Business Law | The Companies Act 2006

The final stage of implementation of the Companies Act 2006 (the 2006 Act) took place on the 1st October 2009. We have outlined below some of the key changes to company administration as a result of the 2006 Act which directors should consider to ensure that their company complies with and benefits from such changes.

Memorandum & Articles

If you are looking to set up a company the 2006 Act has made significant changes to company constitutions. The memorandum is now a short factual document issued on registration which only contains factual statements. For companies incorporated before 1st October 2009 any other provisions contained in the memorandum are automatically treated as forming part of the articles of association.

There are new model articles under the 2006 Act which can be found on Companies House website. New companies can use these articles as their default articles unless they register with their own form of articles. Many companies require a more in depth set of articles than those in the model articles but the model articles can be a useful starting point.

Secretaries

Since April 2008 a company is no longer required to have a secretary but can still choose to have one.

Directors

The Companies Act 1985 did not set out directors duties which came from a mixture of legislation and case law. For the first time there is a checklist of general duties owed by directors to their company. It is important that directors understand these duties and what they mean in practice.

Abolition of Financial Assistance

Private companies are no longer prohibited from giving financial assistance for the acquisition of its own shares. The procedure known as 'the whitewash procedure' no longer applies and could make some processes, such as management buyouts, easier. The restriction does however still apply to public companies.

Resolutions & Meetings

There is no longer a requirement for a private company to hold an AGM although they can still choose to do so. However, if a company's articles still state that an AGM is to be held then the company must continue to do so until such time as it changes its articles.

Written resolutions can now be passed by majority approval rather than unanimously

If you have any queries about these or any other changes introduced by the 2006 Act, contact our commercial team now on