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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.


About the Author

Davenport Lyons [www.davenportlyons.com] is an international business law firm based in the West End of London. The firm has an excellent reputation in areas spanning corporate to property, defamation to intellectual property, music to film finance and digital rights to sport.


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Article Published/Sorted/Amended on Scopulus 2009-03-26 01:14:35 in Legal Articles

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