Companies Act 2006 - October 2009 changes
The Companies Act 2006 (the Act) received royal assent almost 3 years ago and, since then, it has been brought into effect in a number of stages. Substantive changes, including the statutory statement of directors’ duties and the abolition of the prohibition against financial assistance, have already come into effect. The remaining provisions came into force on 1 October 2009 and complete the most radical overhaul in company law for over two decades.
So what will the final changes mean for private limited companies? In short, newly formed companies will have a new set of model articles of association which update the current Table A and new rules relating to share capital, together with provisions which are geared towards streamlining company administration. Some of the new rules will require immediate action whilst others should be considered by companies wishing to take advantage of the changes.
Memorandum and articles of association
The memorandum of association of a new company will be markedly different. It will contain little more than a statement of the initial subscribers for shares, the type of company, its name and details of the initial share capital. It will no longer set out the authorised share capital or contain an objects clause. A company's objects will now be unrestricted unless express restrictions are contained in the articles of association.
A form of model articles of association will apply by default to new companies. The current practice of producing specifically tailored, bespoke articles will still be possible and, in most cases, we would still recommend that companies should adopt bespoke articles to deal with their specific requirements.
From 1 October 2009 there is a new penalty of £200 for failure to file an up to date copy of a company’s articles after they have been amended.
Authorised share capital
The concept of authorised share capital (an often arbitrarily chosen limited beyond which a company may not issue new shares) has been abolished for new companies, unless the articles of association specifically limit the amount of shares which may be issued. Existing companies will still be restricted from issuing beyond their authorised share capital unless they have passed an ordinary resolution or adopted bespoke articles which remove existing limits.
Allotment of shares
Companies incorporated prior to 1 October 2009 may only allot new shares if their directors have been specifically authorised to do so under the articles or by an ordinary resolution. Directors of newly formed companies, with only one class of shares, will be able to allot fresh shares without requiring such authority. This is only the case, however, where the articles of association do not restrict them from doing so. It will still be possible, therefore, for shareholders to impose restrictions on the ability of directors to allot new shares.
Directors will be required to register any allotment in the company's books within two months of the date of allotment; non-compliance will be an offence.
A company will still require the authority of an ordinary resolution to suspend pre-emption rights; this is not necessary, however, if its articles either contain the authority or exclude the pre-emption rights.
Reduction of share capital
Any company may reduce its share capital by court order. However a private company may now do so without the approval of the court. The reduction must not be carried out lightly and a special resolution together with a solvency statement made by the directors is required in order to take advantage of this relaxation.
Purchase of own shares
A company's articles no longer need to contain express authority to allow it to purchase its own shares. Likewise, the requirement for an express authority in the articles to reduce share capital and to consolidate and sub-divide shares is lifted.
Statement of capital
Companies are required to file a statement of capital with the Registrar of Companies on formation, with the annual return and following an alteration of share capital which affects the total number of shares allotted.
A company must also send a current statement of capital to any member that requests a copy. We advise all companies to keep a current statement of capital in their company books.
Directors’ private addresses will no longer be open to public inspection although historic details, being those already filed at Companies House, will remain on public record.
A director will now be able to file with the Registrar of Companies a service address for use on public record. The residential address must still be notified to Companies House but will not be publicly disclosed.
Change of name
Prior to 1 October 2009, a company had to pass a special resolution in order to change its name. A company may now include in its articles of association a provision dispensing with the need to pass such a resolution. It will, therefore, be possible to authorise a change of name by way of a directors’ resolution, provided the articles permit this. The company must send to the Registrar of Companies a statement confirming the change was made in compliance with the relevant provisions.
The final implementation of the Act should streamline company administration and provide opportunities for directors and shareholders of existing companies to review their existing constitutional documents. We will be happy to advise you of the best way to implement any changes to take full advantage of the new provisions.
Partner and head of
corporate & finance
Tel: +44 (0)1332 226 140
Click here to email Ran
Tel: +44 (0)1332 226 479
Click here to email Paul