The three year implementation process for the Companies Act 2006 (the "2006 Act") is nearing completion, with the final commencement date being 1 October 2009. The whole of the 2006 Act will then be in force and all of the company law provisions in the Companies Act 1985 (the "1985 Act") will be repealed from that date.
- Company formation and constitution
The types of company that may be formed under the 2006 Act are the same as under the 1985 Act – a company limited by shares or by guarantee or an unlimited company.
All companies, including public companies, can be formed as single member companies.
A key change under the 2006 Act is the simplified constitution of a company. There is still a memorandum of association and articles of association, but the nature of the memorandum is very different. Under the 2006 Act, the memorandum is a historical document of record issued on incorporation with no continuing impact. It is a statement that the subscribers wish to form a company and have agreed to subscribe.
This means that from 1 October, it will no longer be possible to include an objects clause in a company's memorandum. If a company wants to limit its objects, it must do so in its articles.
Under the 2006 Act, there is no requirement for a company to have a statement of objects. A company's objects are unrestricted unless the articles of association impose restrictions on what the company can do (section 31(1)).
For existing companies, all of the substantive parts of the memorandum are automatically deemed to be part of the company's articles under section 28: the objects, the registered office, the limited liability statement, the authorised share capital and the company name all move across into the articles. Provisions moved across from the memorandum, for example the objects clause, can be removed from the articles in the same way as other provisions in the articles. If a company removes the objects clause from its articles, it must separately notify Companies House of this under section 31.
- 2006 Act model articles
There will be three new default model articles for companies incorporated under the 2006 Act (which replace the 1985 Act Tables A-F for newly incorporated companies):
- private limited by shares;
- private limited by guarantee.
The 2006 Act model articles have been drafted with small, owner-managed companies in mind. They aim to deregulate and simplify corporate procedures for the benefit of these companies.
Existing companies with 1985 Act Table A articles do not automatically move across to the new model articles - they need to adopt new articles if they wish to do so.
- Company capacity, contracts and the remainder of the provisions on execution of documents
The provisions on company capacity and powers of directors to bind a company are largely unchanged from the 1985 Act and are reproduced in the 2006 Act (sections 39 to 40).
The methods by which a company can enter into contracts and execute deeds and documents are also largely unchanged from the 1985 Act and are set out in sections 43 to 52. The key relaxation, which allows a single director to execute a deed on behalf of a company provided his signature is witnessed, has been in force since April 2008 (section 44).
- Registration of company charges
The charge registration provisions are set out in sections 860 to 877. Section 860 of the 2006 Act will replace section 395 of the 1985 Act. There are no changes of substance for registration of charges by English companies, save for the concept of "special registers" (see below). Note, however, that the Government has stated its intention to consult early in 2010 on changes to the charge registration regime for English and overseas companies, so further changes are already on the horizon.
The 2006 Act contains a new concept of a "special register". A charge that is registered on a special register will be treated as if it had been registered at Companies House. A special register is a non-Companies Act register at which registerable charges are required or authorised to be registered. A register will only receive special register status if the Secretary of State is satisfied that appropriate "information sharing arrangements" have been made between the keeper of the special register and Companies House. It is expected that the new Scottish Register of Floating Charges (when it comes into force, probably in 2011) and the register at the Land Registry (when it is fully on-line) will be special registers. We do not believe there will be any special registers on 1 October.
There are new style charge registration and satisfaction forms for use by English companies under the 2006 Act. See New Companies House Forms below for further details.
- Overseas companies, registration of charges and execution of documents (s1052), The Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009 and The Overseas Companies Regulations 2009
Registration of charges
The new charge registration requirements for overseas companies who are registered here are among the most important changes for finance transactions.
The 2006 Act creates the platform for a new single regime for the registration of charges created by certain overseas companies. The new regime is contained in The Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009. The Regulations require those overseas companies which are required to register a "UK establishment" with Companies House (under Part 2 of The Overseas Companies Regulations 2009) and have so registered, to register charges over "property situated in the UK" when they grant the charge. There is no requirement to register charges created by overseas companies who do not have a registered UK establishment, so the unsatisfactory Slavenburg system will disappear.
