Companies Act 2006
01 Oct 2009
Introduction
On 1st October 2009 the remaining sections of the Companies Act 2006 ("the Act") will become law. One of the main purposes behind the new Act is to make running a company easier for directors and to increase shareholder involvement.
This note provides directors and shareholders of private companies with an outline of some of the key features of the Act and particularly those that specifically affect them.
Directors' Addresses
Directors now have the option of filing two addresses with Companies House. The first, known as a service address, will appear as a public document and therefore available for anyone to view. However, the service address does not have to be a residential address. It can for example be the company's registered office address. Directors will still be required to notify Companies House of their residential address but this information will now be protected and available only to credit reference agencies and government departments.
Directors can choose to use their residential address as the service address. Unfortunately, previously filed forms 288a will still appear as a public document unless there is a good reason for Companies House to remove it from the public record.
Shareholders' details will still be provided each year as part of the Annual Return filing procedure.
Abolition of Annual General Meetings ('AGMs')
Private companies are no longer required to hold an AGM (unless the company's articles specifically state that an AGM must be held). In future, any director or 5% of shareholders may request that a meeting is held.
Written Resolutions
It is envisaged that the majority of decisions that require shareholder approval will now be taken via written resolution i.e. a note of the resolution sent to all shareholders asking them to approve or reject the resolution in writing within 14 days of receiving it.
Shareholder decisions approved by written resolution will no longer require unanimity. Instead the written resolution will either require 51% or 75% shareholder approval depending upon whether the decision would require approval via ordinary (51%) or special resolution (75%) if it were being taken at a general meeting.
Accounts
Annual Accounts must now be filed at Companies House no later than 9 months after the end of the company's financial year end as opposed to 10 months as was previously the case. The late filing penalties for this and other filings are substantially increased.
Directors
Companies must have at least one director who is a natural person i.e. an individual, over the age of 16. Any company which does not meet this requirement has until 1st October 2010 to comply.
No director may be appointed who is not at least 16 years old. There is no maximum age limit.
Company Secretaries
Private companies are no longer required to appoint a company secretary (unless the company's articles provide otherwise). The directors then become collectively responsible for the secretarial function.
Companies may still choose to appoint a company secretary and it is our advice that someone is given responsibility for the secretary's duties (such as filing the Annual Return and Annual Accounts, keeping Companies House informed of any changes in directors details and maintaining the company's books generally) even if no one individual has the specific title.
Execution of Documents
Documents that require formal execution by the officers (directors or secretary) of a company such as a lease can now be completed by either two directors signing the document or one director signing in the presence of an independent witness.
Shares; Changes to the way directors issue shares
1. There is no change for companies incorporated prior to the 1st October. Directors must still consider certain issue before issuing shares, significantly:
- that the company has a sufficient number of unissued shares remaining from its Authorised Share Capital.
- that the shareholders had granted the directors the authority to issue shares.
- Under the new Act, directors will still need specific authority unless shareholders remove this requirement from the articles.
2. For companies incorporated on or after 1st October (New Companies), directors will not have to:
- consider whether the company has a sufficient number of unissued shares remaining from its Authorised Share Capital as the notion of a cap on share capital is being abolished (unless shareholders specifically provide otherwise);
- seek shareholder approval prior to the issue of shares as directors are automatically granted this power (unless shareholders specifically remove this power), but only where the company has one class of share. Directors of New Companies with two or more classes of shares will still require shareholder authority to allot shares.
- Directors must still consider pre-emption rights (if any) prior to issuing shares and must always act in the company's best interest. However, theoretically directors can dilute a shareholding (subject to shareholder remedies enforceable in court).
For more details on these new procedures or for any further information on any of the points raised in this note, please contact either Alan Williams, Robert Sedgwick, Brendan Roodt or David Hallett.