Companies Act 2006 - what it means for private companies

Timetable

A number of provisions have already come into force, including provisions dealing with Language and Trading Disclosures, e-communications; e-filing; regulation of actuaries; disclosure of shareholdings; liability for statements, and various repeals being brought into force in April.

The new legislation beings about many changes which will have great effect on all companies. This short article concentrates on the changes for private companies. The legislation aims to give companies greater flexibility in how they operate.

When will the rest of the Companies Act 2006 come into force?

The Companies Act 2006 has now become law. Its provisions will be brought into force in stages, with all of it in effect by October 2009.

Forming a Company – from October 2009

• The Memorandum of Association will simply be a required ‘historic’ document – which, along with various other documents, will record the facts at the time of incorporation. The articles, rather than the memorandum, will set out principles covering the way the company conducts its business;
• New companies registering under the Companies Act 2006, will be able, if they so wish, to ‘amend’ the new default model ‘Articles of Association’ for private companies. These will be set out in clearer language then previously. Larger companies may also adapt and use these articles;
• There will be no requirement in the Memorandum,or the Articles, for the company to state their objectives. Companies will therefore be somewhat unrestricted in what they do.

New / revised requirements

Electronic documents – from January 2007

Electronic communications, including emails and websites, must include the company’s name and number, registered office and other particulars.

If your organisation is made u of a number of subsidiary organisations, it is up to you whether you put details of all subsidiaries on all websites.

Some groups are having a single page which links between all the parts of the group giving their registration details.

If you do not comply you could be subject to a fine. The current fine is one fifth of the statutory maximum of £5000.

VAT numbers and details are not required by the Companies Act 2006, however, you may want to check the point with HM Revenue & Customs.

New accounting arrangements – from April 2008

The deadline for filing annual accounts will reduce from ten months to nine. The exemption from preparing consolidated accounts by medium sized groups has been changed. This only now applies to small groups.

At least one Director – from October 2008

All companies must have at least one actual person as a director. There is no room for ‘companies’ to be acting as directors

Child directors – from October 2008

There will be a minimum age of 16 for directors.

 Director’s   duties

The general duty of directors has been developed mostly by case law. The position is still that directors must act in a way which they consider most likely to promote the success of the company for the benefit of its shareholders. They must therefore have regard to long term factors such as the interests of other stakeholders, the community and the company’s reputation.

Ten company points to remember

• Company secretaries – there is no need to appoint one unless you want to. If you do, he will have the same rights and responsibilities as now;
• Directors – there must be one real person as a director. All directors must be 16 or over;
• Shareholders meetings – private companies no longer need hold an AGM. 10% of shareholders can demand a meeting. If such meetings are to take place, theremust be a 14 day notice period;
• Decision making – written resolutions will be easier to use – requiring a simplemajority (ordinary resolution) or 75% majority for special resolutions;
• Electronic communications – communications can be sent by email and posted on websites as long as the shareholders agree to it. Individual members may still request hard copies. The company name, number registered office and other details must be provided on all company letters and other documents, as well as on any company website;
• Articles – Model Articles are available for amendment and use for all new Companies who have registered under the Act, and any existing companies;
• Financial assistance – the rule that companies cannot give financial assistanceto buy their own shares has been abolished;
• Accounts – private companies must file their accounts within nine months, not ten;
• Capital reductions – there is now a simple, solvency based procedure to enable private companies to reduce capital without court approval;
• General compliance – there is very little companies must do to comply, but they can take steps to take advantage of the deregulatory benefits of the Act.