FAQ: Companies Act 2006
When will it be possible for a company to be relieved from the statutory obligation to allow anyone access to its register of members?Once a company has filed an Annual Return made up to a date after 30 September 2007, it will be subject to the 2006 Act’s provisions relating to access to its register of members. This means that:
- the request for access must include the name and address of the person seeking access and say what the information will be used for, whether it will be shared with anyone else and if so, to whom and for what purpose;
- the company must, within five working days, either comply with the request for access or apply to the court;
- the court will allow the company not to comply if it is satisfied that the access is not being sought for a proper purpose
It is for the court to determine whether any particular application is for a proper purpose.
Will the definition of "participating interest" in section 260 of the Companies Act 1985 will be re-enacted in secondary legislation relating to accounting?
Yes. We will restate section 260 CA1985 without modification in the regulations to be made under Part 15 of the CA 2006.
When will the new Act's requirements on accounts/reports come into effect?
Generally the requirements on the form and content of accounts and reports in Part 15 of the Companies Act 2006 and new regulations to be made under it will be commenced with effect for accounts and reports for periods beginning on or after 6 April 2008. Accounts and reports for periods beginning before then will continue to be prepared in accordance with the Companies Act 1985.
However, the new business review requirements in section 417 of the Companies Act 2006 will be commenced for reports for financial years beginning on or after 1 October 2007
Currently Chapter 2 of Part 20 of the Act dealing with capital provisions comes into force in April 2008. Other capital provisions come into force in October 2008.
Does it not make sense to bring the capital provisions into force at the same time?
We agree. We now intend that Chapter 2 of Part 20 of the Act will come into force in October 2008 along with the other capital provisions.
When does the ban on child directors take effect?
From 1 October 2008, a natural person will have to be at least 16 years old in order to be a director. From that day, anyone who is not yet 16 will no longer be a director.
What is the position as regards corporate directors?
As from 1 October 2008, every company will have to have at least one director who is a natural person. The February consultation document sought views on whether there should be a grace period for existing company boards that do not contain a natural person.
Will companies need to pass a new resolution after 1 October 2007 to ensure they have authorisation for political donations to independent election candidates?
Under Part 14 of the Companies Act 2006, new provisions require companies to seek shareholder authorisation for donations to independent candidates at any election to public office held in the UK or other EU member states, and for expenditure by the company relating to independent election candidates. The provisions in Part 14 of the Act come into force on 1 October 2007 in Great Britain and on 1 November 2007 in Northern Ireland, but the provisions relating to independent election candidates will not come into force until 1 October 2008. This is to allow companies time to pass a new resolution authorising such donations of expenditure, should they wish to do so.
When will companies have to start disclosing donations to independent elections candidates in the directors' report in addition to other political donations?
For directors' reports relating to financial years beginning on or after 6 April 2008 companies will be required to disclose details of donations to independent election candidates in their directors' reports made under the Companies Act 2006. Regulations specifying the content of the directors' report will be commenced at the same time as the other provisions and statutory instruments on accounts and reports (in Part 15 of the 2006 Act) ie on 6 April 2008 for financial years beginning on or after that date. For financial years beginning before 6 April 2008 the existing provisions in paragraphs 3 and 4 of Schedule 7 to the Companies Act 1985 will continue to apply.
Which sections in Part 10 relating to directors' conflict of interest duties are to be commenced in October 2008?
The following sections related to directors’ conflict of interests will be implemented in October 2008:
- Section 175 – Duty to avoid conflicts of interest
- Section 176 – Duty to accept benefits from third parties
- Section 177 – Duty to declare interest in proposed transaction or arrangement
- Chapter 3 of Part 10 (ss182 to 187) Declaration of interest in existing transaction or arrangement
We already use website communications with shareholders who want it. Can we just continue as we are?
Yes. If a company already has an individual shareholder’s agreement to circulate the annual report and accounts, summary financial statement or AGM notice to the shareholder by website under the terms required by sections 238, 251 or 369 of the 1985 Act, the company will be able to continue to do this under paragraph 9 of Schedule 5 to the new Act. As under existing law, paragraph 13 of Schedule 5 requires the company to notify the shareholder each time information is posted on the website.
