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


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?


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?


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?


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


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


• 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.


• 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.


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


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


• 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.


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


• 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.


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


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.

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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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