THE COMPANIES ACT 2006
- PUTTING THE CHANGES INTO EFFECT
An Illustration of Some of the Changes and Action Required
The Companies Act 2006 has introduced substantial changes that will affect all companies. By October 2009 all provisions of the Act will be in force.
The following are examples of some of the changes introduced by the Act and the action required to put them into effect. It is not a comprehensive list, but it demonstrates how important it is for companies to now review all their constitutional documents, policies, communications and procedures.
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ANNUAL GENERAL MEETINGS |
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Private companies are no longer obliged to hold Annual General Meetings ("AGM"), but this does not affect any provision in the Memorandum or Articles of Association that require this. ACTION
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ALLOTMENT OF SHARES |
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Private companies with only one class of shares will not need authority to allot shares unless the articles require. This applies to an existing company only if the members resolve that the directors should have the power given. ACTION
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NEW MODEL TABLE A |
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New model Table A articles will be introduced in October. The version already in force for any company will continue to apply unless the company chooses otherwise. ACTION
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COMPANY SECRETARY |
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There is no requirement to have a company secretary (but a company can decide to have one). ACTION
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DERIVATIVE ACTIONS |
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There are a wider range of circumstances in which a derivative action (i.e. an action against directors brought on behalf of the company) may be brought by a shareholder and a new procedure for a shareholder who seeks to bring a derivative claim. ACTION
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DIRECTORS' DUTIES |
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A statutory statement of directors’ duties has been introduced. Amongst other things, directors will be required to have regard to a list of factors in exercising their duty to promote the success of the company. The duties include matters relating to conflicts of interest. ACTION
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DIRECTORS' AND SECRETARIES' HOME ADDRESSES |
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New rules give a director or secretary the option of providing for the public record their residential address or a service address and the residential address, with only the service address being available for public inspection. ACTION
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OTHER MATTERS CONCERNING DIRECTORS |
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These include disclosure of interests (including those of 'connected persons', the range of which has been broadened); the repeal of statutory controls that apply to directors aged 70 and above; fair dealing rules (including being prohibited from accepting a benefit from a third party unless it cannot reasonably be regarded as giving rise to a conflict of interest); and disclosure of other directorships (no longer required in itself, but may still be necessary to comply with the broad duty to avoid situations where there are conflicts of interest). ACTION
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NATURAL PERSON MUST BE A DIRECTOR |
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Companies must have at least one director who is a natural person; companies without a natural person as a director on 8 November 2006 have until 1 October 2010 to appoint at least one natural person as a director. ACTION
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ELECTRONIC COMMUNICATIONS Provisions have been introduced to allow the use of electronic communications. ACTION
GENERAL MEETINGS The phrases "extraordinary general meeting" and "EGM" are no longer used. ACTION
OBJECTS CLAUSE As from 1 October 2009 the Act will abolish the objects clause in the Memorandum of Association and a company's objects will be unrestricted unless there are any specific restrictions in the articles. For existing companies their objects clauses will be treated as part of the articles. It will no longer be possible to amend or update a memorandum and notice may need to be given to the Registrar of Companies if it is proposed to make any changes to the company's objects (by altering the articles). ACTION
PROXY AND INFORMATION RIGHTS Rights to appoint proxies are increased and nominee shareholders in traded companies are allowed to nominate persons who hold a beneficial interest to enjoy information rights. ACTION
PURCHASE OF OWN SHARES A specific authorisation in the articles for a company to purchase its own shares will no longer be required, but a company will not be able to purchase its own shares if it is prevented from doing so by the articles. ACTION
SHARE CAPITAL From 1 October 2009, companies will no longer be required to have an authorised share capital. If the number of shares to be issued is to be restricted, the articles may need to be amended. A specific authorisation in the articles to reduce a company's share capital will no longer be required, but a company will not be able to reduce its share capital if it is prevented from doing so by the articles. ACTION
SHAREHOLDERS' REGISTERS The rules on the inspection and copying of a company's register of members have been changed. ACTION
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WRITTEN RESOLUTIONS |
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For private companies a written ordinary resolution can now be passed by a simple majority if passed by members representing more than 50% of the total voting rights of eligible members; a written special resolution can be passed by 75% or more of the same voting rights. There are detailed rules on procedure. ACTION
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For further information on the above, or to discuss how our Company and Commercial Team can help your business, please contact Colin Sels or Rebecca Patrickson on tel: + 44 (0)20 7242 0422.
