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Companies Act 2006 - The Final Countdown
Overview of changes
September 2009
Over three years after receiving Royal Assent, and following significant changes to the systems and processes at Companies House, the last remaining provisions of the Companies Act 2006 (the “Act”) are coming into force on 1 October 2009.
In this article, the first of a three part series on the 1 October 2009 changes, we outline some of the key changes affecting private companies that will come into force on that date, together with some of the changes which came into effect on 3 August 2009 to implement the EU Shareholder Rights Directive. Companies, and their officers, should familiarise themselves with these changes and consider updating their articles of association to make them consistent with the new provisions. They should also make the necessary changes to their registers.
Changes coming into force under the Act from 1 October 2009
Business Names. The business names provisions of the Act will come into force on 1 October 2009, largely restating the Business Names Act 1985. The Act makes the rules on business names more consistent with the rules on company names, and will remove duplication relating to the information companies must disclose at places of business and in correspondence.
Company Formation. For the first time, it will be possible for any company (including a public company) to be formed by a single person and have only one shareholder. However, the Act still requires a public company to have at least two directors.
Company Secretarial. There are various administrative changes that should be noted including that:
- Companies will be able to keep some or all of their statutory records and registers at a place other than their registered office. Currently, some of a company’s registers, such as the register of members, may be kept at a place other than the registered office, but others, such as the register of directors and secretaries, have to be kept at the registered office. A further category of records, including copies of directors’ service agreements and indemnities, may be kept at the company’s “principal office”. The company will need to notify the Registrar of the address of this alternative inspection location and the type of records kept there.
- When a person inspects a company’s register of members or a company provides a person with a copy of the register of members, the company will have to advise that person when the register was last updated, and that there are no further alterations to be made. An appointment system will be introduced for inspection of a private company’s records. Fees may be charged for inspection and copies of the records.
- A company will no longer have the power to temporarily close its register of members.
- The register of directors and secretaries is to be changed (as set out below). Registers of directors and particulars provided by directors will no longer need to state the names of other companies of which the director is or has been a director. There are also changes as to the particulars to be provided.
Constitution. From 1 October 2009, the memorandum of association will no longer form part of a company’s constitution. While a memorandum of association will still need to be filed as part of the incorporation process of a new company, that memorandum will be in a prescribed form containing only limited specified information. A company will also have unrestricted objects unless its articles specifically restrict them. The position for existing companies is that those provisions currently in their memorandum which would no longer appear in the memorandum of a new company (including any restrictions on the company’s objects) will be treated as provisions of the company’s articles. Finally, as the concept of authorised share capital is being abolished, any statement of the authorised share capital of existing companies will be treated as a restriction in the articles as to the number of shares that can be issued, which may be amended by ordinary resolution. Further details on this, and the new ‘model articles’ for companies, will be in the second and third articles in this series.
Company Names. A company will be able to change its name by special resolution (as is currently the case) and by any other procedure specified in its articles (e.g. a board resolution).
Information relating to Directors and Secretaries. Directors will be able to provide a service address to appear on the public register, with their residential address being kept on a separate secure register. Existing directors’ residential addresses will remain on the public register, unless a successful application for their removal is made. A director can only apply to have that address removed if it was placed on the register at Companies House after 1 January 2003 and then only in limited circumstances. Company Secretaries will only have to provide a service address (i.e. with no requirement to provide a residential address to be kept on a separate secure register). A company’s register of directors will need to contain, among other things, a service address for each director, which may be the company’s registered office or another address of the company. A further register will then need to be created and maintained, containing the residential address of each director who is an individual. Details of shadow directors are to be removed from the register of directors.
Overseas Companies. There are currently two regimes in England and Wales applying to registration of charges created by overseas companies - one for companies with a branch registered here and one for companies not so registered but which have an established place of business here (this latter regime being commonly known as Slavenburg registration regime). From 1 October 2009, the Act repeals the provisions of the Companies Act 1985 relating to charges over property in England and Wales created by an overseas company so that Slavenburg registrations are not required. Instead, the Act provides for a single regime applicable to all registered overseas companies that create a charge on property in England and Wales. If there is no establishment in the UK, there will be no registration requirement for a charge created by the overseas company even if it is over property in the UK. There are also some changes to the registration requirements for overseas companies.
Share Capital. There will be a number of changes affecting a company’s share capital. These are explored in more detail in the third part of this series. However, notable changes include:
- Redenomination of share capital. A simplified procedure is being introduced for the redenomination of share capital.
- Variation of class rights. A company will be able to specify less demanding procedures in its articles for varying class rights than those required under the Act.
- Statement of capital. A company will be required to file a statement of capital with the Registrar every time there is a change in the amount of the company’s issued share capital.
- Authority to allot. The directors of a private company with only one class of shares will be able to allot shares without prior shareholder approval, provided this is not prohibited by the company’s articles. The directors of existing companies will first need to obtain shareholder approval to obtain this authority.
- Pre-emptive offer. The minimum time period during which a pre-emptive offer (e.g. a rights issue) must remain open for acceptance is being reduced from the current 21 days to 14 days.
- Redeemable shares. Private companies will no longer need authority in their articles to issue redeemable shares. A company’s directors will be able to determine the terms of the redemption if authorised to do by the company’s articles or an ordinary resolution.
- Acquisition of own shares. Companies (private and public) will no longer require authority in their articles to purchase their own shares and private companies will no longer require authority in their articles to redeem or buy back shares out of capital. In addition, on a buy back out of capital, directors will be required to make a directors’ statement on the company’s financial position instead of a statutory declaration, as was previously required.
EU Shareholder Rights Directive and changes from 3 August 2009
New Regulations implementing the EU Shareholder Rights Directive came into force on 3 August 2009. The Regulations amend the Act and change the way in which companies (particularly Official List companies) hold general meetings and communicate with shareholders. The changes relevant for private companies are that:
- Proxies. Proxies appointed by multiple shareholders can exercise one vote for and one vote against a resolution on a show of hands if they have conflicting voting instructions from their appointing shareholders. Proxies must also follow the instructions of their appointing shareholder.
- Corporate representatives. New rules regulate how multiple corporate representatives appointed by the same shareholder can vote on a show of hands.
- Right to call a general meeting. Shareholders holding at least 5% of the shares can require directors to call a general meeting (previously the threshold was 10%).
If you have any questions or would like to discuss anything in this article in more detail, please contact Charlotte Hawkins at Kemp Little LLP on 020 7600 8080.
Kemp Little LLP Solicitors, Cheapside House, 138 Cheapside, London, EC2V 6BJ
Tel: +44 (0) 20 7600 8080 Fax: +44 (0) 20 7600 7878
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