UK: Companies Act 2006 Update - Provisions Coming Into Force On 1 October 2009

Last Updated: 15 September 2009
Article by Leanne Wareham

After almost three years of phased implementation of the Companies Act 2006 (the "2006 Act") all of the remaining provisions will finally take effect on 1 October 2009. In this update, we take a look at the key changes coming into force on this date.

A company's memorandum and articles

Currently, a company's constitution is contained in two separate documents – the memorandum of association and articles of association. From 1 October 2009, the memorandum of association for new companies formed after that date will be nothing more than a simple form stating the name and address of the company and a statement that the initial shareholders wish to form a company and have agreed to be members. The articles will become the key constitutional document.

Going forward, new companies incorporated on or after 1 October 2009 will have unlimited objects, unless specific restrictions are included in the articles. For existing companies, any restrictions in the memorandum (in particular limits on the company's objects or limits on authorised share capital) will be deemed to be part of the articles, unless amended or removed. A company will need to attach a copy of the memorandum of association, indicating the provisions which are deemed to be part of the articles, each time it files a copy of its articles with Companies House.

From 1 October 2009, there will be three new sets of 'model' articles of association available for use – one for private companies limited by shares, one for private companies limited by guarantee and one for public companies. The model set for private companies limited by shares is much shorter and simpler than the current default articles known as 'Table A' and has been designed with the smaller, owner managed business in mind. The new model articles will apply by default to all new companies incorporated on or after 1 October 2009 (unless excluded or amended by the company's articles). However, companies which have adopted Table A as their default articles will continue to be bound by those provisions until they update them.

There are also many provisions of the 2006 Act already in force which may override existing provisions of a company's articles, particularly in relation to general meetings and resolutions. In addition, there are a number of relaxations available for private companies which may require a change to the articles in order to be adopted. Many sets of articles will also contain out of date references to the old 1985 Act and redundant terminology, making them increasingly difficult to interpret.

It would be sensible for companies to consider updating their articles shortly after 1 October 2009. If you would like to talk to us in more detail about the potential changes which could be made to articles of association, please contact us.

Directors' residential addresses

From 1 October 2009, directors' home addresses need not appear on the public register at Companies House. A director must file two addresses – a service address for the public record (usually the company's registered office) and a residential address which will be kept confidential and will only be disclosed in limited circumstances. This provision is not retrospective so any residential addresses already filed at Companies House will not be removed from the public record. On 1 October 2009, an existing director's current residential address will automatically become the service address, and can then be changed online. It will also be necessary for companies to keep a new separate register of directors' residential addresses in their statutory books, in addition to the register of directors. Directors will no longer be required to give details of other directorships.

Company names

From 1 October 2009, it will be possible for a private company to change its name, not only by passing a special resolution, but also by any alternative means provided for in the company's articles. The articles could provide that an ordinary resolution is adequate, or even that a simple board resolution would suffice. It would obviously be necessary for a company's articles to be amended (to set out the alternative mechanism) to take advantage of this provision.

Authorised share capital

New companies will no longer have an authorised share capital fixed in the memorandum of association - there will be an issued share capital only. For existing companies, the authorised share capital will be deemed to be a restriction in the company's articles and will serve as a limit on the allotment of shares until amended (which can be done by ordinary resolution or by amending the articles). Subsisting authorities to allot shares will continue to have effect.

Directors' authority to allot new shares

Currently, directors are authorised to allot new shares either by ordinary resolution (commonly known as a 'section 80 authority') or by virtue of the articles. From 1 October 2009, directors of newly formed private companies with only one class of share will have authority to allot shares without the need for shareholder approval, unless the articles specifically restrict this power. Existing private companies can take advantage of this provision by passing an ordinary resolution. For public companies or private companies with more than one class of share, the position is largely unchanged - directors will only have power to allot new shares if authorised by ordinary resolution or the articles (in either case, the maximum number of shares which can be allotted and an expiry date not exceeding five years must be specified).

Redeemable shares, reductions of share capital and own share purchases

New provisions covering reductions of share capital (other than the new statement of solvency procedure which came into force on 1 October 2008), own share purchases and redeemable shares will all come into force on 1 October 2009. Some of the existing provisions have been re-enacted with little change but there are also significant changes. In particular, from 1 October 2009, companies wishing to issue redeemable shares, reduce share capital or complete an own share purchase will no longer require authority to do so in their articles. This is a reversal of the current position, where express authority in the articles is required. Companies wishing to restrict this power going forward will need to add a specific restriction in the articles.

New Companies House forms

From 1 October 2009, all forms for filing at Companies House will change and the new forms must be used for company events that take place on, or after, 1 October 2009. If you use an old form after this date, your filing will be rejected. Specimen forms are available from the Companies House website at www.companieshouse.gov.uk/forms.

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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