Commercial Property Focus - February 2009
The Companies Act 2006: Overview of the changes and how they
might affect your business
The Companies Act 2006 (“the Act”) was passed
in November 2006. Although the changes to company law have
been introduced gradually since that date, they will all be in
force by 1 October 2009. Now may be the time then to consider
the impact that the Act may have on your business; to see whether
there is anything that you can do to take advantage of changes to
the legislation or, indeed, whether you need to do anything to
protect your interests going forward.
The main aim of the Act is to make the law
more user-friendly for the many small to medium sized companies
that are prevalent in the UK by simplifying the day to day
procedures involved with running a private limited company. Many
things that had previously been applied to both public companies
and private companies alike are now therefore optional for private
companies, which may be of benefit to the directors but which may
be of concern to shareholders that may find they have less control
over the running of the company.
It will no longer be necessary, for example,
for the company to hold an annual general meeting or to lay the
accounts before the shareholders at such a meeting. That may
be welcome news to many directors, but the shareholders may have
more of an issue with relinquishing what may be their only real
opportunity to see what is happening within the company from year
to year.
The changes to the legislation are, in fact,
so numerous that it really is advisable for anyone involved with a
company, whether as a director, shareholder or both, to seek legal
advice in respect of their affairs to see how the changes will
impact on their specific situation.
Some changes might appear to be quite minor,
from a change to filing deadlines (which you must adhere to or risk
incurring a penalty) to the introduction of a minimum age for
directors, but may still impact on your business, depending on your
circumstances.
Other changes introduced by the Act will
include:
- a new procedure for incorporating a
company
- the introduction of model articles of
association (which will automatically apply to a new company if it
does not file bespoke articles of association with the
registrar)
- new rules in respect of written resolutions
(whereby unanimous consent of the shareholders is no longer
required to pass a resolution)
- provisions whereby everything can be passed
by written resolution, other than the removal of a director or
auditor
- the ability for a single person to
incorporate a company (although there must be at least one natural
person who is a director) and no requirement for a company
secretary to be appointed (although the duties currently carried
out by the secretary will not disappear and will still need to be
fulfilled by someone within the company)
- automatic rights in certain circumstances for
the directors to allot shares without requiring specific authority
from the shareholders
The result is that there will be less
restriction on the directors of new companies and less involvement
required from the shareholders. The best way, therefore, to
protect the interest of a shareholder/investor that is not involved
in the day to day running of the company is to ensure that a solid
shareholders’ agreement and bespoke articles of association are put
in place to address such issues.
Finally, perhaps the most significant change
brought in by the Act is the introduction of a set of statutory
director duties, which consolidate and reinforce the old common law
duties applicable to all directors. There is also a new right
of action that can, in certain circumstances, be brought by a
shareholder on behalf of the company for breach of directors’
duties.
Directors’ duties is quite a complex area in
itself but all directors (whether executive or non-executive) must
ensure that they are aware of their responsibilities to the company
so as to avoid falling foul of their obligations and possibly being
held personally liable for their actions as a result.
Lynne Rathbone,
Associate
Lynne.rathbone@weightmans.com