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Companies Act 2006 Update and Directors Duties Introduction During its implementation, the DTI described the aim of the Companies Act 2006 (the "2006 Act") as providing "a coherent, flexible and simpler basis on which companies can set up and do business." With this in mind, the Act has effectively consolidated the previous law contained in the Companies Acts of 1985 and 1989 and part 9 of the Enterprise Act 2002 as well as introducing some substantial changes in the way companies operate in the UK. One of the main aims of the Act is to make setting up and running a company easier for small and medium-sized enterprises. This is a radical shift from the mindset of previous legislation, which has always primarily catered for big business. Despite the best intentions of legislators the Act can, however, seem a complex and frightful instrument. It runs to 1300 sections excluding schedules and subordinate legislation (of which there is plenty!) and is further complicated because its provisions have not come into force simultaneously. The Act has been implemented in several different stages, beginning on the 8 November 2006 (when royal assent was granted) and with the final implementation due to take place this Thursday 1 October. It is our aim in this seminar to present the relevant sections of the Act, which should be accessible to all who run or have an interest in a business in the UK, in a clear and approachable format. In the first part of the seminar we will attempt to concisely summarise the impact that new legislation has already had on Company Law. We will highlight the main changes which have already been bought into force together with their effect on the way in which directors and shareholders run their businesses. Later in the seminar, we will turn to consider the changes which are being introduced on Thursday of this week and the further effects these will have on businesses in the UK. We are of course happy to answer any queries you may have on the legislation, or any other aspect of your business. Please feel free to contact the Head of our Business Law Department, Mr Charles Fuente at charles.fuente@twmsolicitors.com for assistance. Alternatively, please feel free to call 0870 7777 995, where we will be happy to discuss your enquiry. Further information on the Act itself can also be found at the Department for Business, Innovation and Skills: www.berr.gov.uk or Companies House: www.companieshouse.gov.uk. IMPLEMENTATION OF THE 2006 ACT — CHANGES ALREADY IN FORCE De-regulation As we have already stated, a major aim of the 2006 Act is to make it easier for the small business owner to set up and run a private company. There have been various changes under the 2006 Act which are designed to de-regulate companies in this position. AGMs /Auditors /Accounts Under the Companies Act 1985 (the "1985 Act"), a private company was required to do each of the following: - hold an AGM each year; - lay copies of accounts and other documents before the AGM; - send copies of annual report and accounts to members, debenture holders and everyone entitled to receive notice of the meeting not less than 21 days before the AGM; and - re-appoint auditors at each AGM. It was possible, under the 1985 Act, to "elect" out of all of these requirements, by passing a resolution to this effect at a general meeting of the company. This 'elective resolution' had to be agreed by every member of the company entitled to vote at a meeting. This requirement for unanimity meant that, in practice, the resolutions were only viable for smaller companies with fewer shareholders, who could all agree on a course of action. The 2006 Act has removed these requirements for private companies who: - are no longer obliged to hold an AGM, although they may continue to do so if they wish. The system has, therefore, changed to an 'opt-in' as opposed to 'opt-out' format. Note that directors are under a duty to call an AGM where requested to so by the members. Where the directors fail to do so, the members who requested the AGM or any of them representing more than one half of the total voting rights of all of them may themselves call one (see sections 303 to 306 2006 Act). - are no longer obliged to lay accounts and reports before a general meeting (for financial years ending on or after 1st October 2007); and - are deemed to reappoint their current auditor annually, although members have the right to prevent such reappointment. These changes effectively mean that the elective regime under the 1985 Act, which previously required unanimous agreement, has now become the default position under the 2006 Act. It should be noted that the changes are subject to the provisions of the company's articles of association, which may still require, for example, an AGM. A small, but important, consequence of these changes is the reduction of the time limit for filing the accounts. Previously, the time limit was 10 months from the end of the company' s accounting reference period for private companies; this has now been reduced to 9 months (and from 7 months to 6 months for plcs). Company Secretary Almost every company in the UK has a company secretary, as required pursuant to the 1985 Act. Under that Act, a sole director was also prohibited from being the company secretary, therefore necessitating the appointment of at least two officers at the company's incorporation (a director and a secretary). The secretary has traditionally been entrusted with general