companies act update
Resolutions & meetings
One of the key areas of change coming into force on 1 October
2007 are changes to the current law relating to meetings and
decision taking in private companies which will make it easier for
private companies to conduct their business. The changes are
designed to reflect how a large number of private companies already
operate in practice. The intention is that the changes will make it
simpler (and potentially cheaper) to run private companies.
Specific changes of note which are due to take effect are as
follows:
No requirement for AGMs to be held
Private companies will no longer need to hold AGMs unless they
wish to do so. The current position is that all companies must hold
an AGM although private companies can opt out of this requirement
if shareholders agree. The new Act allows private companies to opt
in rather than have to opt out. This means that they will not need
to lay their accounts or appoint auditors at an AGM. Shareholders
will, however, be entitled to receive the audited accounts.
For existing companies with provision in their articles of
association requiring the holding of an AGM, this will be preserved
unless the provisions are removed by shareholder resolution.
Simplified Written Resolution procedure
The Act re-states the current position that private companies
can transact all business which would otherwise require a
shareholders meeting by written resolution (except for the removal
of a director or removal of auditors for which a meeting is still
required) and simplifies the passing of such resolution.
A key change from the existing statutory position is that
unanimous consent is no longer required from all of the
shareholders. Instead, written ordinary resolutions will require a
simple majority and written special resolutions will require a 75%
majority. The company’s articles can prescribe a higher majority
for a particular action if required.
There are detailed provisions in the Act in terms of circulating
the written resolutions which have to be followed although if the
procedure in the Act were not followed, this does not affect the
validity of the resolution passed.
14 day notice period
If a private company still wishes to hold shareholders’
meetings, the notice requirements are standardised so that private
companies only need to give 14 days’ notice of any general meeting,
whatever the business transacted at the meeting. This is subject to
any contrary provision in the articles and the right to call a
meeting at short notice (see below).
Meetings at short notice
Currently shareholders of private companies holding at least 95%
of the voting rights can agree to hold a meeting on short notice.
The Act reduces this majority to 90% although a higher percentage
can be retained if the articles specify.
Next Steps
In light of the new law relating to meetings and resolutions, it
is advisable that companies review their articles of association
and shareholders agreements to see if any changes are needed to
them. This will ensure that they benefit from the new
provisions.
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of aspects of the subject matter and does not provide comprehensive
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