The Companies Act 2006 (the ‘Act’) received royal assent on 8th November 2006 and significantly overhauls many aspects of company law as well as consolidating the existing law.
For example, directors’ duties are codified within the Act, the prohibition on financial assistance for private companies is to be abolished, private companies will no longer need to have a company secretary and will no longer be required to hold AGMs and, in addition, in the procedure for written resolutions will be simplified.
The Act should be entirely in force by October 2008. Here we consider some of the provisions of the Act, already in force, which may be applicable to your business.
Disclosure of details on websites
As of 1st January 2007, companies are required to disclose their place of registration, registered name and number on all correspondence, including company websites, order forms and emails. Companies and LLPs must ensure that the required information is included in their business letters, order forms, electronic communications and websites.
Communications with shareholders
Although under the existing legislation companies could use electronic and website communications in certain contexts, it was not clear whether provisions requiring communication “in writing” would be satisfied solely by electronic communication or also required hard copies to be sent. The new provisions in the Act, which came into force on 20th January, provide for electronic and website communications for the entire Act.
This could offer increased efficiency and reduced costs to companies, particularly in respect of communications with shareholders. The Act provides that if the shareholders consent, either by resolution in general meeting or by a provision in the articles of association, then communication via a website can be the default position. Such a provision will only apply to individual shareholders who have agreed or been deemed to have agreed that the company may supply documents to them in this manner. It may be appropriate to consider passing the relevant resolution in the 2007 AGM.
The Act also contains provisions for a company to communicate by email. Information may be supplied by a company by email to a person who has agreed either generally or specifically that that information may be supplied in electronic form and the recipient has provided an email address for this purpose.
If your company wishes to pursue these forms of communication, a request letter should be sent to each shareholder to obtain consent to receiving documents and information by means of a website; to obtain consent to receiving communications by email; and to obtain an email address for electronic communications.
Conversely, shareholders are able to communicate with the company electronically where the company has agreed to this and has provided an email address for communication. This will occur where the company has given notice convening a meeting or a proxy form.
Other provisions in force
New provisions have come into force regarding disclosure of major shareholdings in publicly traded companies.
Damages for misleading statements in a company’s reports or accounts are now on a statutory footing. Issuers of securities traded on a UK regulated market are liable to compensate anyone who acquires securities and suffers a loss as a result of an untrue or misleading statement in an annual, half-yearly or interim report or a preliminary announcement of annual results.
Furthermore, where a shareholder’s claim is successful, the issuer may then in turn seek to recover any compensation from a director who knew the statement was untrue or misleading or was reckless as to whether this was the case.
Finally, provisions have come into force to formalise the arrangements for the electronic filing and inspection of documents at Companies House. Further consideration of the Act in relation to charities is given on pages four and five and, in particular, how it applies to charitable incorporated organisations.
For more information or advice on the Companies Act 2006, please contact
Mark Lewis.
First published in Newsbrief, Spring 2007