administrative duties regarding the company's affairs, and ensuring that the relevant provisions of companies legislation is complied with by the company. The secretary, however, is purely a servant of the Board who bears no personal, statutory liability. Under the 2006 Act, the requirement for a private company to have a company secretary has been abolished, although companies may retain one if they wish. Alternatively, one can be appointed on incorporation or thereafter. (Such appointment can be terminated by the directors without shareholder approval). Under the 2006 Act, a company secretary can also be a director. Public companies are still required, by law, to have a company secretary. This forms part of the new legislative aim to give small companies greater flexibility in their internal management arrangements. Companies should note, however, that they may still be required to appoint a secretary in accordance with the company's articles of association. (unless the articles merely refer to the company secretary's duties) If this is the case, these articles will need to be amended in order to take advantage of the new regime. Executing Documents Under the 2006 Act, the way in which companies can execute documents has changed, particularly deeds. The traditional way in which a company could execute a deed was either by common seal (this method of execution was made optional following the enactment of the Law of Property (Miscellaneous Provisions) Act 1989); or by the signature of two directors (or one director and the company secretary). It is still possible for companies to execute deeds via each of these methods; however, there is now also a third alternative, introduced by the 2006 Act. A company can now execute a deed by the signature of one director alone, provided this is witnessed. A witness should be able to attest / confirm to the genuineness of the director's signature. Records Under the 1985 Act, companies were required to keep records (or minutes) of all proceedings of the company (including board and general meetings). The obligation also extended to keeping records of written resolutions, and decisions where there was a sole member of the company. The company was obliged to hold these records indefinitely. If a company failed to comply with the requirement, the company and every officer of the company in default would be guilty of an offence and liable to a fine. The 2006 Act introduces a 10 year time limit on the requirement to keep records, which will lighten the burden on companies to hold and store records of decisions. Note that deeds should be kept for a period of 12 years. Meetings: The 1985 Act required a general meeting of the company to be called with at least 14 days notice. This was increased in the case of a meeting at which a special resolution was considered (or an AGM) to 21 days notice. The 1985 Act did make provisions for a general meeting to be called on shorter notice, where members representing 95% of the nominal share value of the company consented. However, unless the company had a very limited number of shareholders, this was unlikely to be a feasible proposition. As with some of the requirements already considered under the 1985 Act, above, a private company could, by elective resolution, reduce the 95% requirement for short notice to a lower percentage (although this could not be lower than 90%). The 2006 Act has now introduced a standard notice period of 14 days for all meetings (whether considering special resolutions or not). This will obviously make it quicker to call meetings where special resolutions are proposed and will also clarify the law in this area by introducing one uniform time period. The 2006 Act has also altered the requirement for calling meetings on short notice. The requisite majority from whom consent to short notice needs to be obtained by private companies has been reduced to 90% in nominal value of the voting shares or such higher percentage (not exceeding 95%) as may be specified in the company's articles. There has been no change to the 28 days for resolutions requiring special notice. Written Resolutions: The 2006 Act introduced new provisions no longer requiring unanimity for written resolutions. Instead, a simple majority is required for ordinary resolutions and 75% majority for special resolutions. However, written resolutions can still not be used for removing directors or auditors from office. Note the practical implications of sections 288 to 300: the written resolution will be sent to all parties able to vote. The required majority will, therefore, be in light of all those eligible to vote as opposed to the required majority of attendees at meetings. Financial Assistance: Broadly, under the 1985 Act, it was unlawful for an English company whose shares were being, or had been, acquired to give financial assistance for the purpose of that acquisition. There were general exceptions to this prohibition, including the "whitewash procedure". This often complicated procedure required the directors of the company to give a statutory declaration of solvency, a special resolution from the shareholders of the company and worked within strict time limits. The 2006 Act has abolished the prohibition on financial assistance (and therefore the whitewash procedure) for private companies, who are now free to give financial assistance for the purchase of their own shares. The prohibition on financial assistance still applies to plcs. Loans to Directors: The CA 1985 contained a general