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Companies Act 2006 - provisions coming into force on 1 October 2009
18 August 2009
After almost three years of phased implementation of the
Companies Act 2006 (the '2006 Act') all of the remaining provisions
will finally take effect on 1 October 2009. In this update, we take
a look at the key changes coming into force on this date.
A company’s memorandum and articles
Currently, a company’s constitution is contained in two separate
documents – the memorandum of association and articles of
association. From 1 October 2009, the memorandum of association for
new companies formed after that date will be nothing more than a
simple form stating the name and address of the company and a
statement that the initial shareholders wish to form a company and
have agreed to be members. The articles will become the key
constitutional document.
Going forward, new companies incorporated on or after 1 October
2009 will have unlimited objects, unless specific restrictions are
included in the articles. For existing companies, any restrictions
in the memorandum (in particular limits on the company’s objects or
limits on authorised share capital) will be deemed to be part of
the articles, unless amended or removed. Next time (post 1 October
2009) an existing company amends its articles, it will need to
include the relevant parts of its existing memorandum and objects
(if not deleted) as part of its up to date articles filed at
Companies House.
From 1 October 2009, there will be three new sets of ‘model’
articles of association available for use – one for private
companies limited by shares, one for private companies limited by
guarantee and one for public companies. The model set for private
companies limited by shares is much shorter and simpler than the
current default articles known as ‘Table A’ and has been designed
with the smaller, owner managed business in mind. The new model
articles will apply by default to all new companies incorporated on
or after 1 October 2009 (unless excluded or amended by the
company’s articles). However, companies which have adopted Table A
as their default articles will continue to be bound by those
provisions until they update them.
There are also many provisions of the 2006 Act already in force
which may override existing provisions of a company’s articles,
particularly in relation to general meetings and resolutions. In
addition, there are a number of relaxations available for private
companies which may require a change to the articles in order to be
adopted. Many sets of articles will also contain out of date
references to the old 1985 Act and redundant terminology, making
them increasingly difficult to interpret.
It would be sensible for companies to consider updating their
articles shortly after 1 October 2009. If you would like to talk to
us in more detail about the potential changes which could be made
to articles of association, please contact us.
Directors’ residential addresses
From 1 October 2009, directors’ home addresses need not appear
on the public register at Companies House. A director must file two
addresses – a service address for the public record (usually the
company’s registered office) and a residential address which will
be kept confidential and will only be disclosed in limited
circumstances. This provision is not retrospective so any
residential addresses already filed at Companies House will not be
removed from the public record. On 1 October 2009, an existing
director’s current residential address will automatically become
the service address, and can then be changed online. It will also
be necessary for companies to keep a new separate register of
directors’ residential addresses in their statutory books, in
addition to the register of directors. Directors will no longer be
required to give details of other directorships.
Company names
From 1 October 2009, it will be possible for a private company
to change its name, not only by passing a special resolution, but
also by any alternative means provided for in the company’s
articles. The articles could provide that an ordinary resolution is
adequate, or even that a simple board resolution would suffice. It
would obviously be necessary for a company’s articles to be amended
(to set out the alternative mechanism) to take advantage of this
provision.
Authorised share capital
New companies will no longer have an authorised share capital
fixed in the memorandum of association - there will be an issued
share capital only. For existing companies, the authorised share
capital will be deemed to be a restriction in the company’s
articles and will serve as a limit on the allotment of shares until
amended (which can be done by ordinary resolution or by amending
the articles). Subsisting authorities to allot shares will continue
to have effect.
Directors’ authority to allot new shares
Currently, directors are authorised to allot new shares either
by ordinary resolution (commonly known as a ‘section 80 authority’)
or by virtue of the articles. From 1 October 2009, directors of
newly formed private companies with only one class of share will
have authority to allot shares without the need for shareholder
approval, unless the articles specifically restrict this power.
Existing private companies can take advantage of this provision by
passing an ordinary resolution. For public companies or private
companies with more than one class of share, the position is
largely unchanged - directors will only have power to allot new
shares if authorised by ordinary resolution or the articles (in
either case, the maximum number of shares which can be allotted and
an expiry date not exceeding five years must be specified).
Redeemable shares, reductions of share capital and own
share purchases
New provisions covering reductions of share capital (other than
the new statement of solvency procedure which came into force on 1
October 2008), own share purchases and redeemable shares will all
come into force on 1 October 2009. Some of the existing provisions
have been re-enacted with little change but there are also
significant changes. In particular, from 1 October 2009, companies
wishing to issue redeemable shares, reduce share capital or
complete an own share purchase will no longer require authority to
do so in their articles. This is a reversal of the current
position, where express authority in the articles is required.
Companies wishing to restrict this power going forward will need to
add a specific restriction in the articles.
New Companies House forms
From 1 October 2009, all forms for filing at Companies House
will change and the new forms must be used for company events that
take place on, or after, 1 October 2009. If you use an old form
after this date, your filing will be rejected. Specimen forms are
available from the Companies
House website.
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