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COMPANIES ACT 2006: IMPLEMENTATION |
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The final text of the Companies Act 2006, explanatory notes and tables of destinations and origins are now freely available to download at: http://www.opsi.gov.uk/acts/acts2006a.htm The Act received Royal Assent on 8 November 2006. To see when specific sections of the Act will or have come into force, check the implementation timetable on the FL Memo Ltd newsletter homepage (follow the link to “Companies Act 2006 implementation timetable”). This document will be updated as new secondary legislation is passed and further announcements are made. The implementation timetable is now up to date to the Fourth Commencement Order (see below). |
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Third Commencement Order The Companies Act 2006 (Commencement No. 3, Consequential Amendments, Transitional Provisions and Savings) Order 2007 (SI 2007/2194) comes into force on 1 October 2007. This Third Commencement Order was discussed in Issue 5. It mainly deals with the provisions coming into force on 1 October 2007 including parts relating to directors, derivative claims, resolutions and meetings and the business review. It also sets out various transitional provisions and consequential repeals and amendments. This phase of the implementation is discussed in this issue’s Focus on…. On 30 September, the Companies Act 2006 (Commencement No. 4 and Commencement No. 3 (Amendment)) Order 2007 (SI 2007/2607) comes into force. The regulations correct various problems which were found with the Third Commencement Order.
The Order essentially makes three amendments to the Third Commencement Order: » it brings fully into force the provision of CA 2006 which allows the secretary of state to set the level of fees a company can charge for the inspection and copying of its records, in anticipation of SI 2007/2612 (see below) coming into force on 1 October; » it leaves the CA 1985 power to make payments to employees on the cessation or transfer of a company's business (s 719 CA 1985) and postpones the implementation of the CA 2006 equivalent (s 247 CA 2006) to bring it into force at the same time as the provision that states that companies’ objects are unlimited unless stated otherwise (s 31 CA 2006, due to come into force on 1 October 2008); and » it reverses the repeal of the requirement to file the following with Companies House: - extraordinary resolutions; - elective resolutions; and - resolutions revoking elective resolutions.
Whilst these resolutions are not included in the new Companies Act, they are still relevant to a certain extent (see Focus on…). Provisions in force on 1 October 2007
Various provisions of the Companies Act 2006 come into force on 1 October 2007. This is the subject of this issue’s Focus on…, which looks at each of the areas affected, giving details of the provisions coming into force and the related paragraphs of Company Law Memo 2007. Table A transitional amendments
The new Companies Act 2006 will introduce new model articles, which companies incorporated on or after 1 October 2008 will be able to use instead of Table A. As a transitional measure to mirror the changes implemented by the new Act so far, an amended Table A applies to companies incorporated on or after 1 October 2007 (SI 2007/2541).
There are two sets of amendments: one applying to private companies, which takes account of the fact that they no longer have to hold AGMs (e.g. it removes the need for directors to retire by rotation); and one applying to public companies. Some of the changes apply to both types of company, such as requiring a special resolution instead of an extraordinary resolution to authorise a liquidator to distribute assets to the shareholders (reg 117 TA 1985). Companies House has published consolidated versions of Table A for private and public companies on its website (http://www.companieshouse.gov.uk/companiesAct/implementations/oct2007.shtml).
These transitional arrangements may be further updated in April 2008, when the next tranche of the new Act is due to come into force, and they will remain in place until the new model articles come into force in October 2008.
The changes brought into force as a result of the implementation of parts of the Companies Act 2006 on 1 October 2007 apply equally to companies already incorporated before that date. However, the amendments to Table A do not operate retrospectively and so the articles of most companies will still contain defunct references, for example to AGMs for private companies and to extraordinary resolutions for all companies. A company does not need to change its articles in line with the transitional amendments to Table A, unless: » it does not wish to use extraordinary resolutions any more. Although they are not included in the new Act, if a company’s articles require a decision to be made in this format (e.g. reg 117 TA 1985), the company must still comply (para 23 Sch 3 SI 2007/2194); and » a private company’s articles include a specific obligation to hold AGMs, and it wishes to take advantage of the removal of this requirement. Provisions in existing articles that require certain decisions to be made at an AGM do not imply an obligation to hold one - the requirement must be specifically set out. Conversely, if a private company wishes to continue to hold AGMs, it will have to amend its articles to include this obligation and set out the procedure to be followed (since the statutory procedure no longer applies) (para 32 Sch 3 SI 2007/2194).
