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The Government announced last week that full implementation of the Companies Act 2006 is being delayed for a year. The Companies Act 2006 was due to be fully in force on 1 October 2008. However, in an unexpected announcement made by Stephen Timms, the Minister of State for Competitiveness, on 7 November 2007, full implementation has been pushed back to 1 October 2009. The announcement came following an admission by Companies House that it could not be certain that changes to its systems and processes, needed to give effect to the new provisions, could be completed on time.
It is a frustrating development for businesses and lawyers alike. The new Companies Act 2006 was intended to simplify UK company law and introduce substantial deregulatory measures (and hopefully cost savings), particularly for private companies. From now, however, until October 2009 parts of both the 1985 and the 2006 Companies Acts will be in force with concern that having to work between the two could lead to higher administrative costs and a degree of confusion.
Where does this leave the implementation timetable?
The original timetable envisaged a 3-phase implementation process with provisions of the new Act coming into force on 1 October 2007, 6 April 2008 and 1 October 2008.
Phase 1 (1 October 2007): A number of provisions of the Companies Act 2006 came into force on 1 October 2007 as planned including provisions codifying directors' duties and simplifying shareholders’ meetings.
Phase 2 (6 April 2008): The further changes always anticipated to be effective from 6 April 2008 should also commence as planned including abolishing the obligation on private companies to have company secretaries.
Phase 3 (1 October 2008 or 1 October 2009?): Most of the provisions due to be commenced on 1 October 2008 will be put back to 1 October 2009. However, there remain a number of uncertainties with this revised timetable. This is because the Government has recognised that some provisions of the new Act which were due to be effective from 1 October 2008 do not require changes to Companies House systems and processes and therefore do not need to be delayed. Some of these provisions are the most keenly awaited of the new Act including: (a) repeal of the rules prohibiting financial assistance for the acquisition of shares in private companies, and (b) the provisions enabling company directors to keep their home addresses private.
What next?
The Government intends to consult key stakeholders about whether or not to implement some Phase 3 provisions on 1 October 2008 without delaying until 1 October 2009. The Government has stated that the pattern of implementation going forward will depend on “the need to balance the timing of the commencement of deregulatory provisions against the complexity of phased implementation”.
Its final decision and an announcement confirming the final commencement timetable are expected in December 2007. We will issue a further briefing then.
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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