The Companies Act 2006

The Companies Act 2006

Jennifer Brannigan examines the new measures coming into force in January to April 2007.

The Companies Act 2006 While the bulk of the Companies Act 2006 (the Company law reform bill, as was) may not come into effect until October 2008, the first commencement order under the Act now been published. As a result, a number of measures will take effect in January and April 2007, in Northern Ireland as well as the rest of the UK. One of these provisions may require immediate action by companies, while others will require consideration by directors in the context of the particular company. Those provisions relevant to private companies are summarised below.

1 January 2007

From 1 January, 2007, every company must list its:

• company registration number;
• place of registration; and
• registered office address,

on all

• order forms;
• e-mails and other electronic documents; and
• company websites (although it does not need to appear on every pages of the website).

Any failure to do so may result in a fine. This extends the scope of the existing requirement to disclose the same particulars on all business letters.

20 January 2007

The 2006 Act introduces a new provision which allows a shareholder to communicate with the company by electronic means where the company has given an electronic address in a notice calling a meeting or in an instrument of proxy or proxy invitation.

It also allows companies to send documents to shareholders in electronic form, including via websites, subject to shareholder approval. The intention is to remove existing company law requirements for the use of paper communications so that companies can, for example, make their full annual report and accounts accessible to shareholders via electronic means unless individual shareholders request a paper copy. The provisions allowing companies to send communications by electronic means are effective for the purpose of any provision of the 2006 Act which authorises or requires documents or information to be sent or supplied by the company, but are subject to contrary provisions in any other enactment.

It is anticipated that this will lead to significant cost savings for companies through reduced paper consumption. Individual companies will need to consider whether it is necessary or desirable to make changes to its articles and/or AGM or EGM circulars as a result of these provisions.

Director's reports

Section 463 of the new Act gives exemption from liability for statements in the director's report in a company's statutory accounts. The exemption is subject to the director not knowing or not being reckless as to whether a statement is untrue or misleading and not dishonestly concealing a material fact. It is designed to give directors comfort that they cannot be sued for negligence by, for example, making forward-looking statements as to prospects in the directors' report. However, the inclusion of any matter in the directors' report means that the auditors will need to report as to whether it is consistent with the accounts.

6 April 2007

Directors' age limit: the current requirement for directors to retire at age 70 will be replaced from 6 April, 2007 but, as it appears in many companies' articles, it may still continue to apply in reality for the time being.

Directors' Shareholding notifications: directors will no longer be required to notify their interests in shares to the company under regulation 332 of the Companies (Northern Ireland) Order 1986.

The Government has confirmed that all provisions of the new Companies Act will be in force by October 2008. The above is, necessarily, a summary of the provisions being introduced in the first part of this year. However, the full text of the Companies Act 2006 and accompanying explanatory notes are available on the DTI website (www.dti.gov.uk).

Jennifer Brannigan is an Associate in the firm's Corporate Department advising on a broad range of corporate and commercial work. Jennifer can be contacted at: jennifer.brannigan@lestrangeandbrett.com

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