THE COMPANIES ACT 2006 – THE END OF THE BEGINNING
Just short of three years after the first provisions of the mammoth Companies Act 2006 came into force, its final provisions will be implemented on 1 October. The impact of these new provisions, and the Act as a whole, are significant for small private companies.
From 1 October, new companies will no longer be required to have a Memorandum of Association in the traditional format. Instead, there will be a much slimmed-down document setting out the capital position of the company as at its commencement date and this will not need to be updated. The Act even provides a standard form of this new Memorandum of Association. This simplified approach will reduce the regulatory requirements in relation to the ongoing running of the company, which can only be a good thing for small businesses.
The rules relating to a company’s authorised share capital will also change if incorporated after 1 October, so that any increase in the company’s share capital beyond that set out in its Memorandum of Association will only need to be sanctioned by a director’s resolution rather than by a shareholders’ resolution. The same goes for increasing share capital in cases where a company has only one class of share. There will be a requirement to keep Companies House informed of any increases in capital by a submission of a new Statement of Capital; and the changes mean that the additional paperwork and logistical hassle of obtaining shareholder approval can be avoided in many circumstances.
One regular source of complaints in the old Companies Act was the requirement for the residential addresses of the officers of a company (both directors and company secretary) to be held in the company’s registers and at Companies House (where they would be available to the public). From 1 October, officers of a company who do not wish their home addresses to be on the public record can provide both their residential address (which will be held confidentially) and a service address which will appear on the public record. Directors of existing companies who wish to take advantage of this can apply to Companies House to have their previously submitted residential addresses removed from the public record and substituted with a service address.
With any set of changes comes a period of disruption and familiarisation and this has been particularly true of the protracted implementation schedule of the Companies Act 2006. However, now that we have reached the end of the beginning, we are left with a new regime that, while not perfect, does go a long way to simplifying the process of company regulation and, in particular, reduces the administrative burden for small private companies and provides greater flexibility in terms of how those companies can operate. In an age where all other forms of regulation appear to be increasing, this must be a good thing for small businesses.
If you have any queries in relation to how the new Companies Act will affect you, then please contact simon.morris@raworths.co.uk
