News & Bulletins
The Companies Act 2006
An Alphabetical Guide to the Changes Effected by the New
Provisions
Accounts
Directors must ensure that they give a true and
fair view both for the company and any subsidiaries included.
(S.393)
Medium-sized companies now need to prepare group
accounts; (S.399, exemptions are in
S.400-402)
Quoted companies must include in Directors'
Reports factors affecting the future of the business;
(S.417(5))
Quoted companies must publish their results on a
qualifying website; (
S.430) only public companies need to lay
accounts before the members in general meeting;
(S.437)
Private companies must send them to the members
by the earlier of the date whenthey are filed at Companies House or
the deadline for such filing; (S.424)
Public companies must file
accounts within 6 months of their year end, private companies
within 9 months of their year end.
(S.442)
lteration of Share Capital
Sub-division/consolidation requires an ordinary
resolution (but not prior authorisation in Articles); it can
authorise successive alterations;
(S.618)
Stock can be converted into shares (but not vice
versa) by ordinary resolution (which again can authorise
successive conversions.
(S.620)
Shares can be
redenominated into a different currency by ordinary resolution (the
company can reduce its capital to avoid the need for fractions).
(S.622, 626)
Approval of Share Transfers
Board must always give reasons for refusal
within 2 months;
(S.771)
Regulations will address the
bringing in of a paperless system.
(S.786-789)
Articles
still required and will now be
sole main constitutional document;
(S.18)
a set of model Articles will
be prescribed to apply in default of specific Articles (in place of
TableA); (S.20)
existing companies Articles will remain effective - but
should be reviewed carefully as a number of provisions may override
new freedoms under 2006 Act; can be amended by Special resolution
unless "entrenched".
(S.21-22)
Auditors
will be
automatically re-appointed for private companies unless the
Articles say otherwise, or they were appointed by Board only, or
they are no longer needed, or 5% of the members require
otherwise; (S.487-488)
it is a criminal offence to cause misleading
information to be included or relevant information to be excluded
from the auditors report. (S.507)
the changeover of auditors happens at the date
when the appointment of the retiring auditors terminates;
(S.487)
when auditors leave they must make a statement to
the company and, if it occurs before the end of their term, to
their regulatory body also. (S.519,
522)
a company cannot indemnify nor insure auditors'
liability, but can agree a fair and reasonable limit to their
liability if approved by ordinary resolution;
(S.532-536)
5% of membership of a quoted company (or 100
members holding in aggregate paid-up capital of at least £10,000)
can require questions relating to the audited accounts to be
published on its website. (S.527)
Authorised share capital
will now be obsolete; on incorporation a company
will file a statement of share capital
showing its nominal value, amount paid up, the number of shares
taken by each subscriber, and the number,
value and rights in each class of shares; (S.10)
a new statement must be filed on any allotment or
other change of capital. (S.555)
Authorised signatories
this concept is no
longer proposed
Beneficial Owners of Shares
a company traded on a regulated market must
permit shareholders to nominate another
person to receive shareholder information instead of them;
(S.146)
Articles may also
grant the right to make such a nomination; (S.145)
Charges
the changes proposed by the 1989 Act have now
finally been dropped;
foreign companies are not required to register
charges over their UK property.
Class Rights
any change can be
authorised by a special resolution or by 75% approval of the class
(unless the rights are "entrenched"). (S.630-631)
Communications with Shareholders
a company can
nominate an e-mail address for notices to it;
(S.1139)
it can accept the purported identity of the
sender unless there is reason for suspicion or the need for
authentication is specified; (S.1146)
a non-traded
company can give notices on its website if the recipient has agreed
to receive in that manner, or the Articles or a Class Resolution
have approved it and if the individual does not refuse to accept
such notice, but it must also notify the recipient of the notice on
the website and keep it there for 28 days; (Schedule 5)
if it is a traded company, the use of the website
for notices must be authorised by a resolution or the
Articles; (Schedule
5)
if the Companies Acts require delivery of a hard
copy, or a member so requests, the company must comply;
(S.1145)
definitions of "hard copy" and "electronic
form" (S.1168)
incorporation details must be shown on websites and
e-communications (S.82)
Connected persons
now include
co-habitants and their infant children, directors' children (even
if adults), and directors' parents but not directors' siblings.
(S.253)
Derivative actions
the statutory right replaces the old common law
right; (S.260-263)
a court must give consent for the action to be
continued. (S.260-263)
Directors
there must be at
least one individual director
(S.155)
the minimum age for individuals is 16;
(S.157)
can publish a service address rather than a home
address - but home address must still be recorded on a private
register and court can order disclosure if service address
ineffective; (S.163, 165,
244)
members' approval required for long-term service
contacts (2 + years), for dealing with non-cash asset (£5000+), for
loans £10,000+, for payments for loss of office or for ratification
of negligence, default, breach of duty or breach of trust;
(S.188-189, 190-196, 197-214, 215-222 and
239)
NB.Quasi-loans and credit
transactions by private companies no longer need members'
approval unless associated with public company;
(S.197-214) if a company is a charity, then
Charity Commission consent also required.
(S.226)
Directors' Duties
to act within powers, to promote the
company (bearing in mind employees, suppliers and community), to
act independently, to use reasonable care, skill and diligence, to
avoid conflicts of interests, not to accept benefits from a third
party and to declare any personal interest.
(S.171-181)
Distributions in Kind
will be taken into
account at book value of the asset if there are distributable
profits, but at market value if not. (S.845-846)
"Entrenched" Articles
where an article is "entrenched", it
will require specific steps to change it; notice must be given to
the registrar. (S.22-24)
Interests in Shares
a company must keep a register of all interests
disclosed for 6 years; (S.808-816) there is no requirement
to verify the accuracy of what is disclosed.