prohibition on loans to directors. The 2006 Act has abolished this prohibition, and replaced it with a requirement for shareholder approval. There remain certain exceptions to the need for approval, including small loans, however the 2006 Act has seen an increase in the threshold from £5,000 to £10,000 (aggravate value). Directors Service Contracts: Under the 1985 Act, shareholder approval was required for a director's fixed term service contract which was not terminable by notice and exceeded 5 years in duration. The 2006 Act introduced an extension of the existing law so that shareholder approval is now required for directors' service contracts in excess of 2, as opposed to 5 years. The Act also grants shareholders the right to request a copy of a director's service contract on payment of a fee. Directors: Under the 2006 Act there is a minimum age restriction of 16 years on all directors. (Note that the maximum age limit of 70 years for directors of public companies has now been abolished). Electronic Communications Provisions The 2006 Act introduced a new provision which allows shareholders 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. The 2006 Act also allows companies to use the company website for communication where this has been passed by resolution of the members or is provided in the articles. Similarly, the company can send documents to shareholders in electronic form (subject to shareholder approval) but the member can request hard copies within 21 days of receiving the electronic form. The intention behind these electronic communications was to dispose of the need 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 otherwise requested. 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. The 2006 Act also deals with documents or information sent or supplied to the Registrar of Companies. General Meetings Members' powers to call a general meeting of the company have now been strengthened. Previously, the 1985 Act required 10% of the voting share capital to request a general meeting before this could be forced upon directors. This percentage has now been lowered to 5% in circumstances where 12 months has elapsed since the last meeting. Proxies The rights of proxies at general meetings, including the right to vote, both on a show of hands and on a poll, have been clarified in sections 282 to 285 and 323 to 333 of the 2006 Act. In particular, the 2006 Act has expanded the use of proxies to enable them to vote on a show of hands. Prior to the 2006 Act, proxies could only vote if there was a poll. Every notice calling a meeting of a company is required to include, with reasonable prominence, a statement informing the member of: his right to appoint a proxy to attend, speak and vote at meetings on his behalf; and any more extensive rights conferred by the company's articles. Where a company has given an electronic address either in a proxy instrument sent out by the company, or in an invitation to appoint a proxy issued by the company in relation to a meeting, the company is deemed to have agreed that any document or information relating to proxies for that meeting may be sent by electronic means to that address, subject to any conditions or limitations specified in the proxy document. The Institute of Chartered Secretaries and Administrators (ICSA) has published guidance on the use of electronic communications including recommendations for best practice. Where a company does not, therefore, wish a reply to be received by text etc, it should specifically state that the contact number on the invitation is for enquiries only. As the e-copy cannot be authenticated with a signature like a hard copy, the company should specify the means of authentication. Where not specified, a statement of identity should be contained or accompanied with the communication. Conclusion The implementation of the 2006 Act will bring advantages to the owners of small and medium-sized private businesses via greater flexibility and a potential decrease in costs. The rights of members have also been improved and access to company information has become more readily available. Furthermore, the authors of the Act have predicted the expanding and widespread access to information technology by enabling documents and information to be sent electronically and by potentially allowing shareholders and/or their proxies to communicate with a company via the internet. This shift will make it possible for both companies and shareholders to communicate instantly and could save both parties the expense of sending documents both nationally and internationally. Advantages for companies It can be cheaper, quicker and easier to send documentation due to electronic communication. Cheaper storage costs — less records need to be kept. Less administration — no need to lay accounts & reports before an AGM. Increased flexibility. One director can execute a deed instead of two (or one director and the company secretary). No need to have a company secretary unless provision in the articles or a plc. Private companies can give financial assistance for the purchase of their own shares. Advantages for Shareholders Members can communicate electronically with the company (providing the company has given an electronic address); The Act will expand the rights/uses of proxies; It will be easier for shareholders to call a GM (in some circumstances only 5% will be needed); Shareholder approval is now needed for directors' fixed term service contracts that are more than 2yrs in length and not