After a three year implementation programme, the final phase of the 2006 Act came into force on 1 October 2009. What does that mean for clients? The five key changes are as follows:-

  1. Creation/Dissolution of Companies
    All companies can now be formed with only one shareholder. Public companies are also able to put in an application to be struck off voluntarily whereas previously only private companies could do this.
    In certain restricted circumstances companies can now be restored to the register without the need to go to Court and the time limit for applications for restoration has been increased from 2 to 6 years from the date of dissolution.
  2. Records
    Companies now need to keep two registers of addresses in relation to directors. The first should show a service address and is available to the public and the second, a separate private register of residential addresses gives details of home addresses. Existing directors may wish to file a Form CH01 to register a service address failing which their current details will be deemed to be a service address.
    There is no longer any need for a register of secretaries and private companies are no longer required to have a secretary.
    Minutes and Board papers now require to be kept for 10 years rather than 20 years.
    The concept of authorised share capital has now been abolished.

    For new companies this means that the number of shares they can allot will be unlimited unless there is a specific provision contained in their Articles of Association limiting the Director's ability to allot shares. For existing companies the authorised share capital figure contained in their Memorandum will be treated as a provision of part of the Articles of Association and will be the maximum amount of shares that the Company can allot. If companies wish to amend this figure they can pass an ordinary resolution in order to remove, increase or reduce it.

    Where a new private company has only one class of shares, the Directors are free to allot shares on a pre-emptive basis without seeking any authority from shareholders unless they are prohibited from doing so by the Articles of Association. Companies with more than one class of shares will require to pass a resolution to give the directors the authority to allot shares and that resolution will need to state the number of shares to which it relates and can last for up to 5 years. Existing companies need to pass an ordinary resolution if they have only one class of shares and wish to be allowed to allot shares without getting shareholder consent. Existing Section 80 authorities continue to be effective until they expire.

    With regard to pre-emption rights, new companies are able to disapply these in their Articles or by special resolution and existing companies' current s95 disapplications will continue until their expiry date.
    Private companies no longer require authorisation in their Articles to purchase their own shares, allot redeemable shares or reduce their share capital.
  4. Memorandum of Association
    The structure of Memoranda of Association has been significantly changed. For new companies it is a two line document stating the intention of subscribers to form a company. New companies have unrestricted objects and can do whatever they like, subject to any restrictions contained in their Articles of Association. For existing companies, the position is more complicated. All the clauses in the Memorandum not required by the 2006 Act are automatically deemed to become part of the Articles of Association as of 1 October 2009.
  5. Articles of Association
    A new Table A set of standard Articles has come into force. These will be the default Articles for any company incorporated after 1 October 2009. These Articles are considerably more user friendly than the old Table A and allow companies to conduct their activities more flexibly and quickly than previously was the case taking account of electronic communications and speed of business in the 21st century.

    Under the previous Act, companies were able to entrench provisions in their Memorandum by stating that these could not be altered. This is no longer possible and new companies will only be able to have provisions in their Articles that can be changed on a specified basis. If a new Company's Articles contain such entrenched provisions notice must be given to the Registrar of Companies of this. For existing companies any entrenched provisions remain unalterable without Court Order. Once a provision is entrenched, the only way to amend it is by unanimous agreement of all the members of the Company or a Court Order. Implementation of these entrenchment provisions has been delayed for further consultation.


We recommend passing resolutions to remove all the unnecessary provisions in the Memorandum and adopting new Articles of Association which are 2006 Act compliant. All Directors should consult with their advisers to decide what changes are required to their Company's constitutional documents and procedures to allow them to take advantage of the new provisions of the 2006 Act. If you have any questions about the new Act and how it impacts on your company contact Catherine Feechan on 0141 228 8096.

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.