By Jaspal Sekhon and Cormac Lloyd, Corporate & Commerical Department, Kerman & Co LLP
From 1 October 2009, the last remaining provisions of the Companies Act 2006 (the “Act”) come into force.
This note summarises some of the key changes that will take effect on 1 October 2009 and recommends action points for companies to consider.
Constitution
Companies incorporated after 1 October 2009 will benefit from a much simpler constitution. The memorandum of association will have a reduced role under the Act and the key constitutional document for a company will be the articles of association.
The changes in the Act give rise to a number of issues for companies incorporated before 1 October 2009 to consider, in particular the suitability of their existing articles of association. Existing companies can continue to use their existing articles, which are most likely to be based on the default articles under the Companies Act 1985 known as “Table A”. However, companies need to be aware that any provisions in the articles which conflict with the Act will be automatically overridden. Furthermore, any provisions contained in the memorandum before 1 October 2009 will be imported into the company’s articles. This may prove restrictive for some companies who might otherwise benefit from the simplified regime under the Act.
Share Capital
The Act introduces a number of provisions to simplify company procedures in relation to raising further capital. Companies should consider reviewing and updating their articles to benefit from the October 2009 changes in order to reduce the time and cost of raising additional capital.
Authorised share capital
From 1 October 2009 the concept of authorised share capital will be abolished. However, companies incorporated before 1 October 2009 will still be subject to the authorised share capital limitation stated in the memorandum. However, companies can pass an ordinary resolution to amend or remove the existing authorised share capital provision or alternatively adopt new articles of association.
Allotment of shares
From 1 October 2009, directors of private companies with only one class of shares will be able to allot new shares unless they are prohibited from doing so by the articles. Existing private companies with one class of shares will, however, need to pass an enabling resolution or modify their articles to take advantage of the new provision.
Shareholder authority will continue to be required for all allotments by public companies and private companies with more than one class of shares. The authority can be set out in the articles or given by ordinary resolution.
Redenomination of shares
The Act now allows companies to convert shares denominated in one currency into another currency by passing an ordinary resolution. The provision simplifies the procedure that currently exists whereby public companies would have to cancel their shares with court approval and reissue shares in a new denomination.
Statement of capital
From 1 October 2009, companies will be required to file a statement of capital every time there is a change to the company’s share capital. The statement of capital will detail the total number of shares in issue, their aggregate nominal value, any rights attaching to the shares and the paid up amount on each share.
Directors’ addresses
Directors’ private residential addresses will no longer appear on the register of directors from 1 October 2009 (although directors’ residential addresses will still need to be provided to Companies House). However, it should be noted that the residential address of a director that has already been provided to Companies House will automatically become his service address.
The Act also requires additional information to be filed in relation to company directors (e.g. the country within the UK in which the director is normally resident). Companies will have until the date of their next annual return to add this additional information to the register of directors at Companies House.
Companies will therefore need to keep two separate registers of directors. Firstly, a statutory register containing certain information about the directors (including their service address) which will be available on the public register. Secondly, a register of directors’ residential addresses which will not generally be available for public inspection.
New forms
Company secretaries and other company administrators need to be aware that from 1 October 2009 a completely new set of forms must be used for filing at Companies House. Existing forms will no longer be accepted by Companies House.
Action points
- Review existing articles and consider adopting new articles to simplify company procedure and take account of the Act’s provisions.
- Create separate registers of directors’ service addresses and directors’ residential addresses. The residential addresses should be kept private.
- Register additional directors’ information by the date of the company’s next annual return.
- Companies may wish to pass a resolution to remove any existing authorised share capital or alternatively adopt new articles of association.
- Companies with international businesses may want to consider whether there is any advantage in redenominating their shares into another currency.
- Be prepared to produce a statement of capital which must be filed when there is any change to the company’s share capital.
- Use the new Companies House forms from 1 October 2009.
For further information on any of these matters, please speak to your usual Kerman & Co LLP contact or call 020 7539 7272.