terminable by notice; Greater transparency as shareholders are able to request a copy of a director's service contract. Directors' Duties Introduction Directors have fairly unlimited powers to make decisions on behalf of the company. Consequently, there are various duties imposed on directors to ensure that a company's interests are protected. Nonetheless, prior to the 2006 Act, most of the duties imposed on directors were solely enshrined in common law and equity. This gave rise to uncertainty and problems with accessibility, which obviously created difficulties and concern for directors who often needed to seek advice to ensure compliance with their responsibilities. The 2006 Act has attempted to codify directors' duties including the general fiduciary duties and those imposed at common law. In this seminar we will look more closely at the seven general duties set out in sections 170 to 181 2006 Act and, in particular, at the new provisions in relation to conflict of interests not previously considered at common law and equity. Duty to Act Within Powers s171 2006 Act A director should exercise only the powers they have been given by the constitution of the company and for the purpose for which they were given. For instance, where the company's articles permit the company to engage in specific activities, a director must ensure that he does not deviate from these activities into areas not prescribed by the constitution. Duty to Promote the Success of the Company A development on the fiduciary duty to act in the best interests of the company, a director must act in the way he considers, in good faith, would promote the success of the company for the benefit of its members. Throughout their role as a director, they must have regard to various factors. He must consider: the likely consequences of any decision in the long term; the interests of the company's employees; the need to make and develop the company's business relationships with suppliers and customers etc; the impact of the company's operations on the community and the environment; the desirability of the company maintaining a reputation for high standards of business conduct; the need to act fairly as between the members of the company. While the Bill was passing through Parliament, the government were wary that the application of these factors should not simply become a "box-ticking" exercise. Directors must, therefore, give proper consideration to each of them, albeit in context. For instance, there will be many occasions when these factors conflict, such as when a transaction which is financially in the best interests of the company in the long term may have a detrimental impact on the environment in the long term, with no expected adverse financial consequences. So what is a director supposed to do in these circumstances? They are not expected to put this factor above and beyond the interests of the company, but the mere fact they had regard to the environmental factors, the government suppose, will better the director and their decision. Therefore any decision that is reached is in full knowledge of all the consequences. This sections aims to widen the responsibility of the director in a corporate context when acting and making decisions for the company. A paperwork trail is to play an important role in determining whether a director has in fact had regard to the various factors contained within section 172. Caution should be displayed against standard precedent minutes of meetings that record these decisions, as these will come under intensive scrutiny should there be an allegation of conflict. Duty to Exercise Independent Judgement A director must ensure that any decisions / judgements he takes are made independently. A director should not, therefore, act on the instructions of a third party, for example a sole shareholder etc. This section will obviously not apply where the company has entered into an agreement restricting the discretion of a director or alternatively where his decision-making is authorised by the company's constitution. Duty to Exercise Reasonable Care, Skill and Diligence A minimum standard of care, skill and diligence is expected of all directors. However, there is also a subjective element to this section. The standard expected of a director is increased where he personally possesses a higher standard of knowledge, skill or experience. Therefore, a director with a particular specialist knowledge, for instance an accountant or an IFA would be required to act with the care, skill and diligence expected of an accountant or IFA; this director will have to attain a higher threshold in discharging his duty. Duty to Avoid Conflicts of Interest A director must avoid situations where he has a direct or indirect interest that conflicts or may conflict with the interests of the company. For instance, he should not enter into a property transaction with a third party where this transaction is not in the best interests of the company. The Act also cites that this duty applies to the exploitation of any information or opportunity. This section does not apply to any conflict of interest arising in relation to a transaction between the director and the company itself. In these circumstances, please refer to s177 below. The legislation includes situations of actual conflicts but in addition extends to circumstances where there are possible conflicts of interest. However, the duty does not extend to situations not reasonably regarded as likely to give rise to a conflict of interest