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The ways in which companies can send and receive information have been revised. The new rules aim to improve communication between companies and shareholders in particular, and should also mean substantial costs savings for companies. |
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The government has brought various provisions of the new Companies Act 2006 into force early, partly to comply with requirements to implement European law and partly to enable companies to benefit from the new provisions aimed at making company management easier (SI 2006/3428; SI 2006/3429). The change that will affect companies the most is the implementation of the new Act’s “company communications” provisions, which occurred as of 20 January 2007 (ss 1143-1148, Sch 4, Sch 5 CA 2006). The new rules apply to: » all companies; » everybody who communicates with companies; and » all types of communication, including general correspondence, notices and information required under companies legislation and legal documents such as court applications and orders. However, it should be noted that if another statutory provision stipulates how a document should be sent to a company and these requirements contradict the new rules, the other statutory provision should be followed instead (s 1143 CA 2006). Sending information to companies Documents can now be sent to a company in hard copy, electronic form or by any other method agreed between the company and the sender (s 1144, Sch 4 CA 2006). Hard copy A document is in “hard copy” if it is a paper copy, or in a similar form which is capable of being read with the naked eye (s 1168 CA 2006). It can be sent to the company by post or delivered by hand to: » an address specified by the company for the purpose; » the company’s registered office; or » any other service address authorised under companies legislation (e.g. court documents can be served on a company registered in Scotland at its place of business in England and Wales, s 725 CA 1985). If the sender can show that it was addressed, prepaid and posted properly, it will be deemed to have been delivered to the company 48 hours after posting, even if the company does not receive it (s 1147 CA 2006). Electronic form A document can be sent to a company in “electronic form” if the company agrees. This includes a document sent by electronic means (e.g. email or fax) or information in electronic form (e.g. on a CD ROM or disk) sent by post or hand delivered. The definition is even wide enough to include text messages. The company can consent to receiving information in electronic form in three ways: » generally, where it agrees to all documents or information being sent to it in that form, specifying an address to which communications can be sent; » specifically, where it agrees that a specific document or piece of information can be sent to it in that form and specifies an address for that purpose; or » it can be deemed to have agreed by statute. For instance, a company is deemed to have consented to receiving electronic communications about a general meeting or proxies at the meeting if it included an electronic address (e.g. email address or fax number) on the relevant notice (s 333 CA 2006, which also came into force on 20 January 2007). If the sender can show that information sent by post was addressed, prepaid and posted properly, or that information sent electronically was addressed properly, it will be deemed to have been delivered to the company 48 hours after posting, even if the company does not receive it (s 1147 CA 2006). Companies sending information to shareholders and others Companies can now send documents and other information in hard copy, electronic form, by posting them on a website, or using any other method agreed with the recipient (s 1144, Sch 5 CA 2006). Hard copy The definition of hard copy is the same as for communications sent to a company. A company can send information to its shareholders and others by post or delivered by hand: » to an address specified by the recipient for the purpose; » if the recipient is a shareholder, to his address in the register of shareholders; » if the recipient is a director, to his address in the register of directors; » if the recipient is a company, to its registered office; » any other service address authorised under companies legislation; or » if none of the above is available, to the recipient’s last address known to the company. If the company can show that the information was addressed, prepaid and posted properly, it will be deemed to have been delivered to the company 48 hours after posting, even if the recipient does not receive it (s 1147 CA 2006). Electronic form A company can send information in “electronic form” if the recipient agrees. The definition of “electronic form” is the same as for communications sent to a company. Where information is sent in electronic form, any shareholder or debenture holder receiving it has the right to request a hard copy, which the company must provide for free within 21 days (s 1145 CA 2006). Failure to do so renders the company and any officer in default liable to a fine. A recipient can consent to receiving information in this way generally or specifically, or he can be deemed to have given his consent by the legislation. Each individual’s consent is required; therefore, even if the articles state that the company can communicate with shareholders electronically, the company will still have to contact each shareholder for his consent and an address to use. Companies must ensure that the method of communication matches the consent given, for example if a shareholder has agreed to receive notices of meetings by email, the company will not be able to send him the annual accounts by email as well. A company which currently relies on sending information to its shareholders by post which wants to be able to use email instead should contact each shareholder. If a shareholder does not respond or refuses to consent to this method of service, the company will have to continue to communicate with him as before. If the shareholders have already consented to this method and provided addresses for service, the company will not have to do so again. If the company can show that information sent by post was addressed, prepaid and posted properly, or that information sent electronically was addressed properly, it will be deemed to have been delivered to the company 48 hours after posting, even if the company does not receive it (s 1147 CA 2006). Companies may want to include a more appropriate deemed service time in their articles for information sent electronically. On a website Companies can use their websites to make information available to shareholders and others, if the recipient agrees. If a document or other information is posted on a website, it must be possible to read it with the naked eye and take and keep a copy of it. Where information is sent in electronic form, any shareholder or debenture holder receiving it has the right to request a hard copy, which the company must provide for free within 21 days (s 1145 CA 2006). Failure to do so renders the company and any officer in default liable to a fine. This method is likely to be mostly used by large companies to communicate with their shareholders, as they will benefit from the cost and administrative savings of using and maintaining a website. Again, recipients can consent to receiving information in this way generally or specifically. Companies can also obtain shareholders’ “deemed consent”, which will benefit companies with a large number of shareholders in particular. A shareholder will be taken as consenting to receiving information via a website if: » the company’s articles provide or the shareholders resolve for information to be made available in this manner (any such resolution will have to be filed at Companies House within 15 days (s 380 CA 1985); » the shareholder has been asked individually to agree to receiving notice via a website; and » he has not responded to that request for at least 28 days. The request must be clear, and can only be made once every 12 months in respect of the same or similar type of document or information. A debenture holder can also be deemed to give his consent, if the instrument creating his debenture contained a provision to that effect, or if the debenture holders so resolved, and he has not responded to a request for his individual consent for at least 28 days. Other non-shareholding recipients cannot give deemed consent. The intended recipient must be notified that the information has been posted on the website and it must be available for the whole of any applicable period, e.g. the notice period for shareholder meetings, or for at least 28 days if there is no such period (unless the website is unavailable for some of the period due to technical difficulties out of the company’s control). The information is deemed to have been sent on the date on which the recipient was notified that it was available, or on the date on which it was posted on the website, if later.
These new provisions should improve communication between companies and their shareholders in particular, making it easier for shareholders to obtain information about their companies and to join in decision making and other issues. Companies should benefit from time and costs savings, once they have the appropriate consents and procedures in place, and will therefore be more inclined to make information available to shareholders. To take full advantage of the new rules, companies will need to: - Review their current methods of communication, particularly with shareholders. - Consider how this can be improved by using the new rules, taking the shareholders’ views into account. - Obtain any necessary consents to use electronic communication, websites or another method and update the company’s procedures accordingly. Companies should review these procedures periodically, for example to monitor how popular the different methods of communication are, to ensure that they deal with requests for hard copies promptly and to check that the systems for recording which shareholders/others have consented to which methods of communication are effective. |
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COMPANY COMMUNICATIONS |