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COMPANIES ACT 2006 UPDATE |
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Summary of amendments at the final parliamentary stage The full text of the Companies Act 2006 has now been published. There are a handful of significant changes which have been made since the last published version, but otherwise the provisions were largely unchanged. In response to pressure regarding the lack of status of private company secretaries, private companies will also have to keep a register of their secretaries and file their details at Companies House (ss 275-279 CA 2006). Other provisions, which were only to apply to public company secretaries apply to private company secretaries as well: » who can act where the secretary cannot act or there is no secretary (s 274 CA 2006); and » the capacity of persons acting as director and secretary (s 280 CA 2006). Private companies will not have to have a company secretary if they choose not to. However private company secretaries who are appointed will retain their ability to execute documents on behalf of the company with directors (s 44 CA 2006). Instead of the proposed “authorised signatory” provisions, the Companies Act 2006 simply states that a document can be executed by a company by two authorised signatories or a director in the presence of a witness. A company’s authorised signatories will be its directors and secretary (if one is appointed) only. The new Act clarifies that where any provision in the Companies Acts requires a shareholder resolution without specifying the type of resolution, the decision can be made by ordinary resolution unless the company’s articles require a higher majority or unanimity (s 281(3) CA 2006). This will allow companies the freedom to give their shareholders different levels of control over decision making, whilst retaining certain fundamental rights (e.g. the right to remove directors by ordinary resolution). The new Act specifies that time periods set out in the legislation relating to shareholder meetings (giving notice, circulating statements etc) are to be calculated in clear days, i.e. ignoring the day on which the notice was sent (or other relevant action performed) and the day of the meeting (s 360 CA 2006). This will help companies to calculate the relevant deadlines with certainty. The provisions of the Companies Act 1985 relating to mergers and divisions have been restated in the new Act (Part 27 CA 2006). |
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Results of consultation on the application of the new Act to existing companies The Government has now published the responses to its consultation on how the new Act should apply to existing companies, and outlined its resulting plans for transitional arrangements. The questions mainly focused on what existing companies should do if their articles conflict with the new Act on certain issues. For the most part, the responses favoured preserving companies’ existing arrangements. This will mean that existing companies will have to alter their articles if they want to take advantage of some of the new freedoms included in the Companies Act 2006. The Government intends to publish guidance to advise companies on how they will be able to do this. As a result of the consultation, the Government plans to make the following transitional arrangements: » to preserve existing absolute entrenchment provisions unless a court or other competent authority orders otherwise, as certain companies (e.g. charitable companies) place great reliance on them; » to preserve existing companies’ authorised share capitals as a restriction in their articles, but to allow shareholders to remove the restriction by ordinary resolution; » where an existing company’s articles do not contain authority to alter its share capital, to preserve this restriction unless the shareholders amend the articles to remove it; » to preserve subsisting authority in articles to allot shares (under ss 80, 80A CA 1985); » to preserve express provisions in companies’ articles to hold AGMs but also to ensure that indirect references to AGMs are disregarded and that if the articles require directors to retire by rotation at AGMs their appointments should continue until terminated under the Companies Act 2006 or other provisions in the articles; and » to require companies to obtain shareholder approval if they want to allow independent directors to authorise a conflicted director to act despite his conflict. Otherwise, any provisions in the articles relating to directors’ conflicts of interest or their transactions with the company are to be preserved. In addition, any provisions in the articles which require or assume the requirement of a secretary will still be valid, so private companies will either have to comply with them or change their articles if they do not wish to have a company secretary. |
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Implementation Since the responses to the Government’s consultation on how the new law will affect existing companies were in favour of giving them time to adapt to the Companies Act 2006 and associated secondary legislation, the Government still plans to bring the whole Act into force by October 2008 at the latest. However, certain parts will be brought into force earlier, either to comply with other legal requirements or to allow companies to benefit from certain provisions (such as the rules setting out how to communicate electronically with shareholders). These are highlighted below. The Government will consult on its detailed implementation plans in February 2007. 1 January 2007 The Government has now confirmed that the provisions of the new Companies Act which will implement the changes to the First Company Law Directive will come into force on 1 January 2007. The draft commencement order and draft regulations making other necessary changes to the Companies Act and the Insolvency Act 1986 were summarised in Issue 6. 20 January 2007 The following provisions of the new Companies Act are planned to commence on 20 January 2007 as part of the UK’s implementation of the Transparency Obligations Directive: » those relating to companies communicating with their shareholders and others, which include rules on how to communicate using electronic communication (principally Sch 5 CA 2006); » those enabling public companies to investigate interests in their shares (Part 23 CA 2006); and » the provision rendering directors liable for false or misleading statements in their directors’ reports (s 463 CA 2006). 6 April 2007 The following provisions should come into force on 6 April 2007: » those which implement the Takeovers Directive (in Part 28 CA 2006); » those extending the community interest company regime to Northern Ireland; and » the provision which amends the Enterprise Act 2002 to enable certain public authorities to disclose information where it will be used in civil proceedings or to establish, enforce or defend legal rights (s 1281 CA 2006). 6 April will also see certain repeals of the Companies Act 1985 come into effect, the details of which will be highlighted in this Newsletter nearer the time. |
