Government today has gazetted local authority companies regulation as part of the Decentralization Act.
Government has opened the opportunity for local councils to create companies and do business with private parties as part of the new amendments made to the Decentralization Act.
The local company authorities regulation states that companies can be formed only if the majority of the members on the island council, atoll or city council approves the proposal.
Moreover, if the only shareholder of the company is the island council then the name of the company should be the island and its atoll. If the shareholder of the company is the atoll or city council then the name of the company should be the atoll or council’s name.
The regulation further states that the share of the companies can only be traded between councils. A motion should also be submitted with the approval of the majority of members on the council to trade shares.
The local authority company should atleast have three board of directors and the articles of association should state the number of directors.
Regarding the eligibility of the directors, directors should be elected by the respective council via a motion passed by the majority of the members on the council. Same applies for dismissal or termination of a director.
If a council wants to collaborate with a private party to conduct any business activity as in a partnership or corporate society arrangement, the council is required to submit a business plan along with the details of the said business activity to the Registry of Companies to seek official approval.
The Registry of Companies will evaluate the proposed business activities, population of the representative island or atoll or city of the council, economic state, and the impact of it on the individuals and businesses of the island, atoll or city before granting approval.
The councils are allowed to own up to 20 percent of the partnership companies formed with private parties under the local authority companies regulation.
The businesses via local authority companies can only be conducted within nine months after the implementation of the regulation.