual breach levied on each day from the occurrence of the breach until its rectification; provided that the total such penalty shall not exceed twenty (20) times the unit penalty amount.

Criminal Breach

It is a criminal offence to obstruct or fail to cooperate with any official of, or appointed by, the Royal Government under this law. The penalty for such obstruction shall be at the discretion of the criminal courts of the Kingdom.

Notes

Chamber of Deputies Hansard Record
Introduction Date:	2013-03-17
Tabled By:	His Royal Majesty
Vote Outcome:	In Favour: ; Against:
Royal Assent Date:	2013-03-17 (Article 28)