The Companies Act 2006 – did the earth move for you?

Thu 28th Oct 2010

In order not to overwhelm the corporate world with too much regulatory reform, the Act commenced in stages with the final and most significant part commencing on the 1st October 2009. The delay was also necessary; subordinate regulations were still not ready for publication some three years after the Act came into force.

But one year after the final commencement, has the fear of a legal War and Peace been transformed into the joy of statutory regulations?

What changed? A short recap on some of the key changes for private companies:

Articles of Association

Brevity defines the new model articles which are much simplified, shorter and written in (relatively) plain English. Most commentators are encouraging their adoption, as they generally incorporate all the modifications that were required to the old Table A articles.

Memorandum

No longer exists and new companies have unrestricted Objects as a pose the old requirement to define every possible company object. Attention must be given to restricting the company now through its articles, particularly for not-for-profit companies.

Authorised Share capital

Abolished for new companies unless a specific requirement is added to the articles and if currently restricted can be removed by way of company resolution.

Company Secretary

Gone! Unless you want to keep one, or your articles require you to have one.

Directors’ Duties

The Act now codifies the common law duties of Directors and these comprise the following:

  • General duty to act within powers (as set out in the Company Constitution).
  • Duty to promote the success of the Company.
  • Duty to exercise independent judgement.
  • Duty to exercise reasonable care, skill and diligence.
  • Duty to avoid conflicts of interest.
  • Duty not to accept benefits from third parties.
  • Duty to declare interest in proposed transaction.

Failure to observe these duties can give rise to personal liability of a Director.

Electronic Communications

Companies can now correspond with shareholders via the web, through email and even by text, where the company has given an electronic address. Company meetings can be held with directors in geographically remote locations provided the means of communication is sufficient for the meeting to be properly held.

Financial Assistance

The “whitewash” procedure is over, for private companies which are not a subsidiary of a public company. A company can now give financial assistance for the purchase of its own shares.

Loans to Directors

Now permitted but subject to shareholder approval.

In summary

There are many changes that have now been implemented affecting the day to day administration and operation of companies, no matter how large or small the business. One year into the Companies Act 2006 the tremors associated with such an all-encompassing statute appear to have largely died off, as companies and their advisers embrace a brave new world of corporate regulation.

Coodes Corporate & Commercial Services

Forming part of the Coodes’ Business Services Unit, the Corporate & Commercial services team is headed by Christian Wilson a partner and solicitor. The team offer a wide variety of corporate advice and guidance, which over the last 12 months, has included:

  • Company formations and incorporations
  • Management buyouts
  • Shareholder agreements and new articles
  • Board and shareholder minutes
  • Companies Act compliance

In addition, the unit also advises on commercial agreements, intellectual property rights (including trade mark registration) and general business matters.

For further information, contact Christian Wilson on 01872 246200 or email: christian.wilson@coodes.co.uk

Thu 28th Oct 2010

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