or where the matter has been authorised by the directors. Previously when there was a conflict, only members could provide the authority for the director to continue to act. The 2006 Act has extended this approach to allow the directors of a company to authorise a fellow director's acts, provided that this is not prevented by the company's constitution. Note that where the company is a public company, the articles must specifically make provision for directors to authorise a fellow director to act, where there is a conflict. There are strict formalities for authorisation to be given by the directors. In particular, only directors who are not subject to the conflict can vote or count in the quorum at the meeting at which the matter of authorisation is to be given. Duty Not to Accept Benefits from Third Parties — 'No Bribes' A director cannot accept a benefit from a third party as a result of him being a director or doing anything in his capacity as a director, unless the benefit cannot be reasonably regarded as likely to give rise to a conflict of interest. Directors have always had to account for any benefit derived from being a director, so this statutory duty has simply sought to codify the existing rules. Directors should be cautious not to accept anything from a third party unless provision is made for such benefit under the company' s constitution. Benefits include both monetary and non-monetary so for instance, corporate entertainment could be considered a breach of the Act where it is reasonably considered influential to a director's decision. This comes down to proportionality and is a judgement call that can only be made by the director in the individual circumstances. An element of transparency between the director and the members is key here to attempt to provide protection for the director. In addition, the Bribery Bill which was published in March this year aims to legislate on the current common law offence of bribery. The intended legislation will create, inter alia, two general offences, dealing with the giving, receiving and offering of bribes and agreeing to receive / accept bribes. It also aims to introduce an offence of negligent failure of commercial organisations to prevent bribery. These offences will apply in relation to all functions of a public nature and all activities connected with a business, trade or profession. Consequently, companies (particularly larger companies) will need to look at and review their anti-bribery systems to ensure there are adequate procedures in place to prevent bribery. Duty to Declare Interest in Proposed Transaction or Arrangement with the Company A director must disclose his interest to the company where a transaction is proposed between him and the company. This duty extends to transactions between the company and persons 'connected' to the director. The duty to disclose these interests ensures that the company can ensure adequate safeguards are in operation to protect the company's best interests. However, the duty does not extend to circumstances where the directors are already aware or ought reasonably to be aware of the director's interest. Breach of Duty The 2006 Act preserves the existing remedies available under common law and equity. Compensation is therefore available for companies in respect of any loss they have suffered as a result of a breach of duty by a director. Directors should also bear in mind that they may be disqualified when they are considered to be unfit to run a business. This will have adverse consequences in terms of restrictions placed on disqualified directors concerning the management of any company. Conclusion The Government is yet to produce guidance on the application of statutory duties but has instead made available Ministerial statements on the purpose and meaning of the new duty provisions. These statements are available on DBERR website www.berr.gov.uk. The duties, to date, remain untested in a court room, so it is difficult to foresee the impact of the new codification on litigation stats. Lord Goldsmith, in particular, does not consider the codification or the provision of new duties will give rise to increased litigation. On 6th February 2006 he stated that there was `...no reason to expect that there will be a greater degree of litigation on those duties than there is now'. Ultimately, the statutory framework imposes a certain and readily accessible core standard of common sense duties imposed on directors to promote a degree of corporate responsibility. The primary lesson for directors to take away at this stage, is to ensure that they are familiar with the company's constitution and the duties and responsibilities they owe to the company and its members in order to fulfill their role and obligations, thus preventing corporate mismanagement and ultimately actions taken by the company or members (derivative actions) against them. Most importantly, directors should ensure that they trade whilst solvent. Outside the 2006 Act, there are further duties imposed on directors by the Insolvency Act 1986. It is the actions brought under this Act that cause the greatest concern for directors. Directors should ensure that they do not trade whilst insolvent (usually a balance sheet insolvency test will apply) as if a liquidator establishes that at any time before a winding-up, a director must have known or ought to have known that there was no reasonable prospect that the company would avoid insolvent liquidation, they can be ordered to make a personal contribution