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Companies Act 2006
Published March 2008 By Jay Jagdev
The changes which came about as a result of the Companies Act 2006 began to be implemented in October 2007 with the new legislation coming into force gradually, some in April 2008 and some in October 2008. Some companies are still not compliant with last October’s requirements, and with spring rapidly approaching, business owners risk a backlog of obligatory changes.
The following is a summary of the changes:
1. Documentation
One of the requirements of October 2007 concerns documentation, both electronic and hard copy. Companies must ensure that their name appears legibly on all documentation. Business letters, order forms and websites must also contain the company’s place of registration, its registered office number and its registered office address. The information doesn’t have to appear on every page of a website, however, so it’s advisable to include an ‘about us’ section online.
2. Company secretaries
From April 2008 private companies will not have to appoint a company secretary.
3. Accounting changes
We will also see changes relating to accounting and reporting requirements, including a general obligation for directors not to approve accounts unless they give a true and fair view of the financial position of the company. The period for filing accounts and reports is reduced to nine months from ten months and the exemption from preparing consolidated accounts by medium sized companies has been changed so as to now only apply to small companies.
4. Business Reviews
From April small companies will also not be required to submit a business review to its shareholders.
5. Auditors and AGMS
Other changes affect audit and auditors. Since 1 October 2007, a newly formed private company need not hold an annual general meeting, unless the shareholders choose to do so. Existing companies will also be able to take advantage of this, unless there is an express provision in its articles for holding AGMs. From 6 April, auditors will be eligible for automatic reappointment in private companies, unless the directors or the members have previously decided that the auditors should not be reappointed.
From April, prior to an auditor leaving office, they must give a statement to the company as to why they are leaving. Both the auditor and company must notify the appropriate audit authority (such as a supervising authority in the case of a private company auditor) of the circumstances in which the auditor has ceased to hold office.
Auditors will also be able to enter into agreements with companies which limit the liability of the auditor, allowing them a new level of flexibility in terms of their fees.
6. Directors Duties
The final set of regulations to come into force is due in October 2008. This will see a change in emphasis on directors’ duties relating to conflicts of interest. There will be an obligation on a director of a company, to actively avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company.
7. Confidentiality
Currently, directors have to file their residential address with Companies House when they are appointed. This is also due to change. Directors will be able to instead file at Companies House a service address (to be kept on the public record) in addition to their residential address (to be kept on a secure register to which access will be restricted). There will no longer be any need to apply for confidentiality orders. Similarly, a company’s own register of directors will only need to include a service address, with residential addresses held on a new register not open to public inspection.
8. Financial Assistance
Other changes concerning financial assistance will see the restriction on a company giving financial assistance for the purchase of its own shares abolished. Currently, it is prohibited for a company to provide financial assistance in or to purchase its own shares.
Please contact us to discuss these changes and how they may affect you and your business.
If you would like to find out more about the services that we provide, please e-mail or contact us to arrange a meeting.