Our articles already make provisions for e-communications with our sharehodlers. Will we still have to pass a resolution?
No. If the articles already contain provisions to the effect that the company may send or supply documents or information to members by website, no resolution is required. However, where a company wishes to go further than the terms of the articles, for example where the articles only cover certain documents, then a new resolution will be required to provide general cover for other documents that the issuer wishes to communicate by website.
Companies traded on a regulated market are subject to the FSA rules, which will include a transitional provision to ensure that where a company could already lawfully use electronic means to communication to shareholders (or holders of debt securities) under existing law, the company will be able to continue doing so.
We want to start using only email communication with our shareholders. What do we need to do?
The company needs to seek individual agreement of each intended recipient to receive information by email. Where an individual does not agree or fails to provide an email address, the company will need to send information in hard copy.
We want to default to using website communications. What do we need to do?
The company will need both to seek individual agreement of each intended recipient and to pass a resolution for the company to use website communications as the default. Where an individual fails to respond within 28 days, the company may consider this as the individual’s deemed agreement to website communications. Where an individual does not agree to website communications, the company cannot ask again for his or her agreement within less than 12 months. The company must notify the individual each time information is published on the website.
What if an email bounces back with an undelivered message?
The 1985 Act continues to apply to the substantive requirement to give notice and those to whom it must be given, and there have been no changes to that as a result of the First Commencement Order. This provision does not prevent a company making provision in its articles not to send notice of a general meeting to members for whom the company no longer has a valid address.
We are concerned that wider use of e-communications will discourage shareholders, who are not willing to go on-line to cast their proxy instructions. What can we do?
When a company defaults to website communications, it must notify – either by email or in hard copy – each shareholder that information has been posted on the website. One option would be to ensure that such notification – whether an email or a postcard or letter – includes, for example, the time and date of the AGM, a list of the resolutions and instructions on how to vote or give proxy voting instructions. This would enable those, who are not able or not willing to communicate with the company electronically, to 'post' their proxy voting instructions back to the company.
Can we communicate by text message?
Yes. An individual and a company can communicate by text message. Clearly, the individual and the company will wish to consider what form of documentary evidence they might wish to keep to record that information has been sent
Who is responsible for enforcing the information requirements of the First Company law Amendment Directive?
Trading Standards have this responsibility.
Does the new provisions on false statements in reports apply to accounts after 20 January, or if the accounting year starts before 20 January, not apply until the issue of the accounts?
Section 463 of the Companies Act 2006 (liability for false or misleading statements in reports) does not apply to a directors’ report, directors’ remuneration report or summary financial statement first sent to members and others under section 238 or 251 of the 1985 Act, or Article 246 or 259 of the 1986 Order, before January 2007. So it depends when documents are sent to members, not which financial year they apply to.
Are private companies to be prohibited from giving financial assistance for the acquisition of their own shares under the Companies Act 2006?
The Companies Act 2006 will not prohibit a private company from giving financial assistance for the acquisition of its own shares (although if it has a subsidiary which is a public company, the public company may not assist the acquisition of shares in its private holding company). Currently, however, the Companies Act 1985 prohibits private companies from giving financial assistance for the acquisition of their own shares unless certain conditions are satisfied. That prohibition will be repealed in October 2008: until then, the prohibition remains in place.
Do we have to put our registration details on emails?
If the email relates to the company’s business, then yes.
My organisation is made up of a number of subsidiary organisations. Do we have to put details of all subsidiaries on all websites?
It’s up to you. We know some groups are having a single page which links between all the parts of the group giving their registration details.
What are the consequences of non compliance?
If you do not comply you could be subject to a fine. The current fine is one fifth of the statutory maximum of £5000.
Do I have to put my VAT numbers and details on documents?
This is not required by the Companies Act. You may want to check the point with HM Revenue & Customs.
Do I have to put the details on every page of my website?
No, though it should be somewhere it can be easily found and read
Does all this information have to go on my business card?
Not unless you want it to.
When will the draft model articles be available?
Draft model articles are now available as part of the consultation document which is available elsewhere on this site.
Who will these model articles apply to?
