UK: Companies Act 2006: What You Need To Know

Last Updated: 3 June 2010
Article by Linzi Hildesley

The Companies Act 2006 ("CA 06") was fully implemented on 1 October 2009, almost entirely repealing the Companies Act 1985. One aim of CA 06 was to simplify company administration.

Many deregulatory measures apply automatically to companies incorporated prior to 1 October 2009 ("existing companies"). Others necessitate action (for example, by amendment to the company's articles of association) in order to take advantage of the greater flexibility CA 06 introduced. This overview focuses predominantly on changes implemented on 1 October 2009 but also references certain earlier changes which may affect your business.

Key changes for private companies

Memorandum of Association

The CA 06 limits the significance of a company's memorandum. For companies incorporated after 1 October 2009, the memorandum has no continuing operational significance after formation and (unless its articles contain an express restriction on its operations) has unlimited powers. The memorandum is simply a statement that the subscribers wish to form a company and have agreed to take at least one share each.

For existing companies, information outside the scope of these limited subscriber details is deemed to form part of the articles from 1 October 2009. For maximum flexibility, therefore, a special resolution could be passed to remove the objects clause and give the directors of the company unfettered powers.

Articles of Association

A new set of default articles for private companies incorporated on or after 1 October replace Table A - the "model articles". These short form articles do not replicate provisions set out in CA 06 and were intended to be suitable for small, owner-managed companies.

Whilst Table A based articles are still valid and will, in most cases, work adequately under CA 06, there are some inconsistencies between Table A and CA 06, for example in respect of general meetings. Should Table A articles be retained, advice should be sought on the relevant provisions of CA 06 when, for example, proposing (either by general meeting or written resolution) a shareholder resolution.

Share capital

  • CA 06 abolishes the concept of authorised share capital. For an existing company, its statement of authorised share capital (imported from its memorandum and treated as part of the articles from 1 October 2009) will continue to act as a ceiling on the maximum number of shares the company may issue and so consideration should be given to its removal.
  • For private companies with more than one class of shares (and public companies) there are no substantive changes affecting the allotment of shares. A private company with a single class of shares formed under CA 06 may allot shares of that class without shareholder approval (subject to a specific restriction in the articles). For existing private companies, a one-off ordinary resolution is required to enable directors to allot shares in future without shareholder approval.
  • In relation to share buy-backs, reductions of capital, the issue of redeemable shares and the consolidation and sub-division of shares, specific enabling authorities are no longer required to be contained in the articles since CA 06 enables all companies (with appropriate shareholder resolutions) to make these changes to share capital by default.


Since 1 October 2008, a statutory duty has been imposed on directors to avoid conflicts of interest with the company. For companies incorporated before that date, an ordinary resolution is required to permit the board to approve directors' conflicts of interest. The unconflicted directors of a private company incorporated post 1 October 2008 have an automatic power to authorise a matter giving rise to a conflict (unless the articles state otherwise).

CA 06 also allows companies to set out provisions dealing with conflicts in their articles - anything done in accordance with such a provision is not a breach of duty. It is advisable, therefore, to consider passing an ordinary resolution permitting directors to authorise conflict situations and/or to incorporate provisions within their articles to permit defined situations which could otherwise constitute a conflict (for example, multiple directorships). In addition, existing conflict situations should be reviewed to ensure they have been properly declared and approved under CA 06.

CA 06 also contains a new statutory statement of directors' duties - companies must ensure their directors are aware of, and that board procedures accord with, the scope of these duties.

Since CA 06 abolishes any maximum age limit for directors, any age limit should be removed from the articles.

Directors' residential addresses

Under CA 06, a director may supply a service (rather than home) address for the public record at Companies House. Home addresses must still be filed but will become "protected information" available only in defined circumstances to certain third parties. The new provisions are not retrospective; existing directors' home addresses already on the public register are automatically deemed to be service addresses under CA 06 and will not be treated as "protected information". A company must now maintain two separate registers of directors - one of home addresses (not available to the public) and the second of service addresses (available for public inspection).

Company secretary

Since 6 April 2008, private companies are not obliged to have a company secretary unless their articles say otherwise (most larger private companies have retained their company secretaries). If the company decides not to have one, references in the articles become irrelevant and could therefore be removed. In this case, someone must undertake responsibility for maintaining company records and making statutory filings. Signing procedures will also need to be reviewed if a single director is to be permitted to execute deeds (provided execution is witnessed).

Company name

CA 06 allows a company to change its name not only by shareholder special resolution, but also by any other means set out in its articles (for example, by board resolution or, for a wholly-owned subsidiary, a written declaration from the parent company).

Companies House

New Companies House forms (named according to the type of action being carried out rather than by reference to section number) must now be used. Companies must ensure their company secretary (or other relevant personnel) is aware of the new forms and filing requirements.

CA 06 has brought about many other changes, including in respect of:

  • capital reductions
  • derivative actions
  • electronic communications
  • financial assistance
  • financial reporting
  • meetings and resolutions

Companies should therefore consider updating their articles to reflect CA 06 and the model articles, to eliminate redundant provisions and remove inconsistencies, and to take advantage of some of the new powers and freedoms offered by CA 06.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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