SI 2007/2541 also amends Table C, the default form of articles for companies limited by guarantee without a share capital. Again, this will apply to this type of company incorporated on or after 1 October 2007. Fees for inspecting and copying company records See CLM: ¶3888+
On 1 October 2007, The Companies (Fees for Inspection and Copying of Company Records) Regulations 2007 (SI 2007/2612) comes into force. The Regulations contain transitional fee levels for the copying and inspection of certain company documents from 1 October 2007, until they are superseded by the Companies (Company Records and Fee) Regulations 2007 (currently in draft form) on 1 October 2008. The level of fees to be charged has been revised since the last draft (see Issue 6).
The Regulations impose the following fees: » inspecting the shareholders’ register and index: £3.50 per hour or part of an hour; » copying the shareholders’ register or a public company's register of interests in shares: - up to 5 entries: £5.00; - up to next 95 entries: £30.00; - up to next 900 entries: £30.00; - up to next 99,000 entries: £30.00; - the rest of the entries on the register: £30.00; plus - the reasonable costs of sending the copies out; and » copying a director’s service contract, director’s qualifying indemnity provision, records of resolutions and meetings or reports on the ownership of a public company's shares: - 10p per five hundred words; plus - the reasonable costs of sending the copies out.
The fees set out by SI 1991/1998 will, however, continue to apply to any requests made before 1 October 2007 for the following: » inspection of the shareholders’ register or index or copying entries in the register. The prescribed fees are: - inspecting: £2.50 per hour or part of an hour; - copying: - up to 100 entries: £2.50 - up to next 1,000 entries: £20.00 - up to each subsequent 1,000 entries: £15.00; and » inspection of the company’s minute books at 10p per 100 words. Company formation See CLM: ¶517+ The Government has issued a revised draft of the Companies (Registration) Regulations 2007, which is still due to come into force on 1 October 2008. The draft regulations were first published in May (see Issue 3). The regulations themselves have not changed, but the schedules have been updated to: » amend the introduction to the form of memorandum for both companies with and without a share capital to make it clearer that each subscriber individually wishes to form a company consents to being a member; and » provide the full forms which will be required to record the shareholders’ consent to a private company being re-registered as unlimited and to a public company being re-registered as private and unlimited.
Changes to the Insolvency Rules See CLM: ¶7997
On 6 April 2008, the new Companies Act will amend the Insolvency Act 1986 so that the expenses of a liquidation will be able to be paid out of the company's assets, including those subject to floating charges, in priority to unsecured creditors and floating charge holders (s 1282 CA 2006). This will deliberately reverse part of the decision in Re Leyland Daf Ltd, Buchler v Talbot [2004] 1 All ER 1289, which held that assets subject to a floating charge cannot be used to meet the expenses of liquidation other than those incurred in preserving or realising the floating charge assets. This change reflects the intention behind collective insolvency procedures, which is that all of the creditors should fund them since they benefit from them. However, the new Act recognises that this may have an unduly harsh effect on floating charge holders, and so allows regulations to be made restricting the expenses to be met to those agreed by the floating charge holder or the court.
The Insolvency Service has issued a consultation on its proposed amendments to the Insolvency Rules. It proposes that: » the expenses of the liquidation should be payable out of the proceeds of any litigation that the liquidator has the power to bring or defend; and » where the assets of the company available to meet the general pool of creditors’ claims are not sufficient to meet the expenses of the winding up, the expenses can be paid out of floating charge assets in priority to the claims of the floating charge holder. However, if the expenses to be met are related to litigation, the liquidator will have to obtain the floating charge holder’s approval. If the charge holder is the defendant in the litigation, or he refuses his consent, the liquidator will be able to apply to court instead. A new form for seeking consent is set out in the consultation.
The new Rules are expected to come into force on 6 April 2008, applying to liquidations commenced on or after that date.
The Insolvency Service’s explanation of the consultation and its proposed draft Rules can be found on the Department of Enterprise, Trade and Investment’s website, www.detini.gov.uk. Comments are invited by 12 October 2007. |