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Companies Act 2006
Key changes introduced by Companies Act 2006 (the "2006 Act")
The Companies Act 2006 received the Royal Assent on the 8 November 2006 and replaces previous legislation, namely the Companies Act 1985, however it does not replace provisions relating to company investigations and community interest companies. The Act will be implemented in stages and it is envisaged that all parts of the Act will be implemented by October 2009.
Below is a summary of the main changes that the Companies Act 2006 will bring when they will come into force:
From 1 October 2007
Meetings
1. Private companies no longer need to hold an annual general meeting (AGM) - (s 336.)
2. Companies will no longer be required to send out their annual accounts and reports prior to a general meeting because the requirement for annual general meeting has been abolished. Instead annual accounts and reports or summary financial statements, should be sent to members by the time they are due to be filed with the registrar of companies - (ss 441 & 423).
3. Shareholders who own 10% shares of the company can demand that the directors call a general meeting of the company. Shareholders still have right to receive accounts - (s 303(3)).
4. Shareholders meetings for private companies can now all be on a 14 days' notice period unless different arrangements are specified in the company's articles - (s 307(1)) .
5. The unanimous consent of all shareholders is no longer required to pass a written resolution. Rather, the required majority rule will apply: 51% for ordinary resolutions; 75% for special resolutions - (ss 282(2) and 283(2) ).
6. Companies will still not be able to dismiss a director or an auditor before the end of his term of office by written resolutions. As no requirement for AGM, an auditor will be deemed to be reappointed for the following year unless the company takes steps to end his appointment or to appoint a different auditor. A company can by ordinary resolution choose to agree a limitation of the auditor's liability for a financial year - (ss 288 (2) and 536)).
7. Written resolutions can be proposed by either directors or by shareholders representing either 5% of members eligible to vote or whatever lower percentage the company's articles provide. Articles can be amended to substitute a lower percentage - (s 292).
8. Any provision in the company's articles which provides that a member voting by proxy will have fewer votes than if he votes in person will be invalid - (s 285(1)).
9. Shareholders can now appoint more than one proxy at a meeting, up to a maximum of one proxy per share. This right will override any conflicting provision in a company's articles - (s 324 (2)).
Communication
10. Electronic communications can now be used: e.g. notice of general meeting, written resolution, etc. can now be done via website or email. Company's name, number, registered office and other details required to be displayed on business letters need to be on such electronic communications - (ss 333 and 1168).
From 6 April 2008
Accounts
11. Deadline for private companies to file annual accounts to be nine months rather than ten months - (s 442 (2)).
12. Exemption from preparing consolidated accounts by medium sized groups now abolished. Exemptions now only apply to small groups - (s 445).
Officers of the company
13. Minimum age of 16 is set for directors. Existing under age directors will cease to be directors when the age criterion comes into force - (s 157).
14. Private companies will not have to appoint a company secretary unless they choose to do so. Company secretaries can still be corporate persons - (s 270 (1)).
15. Documents on behalf of company can be executed by just one director, as long as s/he signs in the presence of a witness - (ss 231 and 270 (3)).
From 1 October 2009
Incorporation documents
16. Memorandum of association to become historic document which accompanies other documents at the time of incorporation. Due to the content of the memorandum of association, there will no longer be a need to update the memorandum. However, a company will still need to file updated articles of association whenever a change is made to the constitution of the company - (s 28).
17. The articles of association will set out the principles covering the way the company conducts its business - (s 18).
18. New companies registering under the 2006 Act will be able to (if they wish) use the model articles of association for private companies. Existing companies can also choose to adopt the new articles (s 20).
19. There will be no requirement either in the memorandum or articles of association for companies to state their objects - (s 31 (1)).
Companies House forms
20. New Companies House forms will be issued in accordance with the relevant sections of the Companies Act 2006.
Directors
21. Directors will be required to file a service address on public record at Companies house. A director's private address will be held as protected information at Companies House (ss 240 - 243).
22. Annual return - still as usual; but details of shareholders' addresses no longer required - (s 856).
23. All companies must now have at least one actual person as a director; cannot just have companies as directors - (s 155).
24. Directors' conflicts of interest - other directors who have no interest in a matter can authorise such conflict provided the company's articles of association makes provision for such. This is in addition to the shareholders' approval currently in place - (s 175 (5)).
Authorised share capital
25. Private companies can reduce authorised share capital by special resolution supported by a solvency statement by each director. Current procedure requires court approval - (ss 641 - 643).
26. Private companies can now give financial assistance for the purchase of their own shares - (s 682 (1) ).
Wording of resolutions
Companies House would expect resolutions to state:
- Resolution type;
- The fact that the resolution was passed or agreed by the members or directors; and
- The date the resolution was passed.
A resolution must be signed by an officer of the company.
The effect of the new provisions is dependent on what is currently in a company's articles of association. For example, an existing private company would still need to pass a resolution to remove any existing clauses regarding annual general meeting from its articles of association.
© Waterfront Solicitors LLP 2007