Companies Act 2006 article Stretching to a staggering 760 pages and with around 1,300 sections the Companies Act 2006 is the longest piece of legislation ever approved by Parliament.Given that the Act was introduced with the intention of simplifying company law one wonders to what extent that aim will prove to have been achieved!Since receiving royal assent in November 2006 there have been at least four significant implementations of the Act as it has been introduced to existing company law in stages.
The final implementation of the Companies Act 2006 took place on 1 October 2009 and this article looks at some of the main changes introduced from that date, and also some of the earlier Companies Act 2006 changes.From 1 October 2009 companies should be aware of, amongst many other things, important changes relating to a companies constitutional documents and share capital.
Previous changes introduced by the Companies Act 2006;
Codification of directors duties.
Since 1 October 2007 all private companies have been able to pass resolutions by the written resolution procedure.These provisions override anything contrary in the company’s articles and any conflicting provisions should be removed to avoid confusion.
No need, since 1 October 2007, for private companies to hold Annual General Meetings, unless required to do so by the company’s articles.
No need, since 6 April 2008, for private companies to have a company secretary, subject to any contrary provisions in their articles.
Since 1 October 2008 new rules for dealing with authorising directors conflicts of interests.
A simplified share capital reduction procedure for private companies since 1 October 2008.
Some key changes from 1st October 2009 are:
Share Capital
The requirement for both private and public companies to have an authorised share capital is abolished.The existing restriction in a company’s articles can be removed via ordinary resolution or the adoption of new articles.
Those private companies with a single class of shares will not need a directors authority to issue shares, nor will there be any need to increase a company’s share capital to allot shares as there will be no ‘unissued’ shares in a company’s capital. This will automatically apply to those companies incorporated after 1st October 2009, existing companies will need to pass an ordinary resolution to take advantage and also check their articles.
Various other dealings with share capital such as purchase of shares, reductions of capital and allotment of redeemable shares previously required authority in articles.That is no longer the case, now if the articles say nothing then the company is deemed to have authority.
Constitution
The Memorandum of Association will have a much reduced role from 1 October 2009, it will become a simple statement of the subscribers intentions to form a company.Companies incorporated after 1 October 2009 will have unrestricted objects.The contents of the memorandum for companies incorporated before 1 October 2009 will automatically be deemed to transfer and form part of that company’s articles of association from 1 October 2009.
The Model Articles will replace the old 1985 Companies Act ‘Table A’ articles and will apply by default on formation (unless varied or excluded) and have been designed with the needs of small, owner-managed businesses in mind and as such only envisage one class of share.Larger companies may need more extensive and bespoke articles.A company will be able to “entrench” provisions in its articles and such entrenched provisions may only be amended if restrictive conditions or procedures are complied with. This could be a useful tool for protecting the interests of key shareholders.
Companies House Forms, will all change from 1 October 2009 and it will be important to become familiar with the new forms to deal with appointing, or retiring directors, dealing with mortgages and charges.The annual return form is also changed.Old forms will be rejected.
Directors’ Service Addresses, Directors’ home addresses will no longer need to appear on the public register held at Companies House, but this information must still be supplied. A service address (for example, the company’s registered office address) may be provided for display purposes. Home addresses of existing directors which currently appear on the register will not automatically be removed after 1 October 2009.
Company Name, a company’s articles may permit it to change its name by means other than a shareholders special resolution. This could be by way of board resolution, or on the happening of a pre-determined event, but the procedure for doing so must be set out in the articles.
What now?
All directors should ask themselves whether they have considered:
Do I need to amend articles to set a mechanism for authorising directors conflicts correctly;
Amending articles to remove any provisions which are inconsistent with the 2006 Act (for example the written resolution procedure);
Amending articles to remove any potentially unnecessary objects clauses which may restrict what a company can do;
Adopting new articles to reflect the model articles and to remove any out-dated misleading references;
Whether there is a need to entrench certain provisions in the articles to protect my interest as shareholder;
Do I need any specific prohibitions in the articles restricting alterations to share capital?
Do I wish to remove the requirement to hold annual general meetings;
For further information on any of the points raised above, or an informal discussion as to how your company could amend its constitution to take advantage of the new Companies Act regime contact Nick Davies or Tim Stone of Steele Raymond LLP on 01202 294566.
