UK: Companies Act 2006 - Key Changes As At 6 April 2008

Last Updated: 15 April 2008
Article by Nick Davis and Ross Bryson

Signing documents

Simple contracts may still be made on behalf of a company by a person acting under its authority. The position is different for deeds. As before, a deed can be executed by a company either by the affixing of its common seal or alternatively by having it signed by two directors or by a director and the secretary. However, there is now a new method of execution available. Deeds can now also be signed by one director, not two, as long as the director's signature is witnessed.

Company secretaries

Private companies are no longer required to have a company secretary. They may choose to have one, but this is not required by law (although a company's articles of association may still require one, so these should be checked). A public company is still required to have a secretary.

Accounts and reports

A quoted company is now obliged to publish its full annual accounts and reports on a website, and these must remain available on the website until the following year's accounts are published. The public must be able to access the website on a continuous basis. This requirement is in addition to the requirement to send the full accounts and reports to members. An AIM company must do this as well by virtue of the AIM Rules for Companies.

The period for filing accounts has changed. It has been reduced for a private company from ten months to nine months after the relevant accounting period. For a public company, the period is now six (reduced from seven) months.

Auditors

Auditors can now limit their liability by agreement with a company. Such limited liability agreements will not be effective unless they are fair and reasonable. The Financial Reporting Council will be publishing final guidance on the use of these agreements by May 2008.

There are two new criminal offences, punishable by fine, in relation to an inaccurate auditor's report. It is an offence knowingly or recklessly to cause an auditor's report to include any matter that is misleading, false or deceptive in a material particular or to omit certain statements required by the 2006 Act relating to problems with the accounts.

There is a new duty on a company to notify the appropriate audit authority whenever an auditor leaves office before the end of his term.

Distributions

If a company transfers an asset for book value or more and the market value is higher, there is a distribution, but its value is £0 and the distribution is lawful. However, if an asset is transferred for less than book value, the amount of the distribution is equal to the difference between the book value and the amount actually paid, and this difference must be covered by the company's distributable profits.

This clarifies the previous doubt arising from the Aveling Barford case of 1989 as to whether a transfer at more than book value but less than market value required distributable profits for the difference.

Private companies - prohibition of public offers

A private company continues to be prohibited from making an offer of its securities to the public. However, breach of this prohibition is no longer a criminal offence. Instead, if it does make such an offer, there is a new process for members or creditors of a company, or the Secretary of State, to apply for an order for re-registration of the private company as a public company or failing that, winding up of the company.

Public companies - authorised minimum share capital requirement

Whilst the authorised minimum share capital requirement for a public company remains at £50,000, the share capital can now be denominated in the euro equivalent of sterling. The euro equivalent of £50,000 is currently set at €65,000.

Register of interests disclosed

A public company may give notice to a person it believes to be interested in its shares to confirm whether or not he is indeed so interested. A person is regarded as interested in shares if, for example, he enters into a contract to acquire the shares, or if he is entitled to exercise any rights in relation to those shares. A company must then keep a register of any information it receives by giving such a notice, known as the register of interests disclosed. This register must be open to inspection.

A request by any person to inspect or receive a copy of the register must contain specified information, including the purpose for which the information is to be used. A company can refuse this request if it is not satisfied that the request has been made for a proper purpose, though there is then provision for a person whose request is refused to apply to court. The court can then decide whether or not to order the company to comply with the request.

Debentures

There is a new requirement for a person making a request to inspect the register of debenture holders or to be provided with a copy, to provide specified information in his request, including the purpose for which the information is to be used. A company can apply to court for relief from the obligation to allow inspection of the register or to provide a copy of the register where the request has not been made for a "proper purpose".

Companies have now to register an allotment of debentures within two months of the allotment date.

www.mishcon.com

This article is only intended as a general statement and no action should be taken in reliance on it without specific legal advice.

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