Companies Act 2006: The Grand Finale!

The final sections of the Companies Act 2006 come in to force on 1 October 2009.

So what will change this Thursday and will these changes affect you?

The changes will affect companies incorporated on or after 1 October 2009 (new companies) differently to companies incorporated before that date (existing companies).

Directors' Home Addresses:

Directors must give Companies House their home address and a service address (for service of legal proceedings and other official communications). The service address can be different to the home address. For example, it could be the company's registered office. After 1 October 2009 home addresses will be kept off the public register. However, this does not apply to directors who filed details before 1 October 2009. They can apply to have their home address kept off public record but only if they can show they are at risk of violence or intimidation. Companies will need to keep 2 registers of directors: one with home addresses not for public inspection and one with service addresses.

Forms:

All Companies House forms will change, including the forms 288a and 288b (appointment and resignation of directors), and form 395 (registration of charges).

Memorandum:

For new companies, the Memorandum of Association is a much shorter document. It will reflect the shares subscribed for on incorporation and cannot be amended. For existing companies most of the Memorandum will be deemed to be part of the Articles unless the shareholders decide otherwise.

Objects:

A new company's objects are unrestricted unless the articles say otherwise. For existing companies, the objects will be treated as if they are part of the Articles.

Model Articles of Association:

Default Articles of Association called the Model Articles replace Table A for new companies. They are shorter and in simpler language, although more complex articles can still be adopted. For existing companies, their existing articles remain in place although should be reviewed.

Authorised Share Capital:

The concept of authorised share capital has been abolished. New companies will have no limit on their share capital unless one is included in the articles. An existing company's authorised capital will be treated as a maximum that the company may allot. It can pass an ordinary resolution to remove this limit.

Directors' Authority to Allot Shares (previously 'Section 80' authority):

• if a new private company only has one class of share, directors do not need shareholder authority to allot shares;
• Directors of existing private companies with only one class of shares will no longer need authority if they pass an ordinary resolution and unless the articles expressly require it. Existing authorities in place under section 80 Companies Act 1985 continue to apply; and
• for directors of both new and existing companies with more than one class of share the position has not changed: they will still need authority to allot shares.

Statement of Capital:

This is a snapshot of a company's issued share capital at any given time. New companies must complete one on incorporation. Existing companies must also file one with their annual return and when there are other changes to share capital.

Overseas Companies:

Registration and reporting requirements for overseas companies with branches or places of business in the UK are now covered by a single regime.

Change of Name:

A company's name can be changed in any way allowed by the articles, not just by the current method which is a special resolution of the shareholders. For example, the directors could be authorised to change the name if the articles allow it.

Purchase of Own Shares:

Companies now automatically have the ability to purchase their own shares and reduce their share capital unless the articles specifically prohibit this. Shareholder resolutions and other steps are still needed before a buy back or reduction can take place. A company may be authorised by special resolution to make a purchase of its own shares which can last for 5 years, up from 18 months.

Public Company Sole Shareholders:

One person instead of two can now incorporate a public company.

What next?

Ashfords advise that companies:

• review their articles: to make sure they take advantage of new powers or, conversely, restrict new directors' powers which some shareholders may consider to be inappropriate;
• review their memorandum to see which parts are now deemed part of the Articles; and
• make sure they have a new register of directors which contains separate entries for home addresses.

Further advice:

If you need more detail please contact us and we can provide briefing notes or more specific tailored advice.

Ashfords LLP is regulated by the Solicitors Regulation Authority. The information in this note is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.