Q. What is the Companies Act 2006?
A. The Companies Act 2006 is a piece of primary legislation that largely applies to companies directly. A number of provisions are currently being set out in secondary legislation, mainly through regulations or orders made by statutory instrument.
Q. Why is the Companies Act 1985 changing?
A. The Companies Act 1985 has been changed in order to meet four key objectives:
- To enhance shareholder engagement and a long term investment culture;
- To ensure better regulation and a â��Think Small Firstâ�� approach; lst
- To make it easier to set up and run a company; and
- To provide flexibility for the future.
Q. Where can I get a copy of the Companies Act 2006?
A. A copy of the Companies Act 2006 is available from the Office of Public Sector Information or from the Companies Act Publications page of the Companies House website.
Q. Who authorised the changes brought about by the Companies Act 2006?
A. The government established the Company Law Review Group in 1998 to consider in detail how company law could be modernised. The Company Law Review recommendations became the blueprint for the reforms proposed in the Company Law Reform White Paper issued in March 2005. Following consultation, the White Paper proposals evolved into a draft Bill which was then debated during its passage through Parliament. Finally, the Bill received Royal Assent (official approval) on 8 th November 2006.
Q. Where can I get more information about the Companies Act 2006?
A. More information about the Companies Act 2006 is available on the Department for Business, Enterprise and Regulatory Reform website.
Q. Is the Companies Act 2006 now complete?
A. No. The Act will be supplemented by a series of Regulations using powers given to the Secretary of State in certain parts of the Act. It will be supplemented by Commencements Orders which bring the Act into force.
Q. What are the main changes in the Companies Act 2006 / How will the Companies Act 2006 effect my company?
A. Some of the key effects resulting from the Act include:
- A clear statement of directorsâ�� general duties clarifies the existing case law based rules
- Companies will be able to make greater use of electronic communications for communications with shareholders.
- Directors will automatically have the option of filing a service address on the public record (rather than their private home address).
- Directors must be at least 16 years old, and all companies must have one natural person as a director â�� i.e. they cannot have all corporate directors.
- There will be improved rules for company names.
- Companies will no longer be required to specify their objects on incorporation.
- The articles will form the basis of the companyâ��s constitution.
- There will be separate and simpler model Articles of Association for private companies.
- As part of the "think small first" agenda, there will be a separate, comprehensive "code" of accounting and reporting requirements for small companies.
- Private companies will not be required to have a company secretary.
- Private companies will not need to hold an annual general meeting unless they positively opt to do so.
- It will be easier for companies to take decisions by written resolutions.
- There will be simpler rules on share capital, removing provisions that are largely irrelevant to the vast majority of private companies and their creditors.
Key benefits: Shareholders
- There will be greater rights for nominee shareholders. These will include the right to receive information electronically or in hard copy if they so wish.
- There will be more timely accountability to shareholders by requiring public companies to hold their AGM within 6 months of the financial year-end.