UK: CompAct - Q&As On The 2006 Companies Act

companies act, directors, members, accounts, audit
Last Updated: 1 June 2007
Article by Deloitte Audit Group

Most Read Contributor in UK, August 2017

The Questions

Directors

1. There is now a minimum age for appointment as a director, but is there a maximum age?

2. What has to be included within the Register of Directors?

3. Are directors’ residential addresses now protected from disclosure?

4. Within what timeframe does the Registrar of Companies have to be notified of any details contained in the Register of Directors?

5. Can a director be removed and are there any rights to protest against removal?

6. What are the directors’ duties under the new Companies Act?

7. A director has an interest in an existing transaction with the company: does the director have to declare it?

8. Is it possible for a director to have a service contract exceeding two years?

9. Must a copy of directors’ service contracts be available for inspection?

10. A director would like to acquire a non-cash asset from the company. Is this allowable under the Companies Act?

11. Is it possible for a company to enter into loans, quasi-loans and credit transactions for the benefit 16 of one of its directors?

12. A company is about to make a payment to a director for loss of office. Are there any requirements for members’ approval?

13. Is the company able to indemnify a director for any negligence or breach of duty?

14. What qualifications must a Company Secretary have and what details must be registered in relation to them?

15. What is the deadline for holding an annual general meeting for a public company?

16. Does the result of a poll at a general meeting have to be made public?

17. Is there a limit on political donations and expenditure made by a company?

18. Who is liable for an unauthorised political donation?

Members

19. Is a member of the company able to bring a claim against a director for an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust?

20. Do companies have the power to obtain information about the holders of interests in their shares?

21. Can the members of a company require directors to obtain information about the holders of interests in the shares of the company?

22. Are directors required to retain information on interests in the shares of the company that are disclosed to them?

23. Does the Companies Act 2006 alter the rights of beneficial shareholders?

24. Does the Act require institutional shareholders to disclose how they have voted?

25. Are restrictions placed on distributions by public companies?

26. What are the consequences of making an unlawful distribution?

Accounts

27. What are the changes for electronic communications?

28. Has there been any change in relation to the qualifying conditions for the small companies regime?

29. Are there any significant new requirements on accounting records?

30. Are there any significant new requirements for the company’s financial year?

31. A UK parent company also has an immediate parent undertaking established under the law of an European Economic Area (EEA) State. Is the UK parent exempt from the requirement to prepare group accounts?

32. Can a UK parent company with an immediate parent undertaking that is not established under the law of an EEA State be exempt from the requirement to prepare group accounts?

33. Is it necessary to have a consistent financial reporting framework across the group?

34. Have the requirements on approval and signing of accounts (including the directors’ report) been changed?

35. What has to be included within the business review?

36. What must directors disclose to auditors?

37. Have the filing deadlines for company accounts changed?

38. Are companies able to provide summary financial statements?

39. To whom is a director liable in the event of making an untrue or misleading statement in the directors’ report or directors’ remuneration report?

Audit

40. Are there any changes in the companies which are required to have their accounts audited?

41. What disclosures are needed in the accounts on the services provided by auditors?

42. Have there been any changes to the auditors’ reporting requirements?

43. What rights do auditors have to information about the company?

44. What procedures are required to be followed when an auditor is not to be reappointed?

45. What procedures are required to be followed when an auditor wishes to resign?

46. How can a company remove an auditor from office?

47. Is it correct that the members of the company will have the power to require website publication of audit concerns now?

48. How will the new limitation of liability agreements (LLAs) with auditors work?

Private companies

49. What are the key areas of private company de-regulation?

Companies Act 2006 – the main messages

Almost ten years ago the Government decided that the time had come to embark on a fundamental review of the framework of company law. The object of the review was to put forward proposals for a modern law for the modern world which would promote the competitiveness of UK companies. The last decade has been a long time in corporate matters and so the 2006 Companies Act has had to address a number of issues, such as increased levels of activism from shareholders and lobbying groups, that were not even considered in those initial Company Law Reform consultation papers.

The Act is the largest piece of legislation to pass through Parliament and runs to almost 1,300 sections. It is an amending and reforming statute that seeks to consolidate existing company legislation, to restate the previous law into clearer and simpler language and to introduce new provisions. Some of the key changes to emerge from the Act are as follows:

 

See question number in this publication

• Directors’ duties have been codified in statute for the first time

6

• Electronic communications become the default although shareholders are still entitled to 27 receive hard copies if they request them.

27

• Shareholders are given a new statutory right to sue directors in a derivative action on behalf of the company for negligence, default, breach of duty or breach of trust.

19

• A registered member can nominate the beneficial owner to be entitled to any or all of the registered member’s rights, e.g. the right to receive the annual report and accounts.

23

• The requirements regarding disclosure of both non-financial and forward-looking information in the directors’ report have been strengthened for quoted companies.

35

• The Government has reserved the power to introduce regulations at a future date to require institutional investors to disclose how they vote.

24

• Private companies will no longer be required to make a statutory declaration when providing financial assistance for the purchase of their own shares. It will also be simpler for private companies to reduce their share capital.

49

• Auditors will be able to limit their liability through a contractual arrangement ("a limited liability agreement") with their clients.

48

• Under a new protection, a director would be held liable only to the company itself for a statement in, inter alia, the directors’ report if the director knew that the statement was untrue or misleading, or was reckless as to whether this was the case.

39

Implementing this large piece of legislation is not a simple task. There are significant consequences for organisations such as Companies House and regulations have to be in place before companies can implement the new measures. With this in mind the Government has adopted a staggered implementation timetable for the Act.

To date the DTI has issued the following information:

First Commencement Order

SI 2006 3428 & 3429 20

Made:

December 2006

Covering provisions in relation to:

Effective from:

• increased facilities for e-communications with the national registrar of companies;

1 January 2007

• company communications to shareholders and others, which include provisions facilitating electronic communication;

20 January 2007

• a public company’s right to investigate who has an interest in its shares; and

20 January 2007

• a statutory basis of directors’ liability to the company in relation to statements in the directors’ report, the directors’ remuneration report and any summary financial statement derived from such reports.

20 January 2007

Second Commencement Order

Draft laid: 8 February 2007

Covering provisions in relation to:

Effective from:

• implementation of the EU Takeovers Directive;

6 April 2007

• the use of the community interest company vehicle in Northern Ireland; and

6 April 2007

• repeal of the share dealings provision in CA85.

6 April 2007

The implementation timetable of the remaining provisions is covered in the DTI Ministerial Statement made on 28 February 2007. In the Q&As contained in this document, the likely effective dates for the relevant provisions are as set out in that statement.

A DTI consultation document issued on 28 February 2007 discusses the application of the Act to existing companies and addresses how those companies will need to alter their current arrangements, if at all, to be able to meet and, in some cases, take advantage of the provisions of the new Act. The basic approach is that where a company has any provision explicitly requiring something that the Act will no longer require, the company will need to seek shareholder approval to amend their articles. The consultation document also sets out the many detailed provisions to be laid down in secondary legislation. The closing date for the consultation is 31 May 2007.

To continue reading this article and to view the answers to the above questions please Click Here

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.