Companies Act 2006

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Companies Act 2006 - final

October saw the implementation of the final phase of the new Companies Act. Here is a summary of the five key changes and what they mean for business.

Memorandum of Association. An area of significant change for new companies, the memoranda is a two-line document setting out the names of the subscribers to the company and their intention to form a new company. Any new companies formed on or after 1 October 2009 will not be required to list objects for the company as these will be unrestricted from that point forward, unless the company chooses specifically to restrict them. For any company incorporated before 1 October 2009 its objects are deemed to be contained in the articles, but they can be removed by special resolution.

Articles of Association. A new Table A standard Articles is now in force and these will apply by default to new companies formed after 1 October 2009. Companies can produce their own ‘bespoke’ Articles but BIS (the Department for Business Innovation and Skills) advises companies to seek professional advice before doing so. The new Articles are intended to facilitate more flexible and timely conduct for company activities, with provision for electronic communications and speed of 21st century businesses.

Statement of capital and shareholdings or Statement of guarantee. Information on capital and shareholdings is no longer part of the memorandum from 1 October 2009; this information will be contained in either a ‘statement of capital and shareholdings’ or, for those companies limited by guarantee, a ‘statement of guarantee’. New companies incorporated on or after 1 October 2009, under the 2006 Act, will be required to file the appropriate statement with the Registrar on registration. Subsequent, updated, statements should be filed with the Registrar as necessary. (Companies House Form IN01).

Creation/Dissolution of Companies. Companies can now be formed with only one shareholder. Public companies can now put in an application to be struck off voluntarily whereas previously this only applied to private companies. In some restricted circumstances companies can apply to be restored to the register without needing to go to court and the time limit for applications for restorations has been increased to six years from two, from the date of dissolution.

Records. Companies must keep two registers of addresses of Directors. The first must show a service address and is to be open to the public. The second is a private register containing home addresses. Existing Directors can now file a service address on Form CH01, failing which their current address will be deemed the address for service. Private companies are no longer required to have a Company Secretary and there is no longer a need to keep a register of secretaries. Minutes and Board papers must be kept for 10 years instead of the previous 20 years.

Shares. The Act abolishes the concept of authorised share capital. This means that a new company can allot an unlimited number of shares, provided there is no provision in their articles to limit the directors’ ability to allot shares in the Articles of Association. For existing companies, the authorised share capital figure contained in the memorandum is deemed part of the Articles and will be the maximum amount of shares that the company can allot. The company can amend this figure by passing an ordinary resolution to remove, increase or reduce the figure.

If a new private company has only one class of shares, the directors are free to allot the shares on a pre-emptive basis without the authority of the shareholders, unless prohibited from doing so by the Articles. Companies with more than one class of shares will need to pass a resolution to give the Directors authority to allot shares and the resolution will need to state details of the number of shares to be allotted. This resolution can last for up to five years. An existing company will need to pass an ordinary resolution if it has only one class of shares and wishes to be allowed to allot shares without obtaining the consent of the shareholders. Any existing section 80 authority remains effective until the date of expiry.

New companies can disapply pre-emption rights in their Articles or by special resolution. Any section.95 provision (disapplication) in existing companies will continue until their expiry date. A private company no longer requires authorisation in the Articles to purchase their own shares, allot redeemable shares or reduce share capital.

A clear user’s guide to the new provisions and further practical information is available on the BIS website at www.berr.gov.uk

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