The model articles to be prescribed under the Companies Act 2006 will only apply by default to companies formed under that Act.
What kinds of model articles will there be?
We intend to make new regulations prescribing model articles for private companies limited by shares, one for private companies limited by guarantee, and one for public companies.
What will the Order do?
The Order exempts companies whose ordinary business includes the publication of news (such as newspapers, and other publishing or media-related companies) from having to seek shareholder authorisation in order to prepare, publish, or disseminate material of a political nature. This is because it would be impractical for them to have to comply with the provisions on political expenditure in Part 14 of the Companies Act 2006 for something which is within the ordinary course of their business.
Does the Order replace any existing legislation?
This Order replaces rewrites the existing Order SI 2001/445 using simpler language and the format of the 2006 Act, with no changes to the substance. What activities in relation to ‘political expenditure’ does the Exemption Order cover? The meaning of political expenditure is given in Article 3 of the Order, and means anything that a company spends on preparing, publishing or disseminating material that could affect support for a political party or candidate. Companies such as newspapers will not need to seek shareholder authorisation for expenditure incurred in preparing, publishing or disseminating advertisements from third parties which could affect public support for a political party or influence voters.
When will the Order come into force?
1 October 2007 along with the provisions in Part 14 of the Companies Act 2006.
What provisions of the Companies Act have already come into force?
A number of Provisions have already come into force, including provisions dealing with Language and Trading Disclosures, e-communications; e-filing; regulation of actuaries; disclosure of shareholdings; liability for statements, and various repeals being brought into force in April. Details are available at www.dti.gov.uk/bbf/co-act-2006
When will the rest of Companies Act 2006 come into force?
Most of the Act is not yet in force. The Government has announced that all aspects of the new legislation will be brought into force by October 2008. In the meantime, certain specific provisions are coming into effect earlier. The Government has now published the timetable for implementing the rest of the Act.
When will the rest of Companies Act 2006 come into force?
Most of the Act is not yet in force. The Government has announced that all aspects of the new legislation will be brought into force by October 2008. In the meantime, certain specific provisions are coming into effect earlier. The Government has now published the timetable for implementing the rest of the Act.
When will regulations be available?
Most of the substance is in the Act itself. We have now published a consultation document (which runs until 31 May 2007 except for those issues relating to political donations and expenditure, for which we request comments by 1 May 2007) covering the main policy elements of secondary legislation, along with the timetable for implementation.
What Company law provisions of the 1985 Act are in the Bill
All the Company Law provisions of the 1985 Act, the 1989 Act and the 2004 Acts have been brought into the Bill, other than the self-standing provisions on community enterprise companies and the provisions on investigations, which go wider that companies.
What parts of the non-company law of the Acts will remain?
- Some Scots Law provisions, which are now devolved to the Scottish Parliament, and which are being replaced by the Scottish Parliament.
- Provisions about the Financial Reporting Council which are about the operation of that body and its subsidiaries, not about how companies generally conduct themselves
- Provisions about assisting overseas regulatory authorities, about financial markets, about the Financial Reporting Review Panel, and about insolvency all of which relate more to financial services law than company law.
Company Investigations
Orders imposing restrictions on shares following an investigation
Provisions about Scottish floating charges and receivers
What is left behind in the 1989 Act?
- Powers to require information and documents to assist overseas regulatory authorities.
- Provisions about Scottish incorporated charities.
- Amendments and savings consequential upon the changes in the law made by the 1989 Act.
- Provisions about financial markets and insolvency.
- The provisions extending the functions of the Financial Reporting Review Panel (FRRP) to interim accounts and reports.
- Provisions about the financing and liability of the Financial Reporting Council (FRC) and its subsidiary bodies.
- Community interest companies
- Investigations can go beyond companies to cover other types of organisation.
- The Scots law provisions left behind are now devolved to the Scottish Parliament.
- The provisions about assisting overseas regulatory authorities, about financial markets and insolvency and about the FRRP relate more to financial services law than company law.
- The provisions about the FRC are about the operation of that body and its subsidiaries, not about how companies generally conduct themselves.
- The provisions about community interest companies form a complete code which is additional for company law and sits alongside it rather than forming part of it.
