Companies Act 2006 introduced from January 2007 – Are you ready?
This Act received Royal Ascent on 8th November and is being introduced in stages from January 2007 to full implementation by October 2008. The key implementation dates going forward are 1 October 2007, 6 April 2008 and 1 October 2008.
The Companies Act 2006 runs to 1264 clauses and 1,000 pages including the explanatory
notes. As well as introducing new provisions, it consolidates provisions set out
within former Company Acts and will aid compliance with EU legislation.
Once fully implemented this Act will change the way companies are set up and run and the relationship that directors have with their businesses.
This Act is very complex in terms of both its staggered implementation and the interpretation of the law. However, there are also a number of areas where the process of incorporating and running of private companies have been made easier. To take advantage of these you may need to take action. Based on our current understanding we are highlighting some of the key changes that will affect private companies. However, we strongly suggest that professional advice is sought before taking or refraining from taking any action.
Directors and Company Secretary
The duties of directors are now codified. It will be necessary to consider other factors such as taking a along tem view, the interests of other stakeholders and the community.
All companies must have at least one natural person as a director. Therefore, If a company’s only director is a company, it will need to appoint a natural person.
Shareholders will be able to take action on behalf of a company against directors who are in breach of duty or have been negligent under new procedures.
The minimum age for a director will be 16. From 1 October 2008 under 16’s will cease to be directors.
It will be easier for directors to enter into a contract with the company.
Directors can protect their residential address by using a service address.
Private companies will no longer be required to have a company secretary,
Company formation and administration
Company formation will be made easier with simpler and shorter Memorandum and Articles of Association.
The need to have an authorised share capital will be abolished.
Prohibition on financial assistance abolished (unless private company is a subsidiary of a public company)
Where a private company only has one class of shares, shareholder approval will not be required for share allotments
Reduction of capital allowed without court approval
The need to have an AGM will be removed.
The time period for filing private companies' annual reports and accounts is to be reduced from 10 months to 9 months after the year end.
Companies are now permitted to communicate with their shareholders electronically.
If you would like more information on how the new Companies Act will affect your company then contact your professional advisors. If you have an existing company and you wish to take advantage of the simplification of processes permitted under the Act you may need to take some action. you can download a helpful guide that the DTI have produced on the ACT and you can contact our firm if you need further guidance or help.
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