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The final provisions of the Companies Act 2006 (CA 2006) will come into force on 1 October 2009. What's changing, and are you prepared?
Here is a brief overview of some of the key changes coming into effect on 1 October 2009, for private companies limited by shares.
Company constitution
For companies incorporated from 1 October 2009:
- Their objects will be unrestricted, unless their articles of association (Articles) provide otherwise.
- New model articles (Model Articles) will apply by default on formation (unless modified or excluded). These Model Articles were designed with the needs of small, owner-managed businesses in mind, so the provisions have been kept as simple as possible. Many companies (e.g. larger private companies and joint venture companies) will need more extensive, tailored Articles.
- Provisions can be entrenched in Articles (i.e. it can be stipulated that certain provisions can only be amended with the approval of a majority of more than 75%), but only on formation of the company or if all members agree. Special notice of entrenched provisions must be filed with Companies House.
In broad terms, an existing company will have to continue to comply with its existing memorandum and Articles (including any restricted objects) unless they are amended.
Share capital
- Companies incorporated from 1 October 2009 will not have an authorised share capital. For existing companies with an authorised share capital, the relevant limit will continue to apply and will be treated as a restriction in their Articles, but it can be removed by ordinary resolution.
- Directors of a private company with only one class of share will not need prior authority from the company's members to allot shares, unless the company's Articles require otherwise.
- Companies will have general authority to issue redeemable shares, and to purchase shares out of capital, subject to any restriction or prohibition in their Articles.
- There will be an easier procedure for re-denominating a company's share capital (e.g. from GBP 1 shares to Euro 1 shares) by reference to "an appropriate spot rate of exchange".
Company names
- Articles can permit a company to change its name without a special resolution – e.g. by a board resolution, or by approval of less than 75% of the company's members.
- There will be new prohibitions on a company using a registered name or a business name that gives "so misleading an indication" of the nature of its activities "as to be likely to cause harm to the public".
Privacy for directors' residential addresses
- Newly appointed individual directors will be able to keep their residential addresses off the public register, which will only publish service addresses (which could be, for example, the company's registered office address).
- Companies House will hold two separate registers: (a) the Register of Directors’ Residential Addresses, which will be kept private (as this will now be "protected information"); and (b) the Register of Directors, containing directors’ service addresses, which will be available to the public.
- For a more detailed look at this new regime, see our recent article "Directors – Privacy for Residential Addresses".
All Companies House forms will change
All Companies House forms will change from 1 October 2009 to reflect the implementation of the CA 2006. Submission of old forms will be rejected.
The CA 2006 so far
By 1 October 2009, all the provisions of the CA 2006 will be in force. Here is a quick reminder of some of the main changes that have already been introduced:
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a codification of directors' duties (1 October 2007);
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new provisions for shareholder approval of directors' substantial property transactions, loans, long-term service contracts and payment for loss of office (1 October 2007);
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changes to formalities for shareholders' meetings and resolutions (1 October 2007);
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the abolition of the requirement for private companies to have a company secretary (6 April 2008);
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the repeal of the prohibition on financial assistance for private companies (1 October 2008);
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new rules dealing with directors' conflicts of interests (1 October 2008); and
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a simplified share capital reduction procedure for private companies (1 October 2008).
Are you prepared?
All companies should be taking the opportunity to consider whether or not they comply with the CA 2006 regime and how they can take advantage of the simplified and modernised procedures.
In relation to the final 1 October 2009 changes, some practical steps for existing private limited companies include:
considering whether you should pass resolutions to remove restrictions that are no longer required under the CA 2006 (e.g. to allow directors to allot shares without members' prior authority)
reviewing your company's Articles and considering whether you should:
- adopt new Articles to reflect the Model Articles; or
- introduce amendments to existing Articles (e.g. to remove or update provisions that are altered or relaxed by the CA 2006); or
- entrench any provisions of your company's Articles; and
updating your internal processes to ensure that your registers of directors and secretaries are correctly maintained, and that those with access to the register of directors' residential addresses are aware that the information is strictly confidential.
How can we help you?
If you would like advice on any of the issues raised here, or on any other aspects of the CA 2006 regime, please do contact us. We can provide you with helpful checklists and guidance notes, and we would be delighted to have an informal discussion with you to explore any concerns or questions that you may have.
Caroline Copeland
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Simkins' early warning bulletins are for general guidance only. Legal advice should be sought before taking action in relation to specific matters. Where reference is made to Court decisions facts referred to are those reported as found by the Court. Please note that past bulletins included in the Archive have not been updated by any subsequent changes in statute or case law.
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