Companies Act 2006

10 September 2008

Further provisions come into force

Whilst the Department for Business Enterprise & Regulatory Reform has deferred the introduction of certain of the remaining provisions of the Companies Act 2006 until 2009, some provisions did nevertheless come into force on 6 April 2008, and other provisions will come into effect on 1 October 2008.

Company Secretaries

From 6 April 2008, private companies are no longer required to have a company secretary, although someone will have to perform the duties previously carried out by him/her.

Under current rules, if the company only has one director, it is necessary for there to be a separate person (natural or legal) to act as secretary, but from 1 October 2008, provided a sole director is a natural person, there will be no need to have a separate company secretary.

If the secretary is to be dispensed with and the company’s articles of association refer specifically to the company having a secretary, it will be necessary to change the articles and file the new articles at Companies House. Whether or not there is such a reference, Companies House will have to be informed that the existing secretary has resigned, using form 288b.

Reports and Accounts

The requirements as to the form and contents of reports and accounts set out in part 15 of the Act came into effect on 6 April. However, they only apply to accounting periods beginning on or after that date, with accounts for periods beginning before then being prepared in accordance with the Companies Act 1985.

The time within which private companies must file their accounts has been reduced from 10 months to nine months after their year end.

The threshold requiring private companies to have their accounts audited has increased, and auditors do not have to be re-appointed each year – the incumbent continues in office until such time as the appointment is terminated.

Directors

From 1 October 2008, there is a minimum age limit of 16 directors. A person who is currently a director but has not reached 16 will automatically have his/her directorship cancelled by Companies House in its records – there is no need to send a form 288b, but the company’s register of directors will need to be amended.

The general requirements in relation to directors’ conflicts of interest also come into effect on 1 October, including the related provisions for declaring interests in existing transactions. A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest in relation to a third party that conflicts, or possibly may conflict, with the interests of the company. It is irrelevant whether or not the company could itself have exploited the interest.

However, the duty is not infringed if “the situation cannot reasonably be regarded as likely to give rise to a conflict of interest” or if the matter has been authorised by the directors. In a public company, the articles must expressly permit the directors to authorise the conflict, whereas in a private company, the directors can authorise the conflict unless specifically prohibited by the articles – there is no problem if the articles are merely silent. If the directors are prevented from giving approval, the matter must be referred to the shareholders.

There are separate provisions which apply to disclosure of potential conflicts of interest arising in relation to a transaction or arrangement between the director and the company.

Share capital

From 6 April 2008, public companies must establish whether they are to maintain their minimum share capital in sterling (£50,000) or euros (€65,000) (previously only sterling was permitted).

From 1 October 2008, the restrictions preventing private companies providing financial assistance for the acquisition of their own shares are removed, and there are simplified procedures for reductions of share capital.