Companies Act 2006: What Impact on Your Business?
Save for a few minor points, the final implementation of the Companies Act 2006 took place on 1 October 2009. Below are just some of the changes to the law which could have an impact on the running of your business, on the whole making it easier to administer and more efficient.
A private company is no longer required to have a secretary
If a company wants to take advantage of this relaxation in the rules, it will need to amend its articles accordingly.
Private companies are not obliged to hold AGMs
Clients may wish to amend their articles dispensing with this requirement
Special and ordinary resolutions of the members can now be passed as written resolutions extraordinary resolutions are now consigned to history.
Directors’ duties are set out in one place for the first time:
- to act within powers;
- to promote the success of the company;
- to exercise independent judgment;
- to exercise reasonable care, skill and diligence;
- to avoid conflicts of interest;
- not to accept benefits from third parties;
- to declare an interest in a proposed transaction or arrangement.
As the duties are now condified there is consensus that directors could be under greater scrutiny than under the previous regime and need to ensure that all decisions of the board are reflected in the board minutes and that the minutes record the fact that they have considered their duties under the Act.
Directors must be age 16 years or over. Also, a company’s directors may not all be corporate - at least one director must be a natural person.
To discuss the duties and consequences of breach, in more detial, please contact Simon Morris.
The law has been extended so that shareholder approval is required for directors’ service contracts in excess of two as opposed to five years
A company may now execute a deed by the signature of a single director in the presence of a witness
Previously two directors or a director and a secretary were required to execute a deed. If you want to take advantage of this change in the law you will need to make sure that your existing articles allow documents to be executed in this way. This now means that it is possible to set up a single person company.
The prohibition on the giving of financial assistance by a private company for the purchase of its shares and the private company whitewash procedure have both been abolished
You should also check your company’s articles to make sure that they contain no restrictions on the giving of financial assistance.
Auditors and companies are allowed to enter into "liability limitation agreements" (LLA)
LLA’s limit an auditor’s liability to a company for negligence, default or breach of duty or trust in relation to the audit of the accounts.
A new criminal offence has been created in relation to inaccurate auditors' reports
A person commits an offence if he knowingly or recklessly causes an auditors' report to include any matter that is misleading, false or deceptive in a material particular or if he omits a statement required under the 2006 Act that relates to problems with the accounts. Both directors and employees of the company are potentially liable under this provision.
If you want to find out more about how the Companies Act 2006 can benefit your business, please contact a member of our Company Commercial Team.
Simon Morris, Partner, simonmorris@stones-solicitors.co.uk
Alex Howard, Solicitor, alexhoward@stones-solicitors.co.uk
Exeter 01392 666777 Okehampton 01837 650200
www.stones-solicitors.co.uk