Your 2006 Act Check-Up - Are You Doing All You Should
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By Catherine Baker, Senior Professional Support Lawyer
26.02.2009
The Companies Act 2006 (2006 Act) has made life, certainly in
administrative and procedural terms, much easier for companies in
general, and in particular for private companies. However,
not all the benefits can be taken advantage of automatically – action
needs to be taken. The aim of this bulletin is to highlight some of the
steps that companies should be taking, to take advantage both of new
flexibilities that have already been introduced, and those being
brought into force on the final implementation date later this
year. The note also highlights some areas where action should
be taken in order to comply with new responsibilities. Think
of this as your annual ‘2006 Act’ check-up. Please note that
this article does not cover additional requirements for companies whose
shares are listed on the main market of the London Stock Exchange.
Have You Taken Advantage
Of These?
Electronic communications
What does the law now allow you to do?
It is now possible for companies to communicate with their shareholders
(and debenture-holders) electronically. A company can send a
document by e-mail if the shareholder has agreed to the use of e-mail,
either in respect of a particular document or in respect of documents
in general. A company can also send a document to a
shareholder by posting it on its website if the shareholder has agreed
to that method of communication, again either in respect of that
document in particular or in respect of documents in general.
A shareholder will be deemed to have agreed to website communication
provided certain conditions are met. It is also now possible
for shareholders to send documents to companies by e-mail – including
an e-mail address in a notice calling a meeting or in a proxy document
is sufficient agreement from the company for this.
What action do you need to take?
Review your articles of Association (Articles) and existing shareholder
consents to see what authorities are already in place. You
may then need to amend the Articles and/or gain shareholder approval in
order to ensure that you take advantage of the wider possibilities in
the 2006 Act.
Meetings and resolutions
What does the law now allow you to do?
There are a number of flexibilities that have been introduced in this
area. For example, private companies no longer have to hold
annual general meetings (AGMs). General meetings can now be
held on only 14 days’ notice, regardless of the type of resolution
being proposed, unless a company’s Articles provide for a longer
period. All companies can include a provision in their
Articles allowing the registered member to nominate another person to
enjoy and exercise all or some of the member’s rights.
What action do you need to take?
If your Articles have an express requirement to hold an AGM, this will
need to be removed. If your Articles provide for a notice
period of more than 14 days for general meetings, you may want to
consider amending this. If you want registered members to be
able to nominate another person to enjoy and exercise all or some of
the member’s rights, you will need to include a provision accordingly
in your Articles.
Company secretaries
What does the law now allow you to do?
Private companies no longer need to have a company secretary if they do
not wish to.
What action do you need to take?
If you no longer want to have a company secretary (although note that
the work won’t just fall away), check your Articles to see if they
contain any express requirement to have one. If they do, you must amend
your Articles. The secretary must also resign their office.
Have You Complied With These New Requirements?
Directors’ duties
What are the new requirements?
The 2006 Act has codified (ie set out in statute) the duties of
directors. Although this hasn’t led to significant change in
terms of the way in which directors should conduct themselves, it has
led to enhanced requirements in terms of the way in which decisions are
taken and documented.
What action should be taken?
Companies should be ensuring that all directors are fully aware of
their duties and responsibilities under the 2006 Act – for example by
having the duties set out in their service contracts and brought to
their attention at board meetings. Companies should also be
ensuring that decisions taken at such meetings are properly documented,
especially where specific considerations under the new duty to promote
the success of the company are relevant.
Directors’ conflicts of
interests
What are the new requirements?
The 2006 Act has introduced a new statutory duty on directors to avoid
a situation where they have, or can have, a conflict or possible
conflict of interest with the company’s interests.
However, independent directors now have the power to authorise
conflicts, although for public companies this is only the
case if the Articles expressly allow for this. Private
companies formed before 1 October 2008 need to obtain the consent of
their shareholders in order for independent directors to gain this
power.
What action needs to be taken?
Directors must identify any situation in which an actual or potential
conflict exists. This will also be relevant when appointing
any additional directors to the board who should declare any conflicts
or potential conflicts from the outset. Public companies will
need to amend their Articles to ensure that independent directors can
authorise such conflicts (and the amendments to the Articles should
also contain ancillary provisions relating to issues such as
confidentiality). Pre-existing private companies will need to
ensure that they have shareholder approval, either via a resolution or
an amendment to their Articles (which might be the preferable route, as
once again the amendments can then deal with the important ancillary
issues).
Trading Disclosures
What are the new requirements?
The obligation to disclose company name and other details has been
expanded and now covers e-mails and websites. Companies are
now required to make a number of displays and disclosures, each of
which must be capable of being read by the naked eye. A
company’s registered name must be displayed at its registered office
and any ‘place of inspection’ (any other location where a company keeps
available for inspection any company record which it is required to
keep so available). The registered name will also have to be
displayed at any other location at which the company carries on
business, unless that location is primarily used for
accommodation. A company must also disclose its name on,
amongst other things, its business letters (which now expressly
includes e-mails), notices and other official publications, order forms
and websites.
What action must be taken?
Companies need to ensure that they are up to date with the
requirements, and are complying with them fully.
Looking Forward To 1
October 2009
There will be a number of new flexibilities and requirements introduced
on 1 October 2009, the final implementation date of the 2006
Act. Companies should be thinking about taking the
following action to take advantage of forthcoming flexibilities:
Making changes to their Articles in order to take advantage of the new
provisions regarding share capital – for example removing any
restrictions on the amount of a company’s share capital, and ensuring
that directors of private companies can take advantage of the new
ability to allot shares without the need for authority from
shareholders.
Removing any restrictions on a company’s objects.
Conclusion
The 2006 Act does simplify corporate life in many respects.
However, steps must be taken in order to take full advantage of
it. Please get in touch with your usual contact at Davenport
Lyons in order to discuss any of these issues further, or visit the
Companies Act page of our website. We will be holding a seminar in the
Autumn on the October 2009 implementation date. Click website to
register your interest.
© Davenport Lyons 2009. All rights reserved.
This document reflects the law and practice as at February
2009. It is general in nature, and does not purport in any way to be
comprehensive or a substitute for specialist legal advice in individual
circumstances.
Davenport Lyons [www.davenportlyons.com]
is an international business law firm based in the West End of London.
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