The Companies Act 2006 is described as the largest act to pass through Parliament. With over 1,300 sections, it has been a long journey from its royal assent in November 2006, with parts and sections coming into force at various times.
There are a number of changes that came into force on 1 October 2009; however, the most significant changes are listed below:
- Registrars powers, Single Alternative Inspection Location (SAIL) and document retention;
- Form changes;
- Change of constitution;
- Change of company name;
- Directors' service addresses;
- Administrative restoration;
- Voluntary dissolution; and
- Share capital/statement of capital.
It is important that existing companies review their articles and consider if amendments are needed.
Some of the changes introduced by the Act will not be reflected in the existing articles and do not apply automatically. The changes to consider are electronic communication, authorised share capital, objects clauses, meetings, the requirement of a secretary and directors' conduct.
There is an extension to the registrars' powers to include the form and manner in which a company delivers its documents. In addition, the registrar can decide what documents are needed and has scope for electronic delivery of documents.
This falls in line with the impending changes to the filing platform that will be accepted for company filing. Companies House will require filing to be submitted using the filing platform Inline eXtensible Business Reporting Language (iXBRL) from summer 2010.
There are certain documents to which these new powers do not extend:
- Incorporation documents;
- Change of company name;
- Becoming or ceasing to be a community interest company;
- Reduction of share capital;
- Change of registered office;
- Registration of a charge; and
The Act also introduces changes to arrangements when inspecting company registers. A company may need to hold as many as 13 registers, which must be held at either the registered office or at the Single Alternative Inspection Location (SAIL). If a company wishes to set up a SAIL address, it must notify Companies House and state which registers will be held at this address.
The previous requirement for the registrar to retain paper documents has reduced from 10 to three years, after which the documents are destroyed, providing the information contained in them is copied.
For dissolved companies, the registrar retains the documents for two years after dissolution and then may direct the documents to the Public Record Office.
There has been, and will be, a rationalising process of the forms that a company needs to submit. Up to 1 October there were approximately 200 forms a company could submit. These have been, and will be, brought up to date, deleted and/or replaced where necessary.
In certain areas the number of forms will increase; for example, the director and secretary forms 288a, 288b and 288c are being replaced by four appointment (AP01, AP02, AP03 and AP04), two termination (TM01 and TM02) and four change of details (CH01, CH02, CH03 and CH04).
A key feature of the new Companies Act was to simplify the administrative burden that companies faced. For example: no requirement to hold an annual or general meeting; all shares being fully paid up; removal of directors' retirement clauses; the concept of single member companies; simplified directors' decision-making; and removal of authorised share capital. In line with this overall philosophy, the incorporation procedures will make it easier to set up and run a company.
The new procedure for incorporating a company will start with the submission of Form IN01, together with the memorandum of association; articles of association; and correct fee.
The memorandum of association may conjure up images of a lengthy, legalistically written document of the past, mainly due to the objects clause. The new document will, in effect, be a form-filling exercise. The new document no longer requires an objects clause, as a company's objects are unrestricted. There may be situations where the company's objects are to be restricted; for example, for charitable companies, community interest companies or joint ventures.
There may also be other instances where companies may wish to restrict actions; for example, having the option of conference call board meetings may not be suitable for every company. The memorandum must be in the prescribed form and authenticated by each subscriber of shares. The details must include:
- The company's proposed name;
- Whether the company's registered office is to be situated in England and Wales (or in Wales), Scotland or Northern Ireland;
- Whether the liability of the members of the company is to be limited, and if so whether it is to be limited by shares or by guarantee;
- Whether the company is to be a private or public company;
- In the case of a company that is to have a share capital, a
statement of capital and initial shareholdings;
- In the case of a company that is to be limited by guarantee, a statement of guarantee;
- A statement of the company's proposed officers;
- A statement of the intended address of the company's registered office; and
- A copy of any proposed articles of association.
From 1 October, the new model articles have superseded table A as the default for companies. They have sensibly not been drafted as a one-size fits all in the mould of the old table A. The three model articles available are for a private company limited by shares; a private company limited by guarantee; and a public company.
Changes of constitution
Companies Act 2006 introduced the concept of entrenchment.
Entrenchment provisions can be detailed in the articles of association and established restrictions. Theses can be included before or after the company's formation. Where there are changes to the constitution of a company, changes need to be informed. Changes include:
- The presence and removal of such provisions of entrenchment;
- When the company amends its articles and these contain provisions for entrenchment; and
- When the company's constitution is amended by court order or by enactment.
Company name change
The process of changing a company's name will now be simpler. There are four methods to change the name:
- By resolution;
- By conditional resolution;
- By resolution from the directors; or
- By means provided in the company's articles.
Since October 2008, a company's name could be changed via the Company Names Tribunal, usually preceded by a complaint. This is administered by the Patent Office. More information is available at www.ipo.gov.uk/
The treatment of names has also been changed. The rule concerning similar names, often described as the 'same as' rule, the definition of 'same as' is now stricter. When looking at the 'same as' rule, names such as 'GB', 'services' and 'com' are ignored.
Companies that belong, or are intending to belong, to a group are allowed to use similar names. In these cases, written consent must be given.
From 1 October 2009, all company directors must provide their usual residential address, together with a service address for each directorship held. The different treatment between the two types of address is that the serviced address will be in the public domain, with the residential address protected.
The serviced address is one where documents can be delivered to and can, for example, be the company's address or the registered office, therefore preventing PO box and DX number addresses. The residential address will be kept private and will only be available to regulatory authorities such as the police, HMRC and perhaps credit reference agencies.
This is in respect of company restoration, which was previously only the domain of the courts. The court role will remain, however. This will be supplemented in a limited number of circumstances with administrative restoration. This can be used when:
- The company was carrying on business, or in operation, at the time of dissolution;
- The company has been struck off under section 1000 or 1001 of the Companies Act 2006;
- The application is made within a period of six years after the date of dissolution;
- The application is made by a former director or former secretary of the company;
- The Crown has signified consent, a bona vacantia issue;
- The company has delivered all the necessary documents to bring the company up to date; ie, all outstanding documents at the time of dissolution and any due during the period of dissolution.
From 1 October 2009, voluntary dissolution will be available to plcs.
The requirement for an authorised share capital will disappear for 1 October 2009, but the available capital to issue will still remain for existing companies formed prior to 1 October that have not made the amendment. It will also not need to be stated on the memorandum of association. In addition, there is significant relaxing of the rules governing the ability to issue private company shares, where only class of shares are in issue. Reserve capital is also abolished from 1 October 2009.
The relaxing on share capital falls in line with the relaxing on reduction of share capital, acquisition of own shares, financial assistance and the simplification of share class rights.
Companies incorporating on or after 1 October 2009 will have to complete a statement of capital and initial shareholdings. This information is again repeated on the annual return submitted on or after 1 October 2009, and on the following forms referring to:
- Allotment of shares;
- Notice of consolidation, subdivision of shares or reconversion of stock into shares or redemption of redeemable shares;
- Redenomination of shares;
- Reduction of capital as a result of
- redenomination; Cancellation or repurchased shares, or (for plcs) immediate cancellation of shares repurchased into treasury;
- Subsequent cancellation of shares held in treasury by a plc; and
- Cancellation of shares held by or for a plc in accordance with Section 662 of Companies Act 2006.
Barinder Chadha is a technical adviser at ACCA and Glenn Collins is ACCA UK's head of advisory services