for any losses (including losses to creditors) which results from their actions. (known as Wrongful Trading — s214 IA 1986). Implementation of the 2006 Act - The Final Countdown Introduction The implementation of the 2006 Act has occurred in several different stages. It began in January 2007 with the Transparency Directive and since then various Parts have come into force on the following dates: April 2007 October 2007 April 2008 October 2008 February 2009 The final Parts of the Act come into force on 1st October 2009. These are: Part 1 Introductory Part 2 Company formation Part 3 Constitution Part 4 Capacity Part 5 Name Part 6 Registered office Part 7 Re-registration Part 8 Members Part 10 Remaining parts re directors (nb new Act = new forms & form numbers) Part 17 Share capital Part 18 Acquisition of own shares Part 24 Annual return Part 25 Company charges Part 31 Dissolution Part 33 Companies not formed under the CA Part 34 Overseas companies Part 35 Registrar of companies Part 41 Business names Today we will focus on some of the most important provisions to be brought in on Thursday. Changes to the Memorandum of Association The memorandum of association will remain a separate document to the articles of association and from 1st October will not form part of a company's constitution. The document will become much shorter and will essentially contain a statement that the subscribers wish to form a company under the 2006 Act, agree to become members of that company (s8) and that in the case of a company with a share capital that they agree to take at least one share each. This is all the memorandum will contain. The usual clauses of the memorandum will be `flipped' into the articles, of which there will be three types: model articles, model articles with amended provisions and bespoke articles. Matters that were contained in the memorandum such as the objects of a company will thus appear in the articles. The memorandum will essentially become a 'snapshot' of part of the company's constitution at the point of registration and will have no continuing relevance. It cannot be amended or updated during the life of the company. It must be in the prescribed form s8(2) and if it contains extra information, the Registrar is likely to reject the application for registration. (See examples of the new style – Appendix 1) For new companies - the default position will be that their objects will be unrestricted unless the articles specifically restrict them s31(1). This has its advantages, but charities and joint venture companies may wish to restrict their own. For existing companies — Elements of the old memorandum such as company name, the liability of the company, the objects of the company, the country of registered office and details of the share capital will form part of the articles. Existing companies will, therefore, be able to alter or update provisions in their constitution which are now set out in their memorandum by amending their articles. This enables companies to potentially have unrestricted objects s28. Companies should note that they are required to give notice of such a change to the Registrar s31(2). Authorised Share Capital From 1 October 2009 companies will no longer be required to have an ASC, which means that there will also no longer be a limit set out in the memorandum on the number of shares that directors can issue. Instead they will need to deposit an Initial Statement of Capital when incorporating (see later). Shareholders wishing to restrict the number of shares that can be issued by a company will need to amend the articles by special resolution to include suitable provisions, if the articles do not already contain such a restriction. For new companies — ASC will be abolished. If shareholders wish to restrict the number of shares that can be issued (ie change the default position) a suitable provision should be included in the articles. For existing companies — ASC continues to operate as a restriction in the articles and therefore acts as a ceiling on the number of shares that can be allotted. Their articles should be amended to abolish any reference to ASC if they want to allow the company to allot beyond that ceiling. Allotment of Shares Most private companies have only 1 class of share. In these companies, directors are able to allot further shares of that class to members on a pro-rata basis (subject to any rights of pre-emption in either the articles or the Act — however these pre-emption rights can be disapplied by s569 — see later) without prior authorisation from the members. However, directors must always act in accordance with the wishes of the members and act within their own authority. The power is subject to a limitation on allotment in the articles, so a company may need to make an amendment to these if it wants the power to apply. Alternatively, the members may wish to consider whether the articles should prohibit the directors' ability to allot shares without first getting the members' approval, or whether they want to place some other restriction on the directors' allotment powers. Change of Company Name A company can change its name by: Special resolution; Following the procedure for change set out in the articles of association Companies must notify the Registrar by completing a notice available for each method and the notice must be accompanied by a fee. The change of name is only effective when the Registrar has processed all the documentation required. The Registrar is entitled to reject an application