The provisions of the new Companies Act 2006 are coming into force over a period, starting from April 2008.
How will the Companies Act 2006 affect my company?
All section of the Act could affect your company but there are some key areas that will impact the majority of private limited companies:
1. Written Resolutions can now be passed by members holding the required number of shares to reach a majority (subject to the definition of "majority" in the company’s Memorandum & Articles of Association). This replaces the previous rule, which required Written Resolutions to be signed by all members.
2. Annual General Meetings (AGM). A private company is no longer required to hold an Annual General Meeting.
3. Company Secretary. The appointment of a Company Secretary ceased to be mandatory for private limited companies with effect from 6 April 2008 onwards.
4. Notice period. For extraordinary general meetings the notice period is now fixed at 14 days and it is now 21 days for annual general meetings.
5. Accounting Reference Date (ARD). For accounting periods starting on or after 6 April 2008 the filing period was reduced by one month (now set at 9 months for private companies (LTD) and 6 for public companies (PLC).
6. Execution of Documents. Rules have changed for the execution of company documents, particularly with regard to the fact that private companies may now have a single Director as the only officer. However, before changing the way you do this you need to look carefully at your Memorandum & Articles of Association to make sure that they do not oblige you to operate under the previous procedures.
Should I review the company’s Articles of Association?
You need to review your articles if you wish to take advantage of the new Act. The following examples illustrate changes that may affect, or be limited by, your M&A:
- You want to dispense with the office of Company Secretary. Do your articles say that a Company Secretary must be appointed? Or do they refer to certain acts needing to be done by the Secretary? If they do, you may need to change the M&A to allow this change to your legal structure. In particular, you should look at the rules in your M&A concerning the use of the company seal. If the company has only one director and no secretary then it may not be permissible to affix the seal. Standard provisions normally require the seal to be affixed with the signature of a secretary or a second director – unless the Articles say that it can be used with a single signature.
- If you want to stop holding an Annual General Meeting:
You need to check if your articles specifically state that you must hold an AGM; if they do, you must continue to hold an AGM no matter what the Act says or you must change your M&A. However, if you had already passed an elective resolution under the 1985 Act to dispense with AGMs this will still cover you for this purpose.
- You are a not for profit company (CIC or Limited by Guarantee) and you think it necessary to hold an AGM each year: your articles may say that you must hold an Annual General Meeting but you should check and update them if necessary.
Does the Company still need a Secretary?
You need to think about this carefully and to separate the office of Company Secretary from the tasks and functions that the Secretary performs. Despite the removal of the mandatory requirement to appoint a Secretary, the new Act has not abolished a single form or report! A wide range of activities that have traditionally bee the Secretary’s responsibility will still have to be done by someone. If you do not have a secretary those burdens will fall on the directors and, if you are the sole director, that could impinge on the rest of your business. Make sure that you have adequate cover so that your company does not run into problems or penalties because of late or inaccurate filing of company forms and reports. It is no longer a legal requirement to appoint a Secretary, but the role still exists and it may be in your best interests to see that someone is covering the job for you. You can appoint a professional company secretary to handle these tasks from outside the business.
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