COMPANIES Office of Jamaica (COJ) is intensifying efforts to tackle non-compliance among businesses that fail to file their annual returns.
Despite a surge in entrepreneurship during the COVID-19 pandemic, with a record number of business registrations, the COJ is concerned about the high rate of non-compliance.

“We have a high rate of non-compliance, which is why we’ve had to strengthen the law in several ways and which is why other strengthening is pending,” CEO and Registrar of Companies Shellie Leon regrettably expressed during a Jamaica Observer Business Forum.

According to the COJ, the past three financial years have seen significant business growth, with over 16,000 new businesses registered during the year of the pandemic, followed by 15,000 plus in the next financial year, and 14,000 plus in the most recent financial year. Additionally, there were over 5,000 new company registrations.

The COJ plans to address this issue through general amendments to the Companies Act, aimed at encouraging businesses to be more compliant. Leon emphasised that the compliance rate is “not great” and that further measures are necessary to ensure accountability among businesses.

“Based on the statistics, only about 30-some per cent of companies are fully in compliance,” Leon added. “We have had a low compliance rate for some time prior to the pandemic.”

Companies Office of Jamaica (COJ) has revealed that amendments to the Companies Act are on the horizon, driven by a desire to not only address delinquency but also fortify the regulatory framework. According to CEO Leon, the current Act is overly broad, operating as a “one-size-fits-all” approach. She explained that the upcoming legislative changes will introduce more nuanced regulations, tailoring requirements to specific types of companies. For instance, single-member companies will be exempt from certain obligations, while interest groups have proposed adjustments to audit and reporting requirements.

“I know that a few weeks ago the matter had come before Cabinet but there were some interest groups who indicated that they wanted to take a further look at the amendments, so the matter was paused for those interest groups to look at them,” Leon responded when asked about a timeline.

COJ anticipates that amendments to the Companies Act will be brought before the legislature in short order, with a timeline of just a few months. However, it remains unclear when the changes will be formally introduced. COJ, in shedding light on its enforcement process, revealed a lengthy and resource-intensive procedure. When companies fail to comply with regulations, field officers serve notices and conduct follow-ups over several months. If non-compliance persists then cases are referred to court, but this can take up to two years. COJ typically takes around 330 companies to court annually, a small fraction of the total number of non-compliant businesses. The most common issue is failure to file annual returns. Some individuals pre-emptively file the necessary documents before appearing in court, thus avoiding a court appearance. However, among those who do go to court, only about 30-40 per cent comply by filing the required documents.

“We have the option to pursue enforcement against those entities but enforcement would likely result in imprisonment, so we’ve been reluctant to take that approach,” said Leon in a tone of compassion.

“Despite there being thousands of under-registered companies, we estimate that around 70,000 companies are actively operating. Of these, approximately 30 per cent are compliant with regulations. Breaking down the active companies further, the COJ focuses on eliminating limited private companies by shares. Unfortunately, the delinquency rate among non-profit companies is alarmingly high, with around 80-90 per cent failing to meet their obligations.”

Companies Office of Jamaica acknowledges that many businesses register with good intentions but struggle to maintain compliance. While some companies file regularly, others may not, and vice versa with tax payments. The office partners with the tax authority to gauge the number of active companies but admits it’s challenging to determine which businesses are truly operational. The registrar can only speak to companies engaged with their office but lacks resources to verify the status of all registered businesses.

“Several private and public centre entities, we’re looking to partner with people who may license people, people with whom you’re part of an association, so we’re forging more of those partnerships to help us,” revealed Inger Hainsley-Bennett, AML & CFT manager.

To enhance compliance and understanding, COJ is strengthening its public education initiatives through multiple channels, including increased collaboration with professional associations such as Jamaica Bar Association and Private Sector Organisation of Jamaica (PSOJ).

Despite attempts to assist businesses in becoming compliant through amnesty programmes during the COVID-19 pandemic, many companies remain non-compliant. The most recent amnesty programme, which ended in 2023, aimed to help non-operational companies dissolve without filing outstanding documents. The programme allowed companies to close by simply indicating that the majority of directors signed a declaration stating their intention to dissolve the company. However, the programme’s impact was limited, and many businesses continue to operate in a state of non-compliance.

COJ has been working to tackle the issue of delinquent companies, typically removing around 3,000 companies per year. However, during the COVID-19 pandemic COJ removed 2,000 companies through a targeted amnesty programme aimed at non-operational businesses.

“When we have our strategic meetings we do an assessment to determine how to change the dynamic of delinquency, and that has usually sparked some of the amnesties that we’ve had over the years,” explained Hainsley-Bennett regarding on what the decision to offer amnesties is based.

COJ has disclosed that it will not offer any more amnesties, at least for now.