Companies Act 2006 - Final Changes
On 1 October 2009 the final provisions of the Companies Act 2006 came into force. This article sets out the key changes from 1 October 2009 and some considerations for existing companies.
Directors and their residential addresses
With immediate effect Companies House will no longer place a director’s residential address on the public register. Instead, directors can provide a service address (which can be the company’s registered office) which will appear on the public register. All directors should be aware that this change is not retrospective, and therefore any residential addresses already showing on the public register will continue to do so. In addition, a company’s register of directors will no longer need to state the companies of which the director has been or is a director.
Memorandum of association
All companies incorporated after 1 October 2009 will have a short form memorandum of association which will detail its name, subscribers and the number of issued shares on the date of incorporation. The new style memorandum will act as a snap shot of the company on incorporation only and will not be capable of change. Therefore, the significance of the memorandum will be greatly reduced following 1 October 2009, after which time the main constitutional document of a company will be its articles of association.
All companies in existence on 1 October 2009 will retain the traditional long-form memorandum (including objects, statement of limited liability and statement of the authorised share capital (if applicable)), which will become part of the company’s articles. If a company wishes to change the content of its memorandum, for example to remove the restrictions in its objects clause, it can do so by passing a special resolution to amend the articles.
Objects of a company
Companies incorporated after 1 October 2009 (and therefore with a short form memorandum) will have unlimited objects, unless the objects of the company are expressly limited in the articles of association. For companies incorporated prior to 1 October 2009, however, the objects clause in the memorandum will remain effective until amended by special resolution.
Authorised share capital
Companies incorporated after 1 October 2009 will not have a statement of authorised share capital. This means that the directors of the company can allot any number of shares at their discretion (provided that the company only has one class of share) without the need for authorisation from the shareholders. Shareholder authorisation will still be required to waive pre-emption rights however.
For existing companies, the authorised share capital set out in its memorandum will remain a restriction on the number of shares which can be allotted. If a company would like to remove this restriction, it can do so by amending its articles by special resolution.
Existing articles of association
The articles of association of a company incorporated before 1 October 2009, will continue to be effective after 1 October 2009. However, all articles will be interpreted in line with the Companies Act 2006 and may no longer be accurate or consistent. In addition, the articles may impose unnecessary restrictions or unduly complicated procedures, which have been removed or simplified by the Companies Act 2006. As a result, now may be a good time to update your articles.
New articles of association
New model articles for private companies replace the existing Table A and C articles as the default articles for all companies incorporated on or after 1 October 2009. The new model articles are designed for small owner-managed businesses with only a small number of directors and shareholders and therefore, they may not be suitable for larger or more complex companies. In addition, the model articles do not duplicate provisions which are already in the Companies Act 2006 in order to keep them simple. This means that the articles are not a full statement of the rights and obligations of the shareholders and directors and reference must also be made to the Companies Act 2006 itself (which has 1,300 sections). This could lead to uncertainty and confusion.
Therefore all companies incorporated after 1 October 2009 should consider whether the model articles are suitable for their needs. If they are not, bespoke articles should be drafted and should be used in place of the default model articles.
What changes to your company’s constitutional documentation should you consider?
Since its implementation began on 1 October 2007, the Companies Act 2006 has made a great number of changes to company law. Now that the final changes have been implemented, it may be a good time to consider whether amendments are required to your constitutional documentation, which could now be greatly out of date.
Companies incorporated prior to 1 October 2009 should consider the following in respect of their articles:
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Do you still require the company’s objects to be restricted?
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Do you wish for the authorised share capital of the company to be limited and for directors to require authority to allot shares?
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Do you wish to have annual general meetings now that they are not required?
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Do you wish to have a company secretary now that they are no longer required?
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Do your articles provide for 14 days notice of a general meeting, the use of written resolutions and electronic communications with shareholders?
If the answer to any or all of the above is ‘no’, you may wish to consider updating your articles to bring them into line with the Companies Act 2006.
If you would like to discuss any of the matters raised in this article, or if you are interested in updating your company’s articles, please contact Catherine MacRae on 023 8082 0456 or Mike Watson on 023 8082 0546.
