Companies Act 2006: in force from 1 October 2008
The act's 1,300 sections are coming into force over time during 2007 - 9. What follows is a round up of the main provisions that commence on 1st October 2008 that differ from the CA 1985.
The prohibition on companies giving financial assistance in connection with the acquisition of shares in their own capital has been repealed for most private companies.
Parties providing acquisition finance and others involved in a transaction may take security or payment or other financial benefit from companies being acquired without going through the complicated "whitewash" procedures.
Broader company law must continue to be addressed however. The directors must ? be satisfied the company is solvent and will remain so for the foreseeable future ? observe their duties as director (eg the assistance will promote the company's success) ? ensure the company's constitution allows the assistance and ? ensure assets, if any, are transferred at book value or more.
The law remains broadly unchanged where the shares being acquired are in, or the company providing the assistance is, a plc. However, the Act now expressly allows a foreign subsidiary to give financial assistance for the acquisition of shares in its UK plc parent.
Creating distributable reserves
Private company shareholders may now resolve to cancel shares so long as the directors, as an alternative to going to court, each sign and file a solvency statement. A reserve corresponding to the amount cancelled is created and distributions of that amount may be made.
There are seven of them. They and related provisions are now all in force. Directors (executive, non executive and shadow) have a duty to
- Act within their powers - s. 171
- Promote the success of the company - s. 172
- Exercise independent judgement - s. 173
- Exercise reasonable care and skill - s. 174
- Avoid situations of possible conflict of interest - s. 175
- Not accept benefits from third parties - s. 176
- Declare interest in proposed transaction or arrangement - s.177
Companies must have at least one director who is a natural person (ie a company may no longer hold office if the only director). There is a grace period for some companies. Individuals may not hold office unless they are 16 or more in age.
The simplified arrangements for keeping residential addresses private do not come in until October 2009.
The Act creates a new right for any person (not just a company) to object - to an adjudicator of company names! - where ? a company's name is the same as a name associated with the objector in which he has goodwill or ? the name is sufficiently similar to such a name that it would be likely to mislead (s. 69).
When checking compliance of company name plates, correspondence and other communications (hard copy, electronic or any other) the place to look now is The Companies (Trading Disclosures) Regulations 2008 (SI 2008/495) enacted under s. 82.
The regime (similar to earlier law but now in one place) covers: registered name and number, any business name, names of all or no directors (but not some), share capital (if stated, must all be paid up), registered address and, if different, the address where records may be inspected by persons dealing with the company (public).
Trade disclosure law for unincorporated businesses remains outside the CA 2006 until 1 October 2009.
Sections 362 - 367 prohibit directors from making political donations without the approval of shareholders.
The provisions are similar to those within CA 1985 but now extend the control regime to the making of donations to independent election candidates.
Donations to trade unions, unless to their political fund, are now outside the regime and do not require authority, so clarifying the CA 1985 position on this point.
Please feel free to e-mail or telephone with any enquiry concerning the above or company law.