The Companies Act 2006
The Companies Act 2006 (the "Act") received Royal Assent on 8 November 2006 and it is anticipated that it will be brought into force in full by October 2008. As and when it comes into force the Act will introduce the most fundamental changes to UK Company Law for over 20 years.
Introduction
The Act has had an extremely long gestation period, beginning with the Company Law Review (1998). Originally, as the Company Law Reform Bill (the Bill), it was intended to sit alongside the Companies Acts 1985 and 1989, however at a late stage in the Bill’s passage through Parliament the government consolidated provisions of the Companies Acts 1985 and 1989 into the Bill and it became known as the Companies Bill.
The Act is intended to address the following objectives:
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Enhance shareholder engagement and a long term investment culture;
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Ensure better regulation and a “Think Small First” approach;
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Make it easier to set up and run a company; and
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Provide flexibility for the future.
Key Changes
The Act represents a more comprehensive code of UK company law and, as it comes into force, will introduce major changes to UK company law, including the following:
1. The codification of directors’ duties.
2. A simplification of the regulatory/administrative regime for private companies, including:
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It will not be necessary to have a company secretary.
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The prohibition on giving financial assistance in relation to the purchase of a company’s own shares will be removed.
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They may reduce their share capital without court approval.
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The requirement for an authorised share capital is removed and the current “elective” regime (e.g. to dispense with the requirement to hold AGMs) becomes the default regime for private companies.
3. A new procedure for derivative actions (i.e. shareholders raising court actions in the name of a company or seeking relief on behalf of a company) is introduced.
4. Auditors are given the power to agree liability limits with companies.
5. The Takeover Panel is put on a statutory footing.
6. The introduction of a general scheme of electronic and web based communications.
7. The implementation of the EU Transparency Directive, as a result of which amendments are made to the Financial Services and Markets Act 2000 – these amendments will change: periodic financial reporting rules for companies; the regime for disclosing major shareholdings; and the way companies communicate with shareholders and the financial markets.
Commencement
On 22 December 2006 the first Commencement Order was published:
1. With effect from 20 January 2007 the following provisions will come into effect:
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Provisions re company communications to shareholders and others and use of electronic communications.
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Provisions re a public company’s right to investigate who has an interest in its shares.
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Section 463 of the Act (setting out a statutory basis of directors’ liability to the company in relation to the Directors Report, including the Business Review) and the Directors’ Remuneration Report.
2. With effect from 6 April 2007 the following provisions will come into effect:
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Provisions relating to fees payable to the Registrar of Companies.
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Amendments to Part 9 of the Enterprise Act 2002 to enable public authorities to disclose information where the information is to be used in civil proceedings or otherwise.
The exact timing of when the majority of the Act will be brought into force is to be the subject of consultation by the Government during the coming months.
We will be issuing regular briefings and analysis of the key implications of the Act and its coming into force over the coming months. In the meantime if you wish to discuss any aspect of the Act please contact any member of the Corporate Group at Semple Fraser.
The Companies (Registrar, Languages and Trading Disclosures) Regulations 2006
The Companies (Registrar, Languages and Trading Disclosures) Regulations 2006 (the "Regulations") came into force on 1 January 2007 and implement The First Company Law Amendment Directive.
The principal practical impact of the Regulations on a day to day basis is to amend sections 349 and 351 of the Companies Act 1985 and the Limited Liability Partnerships Act 2000 so that they extend to all companies and LLP’s electronic communications and websites.
As a result, every company/LLP now requires to state its full corporate name legibly on all:
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business letters;
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order forms;
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notices and other official publications;
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cheques, promissory notes, bills of exchange, endorsements or orders for money or goods;
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invoices, receipts, letters of credit and bills and parcels; and
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all websites.
All business letters, order forms and websites must also contain legible details of the Company/LLP’s:-
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place of registration;
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registered number;
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registered office address; and
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if a limited company is not required to use the word "limited" as part of its name, the fact it is a limited company;
It is important to appreciate that for these purposes such documentation includes not only a hard copy (such as a letter) but now also electronic versions (such as e-mails (including those sent from mobile devices such as a Blackberry) and faxes).
Any officer of a company who issues or any person on its behalf who authorises the issue of any document of the type mentioned above or the appearance of a website which does not comply with these provisions is liable to a fine.
It is also important to bear in mind that an officer of a company could be found personally liable for any cheque, promissory note, bill of exchange or order for money or goods in breach of these provisions of the Companies Act 1985.
Immediate Action Required
You should ensure that all relevant corporate documentation and websites comply with the amended provisions of the Companies Act 1985/Limited Liability Partnerships Act 2000. The principal checks that will be required are:
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that all business correspondence and order forms, including those sent electronically (including e-mails and faxes), contain the necessary information – in our experience many emails do not contain this information in their standard disclaimer or footer and this especially applies to e-mails sent from mobile devices such as a Blackberry; and
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that your website complies.
If you wish to discuss any aspect of these changes or you wish us to review your templates, headed notepaper, order forms and other company documentation, or carry out an audit of your website for compliance with this and other legislation (including data protection laws), then please do not hesitate to contact any member of our Corporate Group.
For further information please contact: Bill Fowler