The Companies Act 2006 received royal assent on 8 November 2006. It repeals and restates, in plain English, almost all of the current Companies Acts, which it will largely replace. This is the longest Act ever to be passed by Parliament and introduces reforms which will affect Directors, Auditors, Shareholders and Company Secretaries of private, public and quoted companies.
The majority of the provisions of the Act will come into force by October 2008 however some are being implemented sooner in order to comply with EU directives. An implementation timetable has been published and the Government also intends to publish non-statutory “plain English” guidance for directors to explain how certain aspects of the new regime will apply in practice.
The Act is intended to modernise current company law so that it meets today’s business needs, provides flexibility for the future and remains accessible for those who use it. The overriding principle is to “think small first” with a much simpler, more lightly regulated, regime for small private companies. This is then augmented by extra requirements applicable to large, public and quoted companies.
This bulletin summarises some of the initial changes arising from the Act and other recent company legislation. Please note this in not a comprehensive list and does not cover provisions aimed solely at listed companies and groups.
Provisions already implemented
From 1 January 2007 the existing rules on disclosure of registered name, number, place of registration and registered office address on business letters were extended to cover order forms, e-mails and websites. Companies and their officers are liable to a fine if they are in breach of these provisions.
Improved electronic filing provision at Companies House, particularly with regard to company formations were also brought into force.
From 20 January 2007 communications with shareholders may now be conducted electronically without the need for hard copy documents being delivered.
In summary:
- Documents or information can be supplied by a shareholder to a company in electronic form if the company has agreed to that method of receipt. A company is deemed to have agreed where it has given an e-mail address in a notice of meeting or on a proxy form.
- A company can send documents by e-mail to a shareholder if he or she has agreed and has provided an e-mail address.
- A company can send documents and supply information to its shareholders by making the document or information available on its website if the shareholders have passed a resolution permitting this or the company's Articles have been suitably amended. The company must inform shareholders each time information is posted to the website and each shareholder must have previously consented to receiving information by this method.
There is also a new liability regime for narrative reporting which effectively introduces a safe harbour for information in directors’ reports. Directors will be liable for untrue or misleading statements if made knowingly or recklessly or if an omission was a dishonest concealment.
From April 2007:
- Abolition of upper age limit for directors of PLCs and their subsidiaries.
- The abolition of the statutory disclosure requirement for directors' share dealings.
Provisions that are coming into force include:
From October 2007:
- New statement of general directors duties which are currently established in case law rather than statute. The Act confirm the primary duty of the directors is to act in a way which they consider most likely to promote the success of the company for the benefit of the shareholders as a whole and that, in doing so, they will need to have regard where appropriate to long term factors, the interests of other stakeholders and the community, and the company’s reputation. The government intends to issue further guidance on this.
- New rules concerning private companies appointing their auditors including deemed re-appointment.
- New rules for meetings and resolutions which will remove the requirement for private companies to hold an AGM and easier use of written resolutions.
From April 2008:
- No requirement for private companies to appoint a company secretary.
- Accounts filing deadlines reduced to nine months for private companies and six months for public companies.
- Medium-sized groups no longer exempt from preparing group accounts.
From October 2008:
- Simplified provisions in respect of company constitutional matters including Memorandum and Articles of Association, company names, share capital, acquisition by a company of its own shares.
- Directors minimum age of 16.
If you wish to discuss this in further detail, please contact your local Vantis office or complete and submit the online form below.