The Companies Act 2006 is a piece of primary legislation that is changing the law for companies operating in the United Kingdom and largely applies to companies directly.
Passed in 2006, the Act reached the final stage of implementation on 1st October 2009; a number of its provisions are currently being set out in secondary legislation, mainly through regulations or orders made by statutory instrument.
The Companies Act 1985 has been changed in order to meet four key objectives:
- To enhance shareholder engagement and a long term investment culture;
- To ensure better regulation and a ‘Think Small First’ approach;
- To make it easier to set up and run a company; and
- To provide flexibility for the future.
A copy of the Companies Act 2006 is available from the Office of Public Sector Information http://www.opsi.gov.uk/acts/acts2006a.htm, or from the Companies Act Publications page of the Companies House website. Further info about the Companies Act 2006 is available on the Department for Business, Enterprise and Regulatory Reform website at http://www.berr.gov.uk/bbf/co-act-2006/index.html
The Companies Act will be supplemented by a series of Regulations using powers given to the Secretary of State in certain parts of the Act. It will be supplemented by Commencements Orders which bring the Act into force. As they are published, details can be at http://www.berr.gov.uk/bbf/co-act-2006/made-or-before-parliament/page35232.html
Some of the key effects resulting from the Act include:-
- A clear statement of directors’ general duties clarifies the existing case law based rules.
- Companies will be able to make greater use of electronic communications for communications with shareholders.
- Directors will automatically have the option of filing a service address on the public record (rather than their private home address).
- Directors must be at least 16 years old, and all companies must have one natural person as a director – i.e. they cannot have all corporate directors.
- There will be improved rules for company names.
- Companies will no longer be required to specify their objects on incorporation.
- The articles will form the basis of the company’s constitution.
- There will be separate and simpler model Articles of Association for private companies.
- As part of the “think small first” agenda, there will be a separate, comprehensive “code” of accounting and reporting requirements for small companies.
- Private companies will not be required to have a company secretary.
- Private companies will not need to hold an annual general meeting unless they positively opt to do so.
- It will be easier for companies to take decisions by written resolutions.
- There will be simpler rules on share capital, removing provisions that are largely irrelevant to the vast majority of private companies and their creditors.
Key benefits for Shareholders:
- There will be greater rights for nominee shareholders. These will include the right to receive information electronically or in hard copy if they so wish.
- There will be more timely accountability to shareholders by requiring public companies to hold their AGM within 6 months of the financial year-end.
Should you have any further questions regarding the Companies Act 2006, please contact Jonathan Abrams, Senior Associate Solicitor in our Corporate department on 0151 236 5000 or direct via email on email@example.com. (Jonathan is also a licensed US Attorney and can answer questions and advise no US Corporate Law matters).