Are you taking full advantage?
The Companies Act 2006 sets out the most significant reform of company law for over 20 years. The final provisions of the new Act were implemented on 1 October 2009.
Clearly it is not appropriate to discuss all 1,300 sections but we highlight below some of the main changes in the law and where relevant the actions that companies (particularly private companies) may want to take.
Company secretary
Private companies are no longer required to have a company secretary (although they can choose to have one if they wish). This means that you can have a single director in a company without having to appoint someone else (who are often not really involved with the company) to be the company secretary. Public companies are still obliged to have a company secretary.
Execution of documents
Changes have been made to reflect the fact that private companies are no longer required to appoint a company secretary. A document can now be signed on behalf of a company either by two authorised signatories (i.e. the directors or the company secretary) or by a director of the company in the presence of a witness who attests his or her signature. This should help simplify the signing process for many private companies as they will no longer need to have two directors available for signing documents.
Electronic communication
The Act has introduced new provisions to allow companies to send documents to their shareholders in electronic form (e.g. by email or via their website), subject to shareholder approval. The Act also allows shareholders to communicate with the company by electronic means if the company has given an electronic address in a notice of general meeting or in a proxy form. This is clearly going to be of most use to companies with large numbers of shareholders but any company with more than 15 or so shareholders could well benefit.
Annual general meetings
Private companies are no longer obliged to hold annual general meetings, provided that their articles of association do not have any provisions to the contrary. This could reduce the administrative burden for a number of private companies who have had to hold annual general meetings each year knowing that only a couple of shareholders will actually turn up.
Written resolutions
The written resolution procedure allows private companies to pass resolutions without calling a general meeting and is extremely useful because it avoids the need to give the requisite 14 day notice period to the shareholders. Under the old regime, written resolutions had to be signed by all the shareholders of the company. However, written ordinary resolutions can now be passed by a simple majority and written special resolutions can be passed by a 75% majority of those eligible to vote (i.e. just as if the resolutions were put to a general meeting). This could possibly be the most helpful change for private companies with regard to streamlining the corporate administration whereas previously if you wanted to pass a resolution but you had a small dissenting percentage shareholding, you would have to wait at least 14 days to hold an EGM, now you can pass a written resolution as soon as you have sufficient shareholders who have signed the resolution.
Reduction of share capital
Previously, companies wishing to reduce their share capital were obliged to obtain a court order and this was time consuming and costly. The Act has introduced a new, quicker alternative procedure so that a private company can reduce its share capital, without applying for a court order, if the directors sign a solvency statement confirming the state of affairs of the company. Previously, undertaking a reduction of share capital was often prohibitively expensive. This new regime may well make it financially viable for private companies to unlock capital which is tied up in share premium or other undistributable reserves and potentially allow them to pay dividends in the future.
In brief
Many of the new benefits introduced by the Act are subject to the provisions of the articles of association of the company. Therefore, private companies may need to amend their constitution to take advantage of the streamlined regulations.
For further information, please contact Abigail Owen by emailing Abigail or calling her on 08450 990045.