UK: Companies Act 2006 - Changes To Implementation Timetable

On 30 May the DTI announced that:

• It intends to bring forward to 1 October 2007 the introduction of those sections in Part 8 (principally sections 116-119) of the Companies Act 2006 that deal with the right of members and the public to inspect a company’s register of members

• The new business review requirements in section 417 of the 2006 Act will be commenced for reports for financial years beginning on or after 1 October 2007

• Chapter 2 of Part 20 of the 2006 Act (which deals with minimum share capital requirements for public companies) will be commenced on 1 October 2008, at the same time as the other capital provisions

• For directors’ reports relating to financial years beginning on or after 6 April 2008, companies will be required to disclose details of donations to independent election candidates

• As expected, those sections relating to directors’ conflicts of interest (sections 175 - duty to avoid conflicts of interest; 176 - duty to accept benefits from third parties; 177 - duty to declare interest in proposed transaction or arrangement; and 182-187 - declaration of interest in existing transaction or arrangement) will be implemented on 1 October 2008. The other provisions on directors’ duties in Part 10 of the 2006 Act will be commenced on 1 October 2007.

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On 30 May the DTI announced that:

• It intends to bring forward to 1 October 2007 the introduction of those sections in Part 8 (principally sections 116-119) of the Companies Act 2006 that deal with the right of members and the public to inspect a company’s register of members

• The new business review requirements in section 417 of the 2006 Act will be commenced for reports for financial years beginning on or after 1 October 2007

• Chapter 2 of Part 20 of the 2006 Act (which deals with minimum share capital requirements for public companies) will be commenced on 1 October 2008, at the same time as the other capital provisions

• For directors’ reports relating to financial years beginning on or after 6 April 2008, companies will be required to disclose details of donations to independent election candidates

• As expected, those sections relating to directors’ conflicts of interest (sections 175 - duty to avoid conflicts of interest; 176 - duty to accept benefits from third parties; 177 - duty to declare interest in proposed transaction or arrangement; and 182-187 - declaration of interest in existing transaction or arrangement) will be implemented on 1 October 2008. The other provisions on directors’ duties in Part 10 of the 2006 Act will be commenced on 1 October 2007.

These points were included in new FAQs on the 2006 Act that the DTI added to its website on 30 May to deal with:

• Access to register of members

• Directors’ conflict of interest duties

• Child and corporate directors

• Control of political donations and expenditure

• Accounts and reports

• Share capital provisions

The FAQs clarify and update the DTI’s intentions in relation to a number of important areas:

In its consultation paper and implementation timetable published in February (the February CP), the DTI said that it intends to commence Part 8 (register of members) and Part 24 (annual return) on 1 October 2008. Part 8 (sections 112-144) deals with the register of members and rights of inspection; registers of overseas branches; single member companies; and the general prohibition on a subsidiary being a member of its holding company. Part 24 contains the duty to file an annual return; specifies its contents; and allows the Secretary of State to make regulations varying the contents. The DTI has said that it will use this power to make regulations - to come into force on 1 October 2008 - allowing companies to omit from their annual return the address of any shareholder, except where the company’s shares are traded on an EU regulated market and the shareholder holds 5% or more of any class of shares at any time during the year in question.

In response to requests from industry, the DTI has now decided to bring forward to 1 October 2007 the introduction of those sections in Part 8 (principally sections 116-119) that deal with the right of members and the public to inspect a company’s register of members. These sections require a person seeking access to the register to give their name and address and the purpose for which access is sought, and allow the company to apply to court for permission not to comply on the grounds that the request is not made "for a proper purpose". The Act contains no guidance on what this means: it will be left for the courts to determine.

The relevant commencement order is expected to say that a company will be subject to the new provisions under the 2006 Act once it has filed an annual return made up to a date after 30 September 2007 (the rationale being that there would be no point in allowing a company to deny access to its register if it would subsequently have to file an annual return under the Companies Act 1985 containing details of its shareholders).

Generally the requirements on the form and content of accounts and reports in Part 15 the 2006 Act and new regulations to be made under it will be commenced with effect for accounts and reports for periods beginning on or after 6 April 2008. Accounts and reports for periods beginning before then will continue to be prepared in accordance with the 1985 Act.

However, the new business review requirements in section 417 of the 2006 Act will be commenced for reports for financial years beginning on or after 1 October 2007. (Previously, it was not clear when the new requirements would apply.)

Part 20 the 2006 Act deals with the prohibition on private companies offering shares to the public, and the minimum share capital requirements for public companies. In the February CP, the DTI said that it expected to commence the whole of Part 20 on 6 April 2008. However, as most of the other capital provisions will come into force on 1 October 2008, the DTI has now decided that it makes sense to commence Chapter 2 of Part 20 (which deals with minimum share capital requirements for public companies) on 1 October 2008, at the same time as the other capital provisions.

Under Part 14 the 2006 Act, new provisions require companies to seek shareholder authorisation for donations to independent candidates at any election to public office held in the UK or other EU member states, and for expenditure by the company relating to independent election candidates. The provisions in Part 14 of the 2006 Act will come into force on 1 October 2007 in Great Britain and on 1 November 2007 in Northern Ireland, but the provisions relating to independent election candidates will not come into force until 1 October 2008. This is to allow companies time to pass a new resolution authorising such donations of expenditure, should they wish to do so.

For directors’ reports relating to financial years beginning on or after 6 April 2008, companies will be required to disclose details of donations to independent election candidates in their directors’ reports made under the 2006 Act. For financial years beginning before 6 April 2008, the existing provisions in paragraphs 3 and 4 of Schedule 7 to the 1985 Act will continue to apply.

As expected, the following sections related to directors’ conflicts of interests will be implemented on 1 October 2008:

• Section 175 - Duty to avoid conflicts of interest

• Section 176 - Duty to not accept benefits from third parties

• Section 177 - Duty to declare interest in proposed transaction or arrangement

• Chapter 3 of Part 10 (ss.182-187) Declaration of interest in existing transaction or arrangement

The other provisions on directors’ duties in Part 10 of the 2006 Act will be commenced on 1 October 2007, which will necessitate some adaptations to sections that refer to the conflict of interests duties, including sections 170, 180 and 181.

The DTI’s FAQs on the 2006 Act
The February CP
Our Overview of the 2006 Act and note on the implementation timetable, which were both published on 17 April 2007

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

The original publication date for this article was 07/06/2007.