if - Its use would, in the opinion of the SoS, constitute a criminal offence. It is offensive. It is "the same as" a name already registered on the index of company names. It is an inappropriate use of indication of company type or form. It includes letters, other characters, punctuation or symbols not permitted by Regulation 2 of The Company and Business Names Regulations 2009 (a list of permitted letters, characters, symbols and punctuation is attached Appendix 2). Meanwhile, the Secretary of State's approval is needed where – The name implies national or international pre-eminence (e.g "British") The name implies representative or authoritative status (e.g "council") The name implies specific objects or functions (e.g "chemist" and "insurer") Both the Secretary of State's approval and approval from the relevant regulatory body are needed where the name includes words such as "dental", "polytechnic" and "royal". Director's Service Addresses From 1 October every director must provide Companies House with both their usual residential address and a service address for each directorship they hold. The service address will be on the public record but the residential address will be protected information, available only to prescribed regulatory authorities such as the police, HMRC and Credit Reference Agencies (however s243(5) allows a director who is at risk from harm to apply for their usual residential address to not be disclosed to Credit Reference Agencies). The director can choose any address as the service address including the registered office address of the company or if desired, his residential address. (The address cannot be a DX or PO Box number). There will be no payment to file a service address with Companies House. Administrative Restoration This is a new provision which will be used to supplement the existing Court power to restore companies. The provision only relates to companies struck off and dissolved by the Registrar under ss1000-01 (i.e the Registrar has reasonable cause to believe that the company is not carrying on business or in operation). It does not apply to companies struck off at their own request (ss1003-1011). An application for Administrative Restoration can only be made by a member or director of the company and must be made within 6 years of the date of dissolution. Applications after 6 years will be rejected. To fall within the provision the company must: have been carrying on business/or in operation at the time when it was struck off; obtain the consent of the Crown; deliver to the Registrar all outstanding statutory returns and pay any late filing penalties which may be due in respect of accounts. Statement of capital This is essentially a snapshot of a limited company' s issued share capital at a given time. Companies incorporating as limited by shares (whether private or public) must complete a statement of capital and initial shareholdings as part of the application to incorporate. All companies limited by shares must complete a statement of capital as part of any annual return filing made up on or after 1 October 2009. It will need to show: 1 the total number of shares of the company; 2 the aggregate nominal value of those shares; 3 for each class of shares: prescribed particulars of the rights attached to the shares; and the total number of shares of that class; and the aggregate nominal value of shares of that class; and the amount paid up and the amount (if any) unpaid on each share. Pre-emption Rights The basic principle is unchanged but there is some change in terminology. s561 replaces s89 (1) (3) (4) and (6) and restates the existing shareholder' s right of pre-emption where there is an allotment of equity securities. s569 is a new provision which sets out how members of a private company with only one class of shares may authorise the directors to allot shares without complying with the statutory pre-emption provisions (see reference to Allotment of Shares section). This is made possible by a special resolution or by power in the articles. This new section replaces the exemption in the 1985 Act for private companies to issue equity securities on a non-pre-emptive basis where permitted by their memorandum or articles. So...are all the provisions of the 2006 Act in force? No. The vast majority will be by Thursday, however following this final commencement, four provisions will not have commenced. These are: s327(2)(c) - notice required of appointment of proxy s330(6)(c) - notice of termination of proxy's authority s1175 as it applies in Northern Ireland - removal of special provisions about accounts and audit of charitable companies Part 2 of Schedule 9— specified descriptions of disclosures for the purposes of s948 (which is about restrictions on disclosure of information) s22(2) - provision for entrenchment What Must be Included in the Statement of Capital? s 1 0 sets out the information that must be included in the statement of capital. 1 The total number of shares of the company to be taken on formation by the subscribers to the memorandum; and 2 The aggregate nominal value of those shares; and 3 For each class of shares: prescribed particulars of the rights attached to those shares, the total number of shares of that class, and the aggregate nominal value of shares of that class; and 4 The amount to be paid up and the amount (if any) to be unpaid on each share (whether on account of the nominal value of the shares or by way of premium). |
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