(S.817)
Meetings of Shareholders
a private company will not need to hold an AGM;
(S.336)
any resolutions at general meetings must follow the procedure
specified in the Act, as well as any in the Articles;
(S.301)
a public company must hold its AGM within 6 months after its
year end. (S.336)
Members
a single member company will be the same as any other;
(S.38)
100 members holding in aggregate paid-up capital of £10,000 can
direct certain acts by a company. (S.153)
Memorandum
no longer required for new
companies;
the memorandum of existing companies
becomes part of their Articles; (S.28)
objects will be
unlimited unless restricted in the Articles;
(S.31)
a statement of objects must be filed
and any change notified. (S.31)
Name
anyone who has existing goodwill in
a similar name can object (to an adjudicator of company names) to a
corporate name; (S.69-74)
Articles can specify the procedure
for changing a company's name (notice must be given to the
registrar); (S.77-79)
business name requirements still
apply; any foreign company trading in UK must comply with
them; (S.1192)
use of a misleading business name is
specifically forbidden. (S.1198-1199)
Notice of Meetings
calculation of "clear notice"
is clarified; (S.360)
21 days for public company
AGMs, 14 days for all others;
(S.307)
consent to short notice
requires 90% approval; (S.307) provisions made for notice by
e-mail or on website. (S.308-309)
Offers to the Public
it is no longer a criminal offence
by a private company but is still prohibited and a specified
procedure to restrain a proposed offer is provided.
(S.755-760)
Own Shares
financial assistance no longer prohibited for
private companies; (S.678)
prior authorisation in Articles is no longer
necessary for purchase of own shares or issue of redeemable
shares; (S.690)
Board can authorise terms of redemption of
shares; (S.685)
payment out of capital requires a statement (not
declaration) of solvency by all directors; but prior authority in
Articles not necessary. (S.709,
714)
Political donations
to be authorised by members and, by members of
its holding company; (S.366)
donations to a trade union only political if made
to its political fund. (S.374-378)
Proxies -
can speak, vote and count as quorum as the
shareholder would. (S.324-331)
Quoted Companies
must publish on a website the results of polls
taken at general meetings; (S.341)
must get an independent report on a poll if so
required by 5% of the membership or by 100 members holding paid-up
capital of aggregate of £10,000.
(S.342-350)
Records
companies must keep board minutes, shareholders'
resolutions and minutes of members' meetings for 10 years;
(S.248, 355)
must keep a copy of a director's service contract
for 1 year after expiry. (S.228)
Reduction of Capital
A private company can authorise
by Special Resolution with a statement (not a declaration)
of solvency by all directors; (S.641, 643)
can only be distributable in circumstances
provided in regulations. (S.
654-657)
Register of Members
can be kept anywhere but location must be
specified; (S. 114)
those inspecting must give reasons for inspection
and their own details; (S.
116)
a private company does not have to supply
members' addresses. (S. 113)
shares can be issued as warrants or to bearer as
well as in registered form. (S.
122)
Registered Office
special provision only for Welsh companies.
(S. 188)
Registrar of Companies
can correct documents submitted, if
authorised by the company; (S.
1075)
can give company directors, and public company
secretaries, an individual identifier; (S.
1082)
can remove existing addresses from the public
register; (S. 1088)
need keep original documents for 3 years only.
(S. 1083-1084)
Reserve Capital
abolished. (Schedule 16)
Resolutions
written resolutions of
private companies don't need to be
unanimous;(S. 283-285)
electronic media can count as written;
(S. 298)
Special Resolutions still require 75%, but no
longer need 21 days notice; (S. 283) a specified
procedure for written resolutions overrides the Articles;
(S. 288-289)
public companies can only pass resolutions at
members' meetings. (S. 301)
Restoration to the Register
can be by procedure, by a director or member,
within 6 years of removal, if the company was in
business, if there are bona vacantia and if the annual documents
are brought up to date; (S. 1024-1025)
the previous procedure is now under Section
651-653, but must generally also be within 6 years unless for
personal injury;
public companies can also apply to be struck off.
(S. 1003)
Secretary
private companies do not require one unless the
Articles so specify; (S. 270)
public companies must have one but it need not be
an individual. (S. 271-273)
Share Premium Account
cannot be used to issue or redeem
debentures. (S. 610)
can be used to pay commission/expenses but only
for that issue. (S. 610)
Shares
a new statement of capital to be filed on any
allotment or other changes; (S. 555)
the nominal value can be in any currency and
can be re-denominated; (S. 542)
a private company with a single class of shares needs no "s.80"
authority to allot unless Articles specify, but pre-emption much as
"s.89" (S.550, 561 & 569-573)
Statements
incorporation requires filing re capital, objects and officers.
(S.10,12 & 13)
Transparency
the provisions of the Transparency Directive are
incorporated by s.[ ] adding new ss 89A - M, 90A and 100A in
FSMA; (S. 1265-1271)
FSA can make regulations requiring voteholder
information (in respect of holdings over a minimum size) and can
also require issuers to notify or publish voteholder
information;
FSA can require institutional investors to
disclose information about exercise of voting rights.
Takeovers
Takeover Directive (Interim Implementation)
Regulations apply pending relevant parts of the Act coming into
force. (Part 28)
The Takeover Panel is
given statutory powers and status;
companies can opt-in or opt-out to
the provisions of Article 11 with regard to impediments to
takeovers.
Date:
April 2007
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