Click here for our previous e-bulletin on registration of charges by overseas companies.
Execution of Documents
The Foreign Companies (Execution of Documents) Regulations 1994 (as amended) are repealed and replaced by The Overseas Companies (Execution of Documents and Registration of Charges) Regulations 2009 on 1 October 2009. There are no changes of substance.
- Registration of charges by companies registered in Scotland
As is the case under the 1985 Act, there are separate registration requirements for Scottish companies. These are in sections 878 to 892 of the 2006 Act. There are also new Scottish company charge registration forms, for example MG01s, MG02s, MG03s, MG04s etc.
- Registration of charges by limited liability partnerships
The charge registration provisions relating to limited liability partnerships ("LLPs") are in Part 8 of The Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009. The provisions for LLPs are similar to the charge registration provisions for English companies, and have been adapted where appropriate. For example, there are no provisions regarding charges over uncalled share capital or calls, as these are not relevant to an LLP. There are new charge registration and satisfaction forms for LLPs, for example the charge registration form is LL MG01.
- New Companies House Forms
All of the Companies House forms are changing for the 2006 Act. The section numbers will appear on the form but not as part of the form number. There is a new alpha code which identifies their function or category and a number which runs in sequence in each group of forms.
Forms relating to mortgages or charges start with or include "MG". The 1985 Act charge registration form M395 will be replaced by a form MG01. The 1985 Act charge satisfaction forms M403a and M403b will be replaced by forms MG02 and MG04. An MG02 is a statement of satisfaction in full or in part of a mortgage or charge and an MG04 is an application for registration of a memorandum of satisfaction that part (or the whole) of the property charged (a) has been released from the charge and/or (b) no longer forms part of the company's property.
Both the charge registration and satisfaction forms can be signed by a person with an interest in the registration of the charge, so including a mortgagee. There is no requirement to swear the charge satisfaction forms – signing is all that is required.
The 2006 Act forms will come into use on 1 October 2009 but only for documents filed in relation to an obligation arising on or after that date. Documents sent to Companies House on or after 1 October 2009 in relation to an obligation which arises before that date should still be filed on the 1985 Act forms.
For example, there is an obligation to register a charge under section 860 of the 2006 Act. Therefore, a form MG01 must be used for registering charges created on or after 1 October 2009. If, however, a charge is created on or before 30 September 2009, a form M395 must be used even if registering it on or after 1 October 2009.
In contrast, where there is no obligation on a company to make a filing, the key date is the date on which the form is received by Companies House; if the form is received on or before 30 September 2009 a 1985 Act form should be used, but if it is received on or after 1 October 2009 a 2006 Act form should be used.
For example, a company is not obliged to file a form M403a when a charge is released or satisfied – rather it has the right to do so if it wishes to remove details of the charge from its register of charges. In this case, if a charge is released on 26 September 2009, and the company does not send a satisfaction form to Companies House until 7 October, it must do so using a 2006 Act form, either a form MG02 or a form MG04 (whichever is appropriate).
- Capital maintenance/financial assistance
The financial assistance prohibition for public companies is in section 678 of the 2006 Act. The prohibition applies when either the company giving the financial assistance, or the company in which the shares are being acquired, is a public company (even if the company giving the assistance is a private company).
There is one useful clarification - the prohibition does not apply if the financial assistance is given by a foreign incorporated subsidiary on the acquisition of shares in the subsidiary's UK parent company. However, the question of whether a UK public company parent could itself be giving unlawful financial assistance still needs to be considered.
The big change in this area, the abolition of the prohibition on financial assistance for private companies, has been in effect since October 2008, when the prohibition and whitewash provisions were repealed.
- Share capital
The requirement to have an "authorised share capital" is abolished. Shares can just be created and allotted by a resolution of the board, subject to shareholders' authorisation for the directors to allot shares if necessary.
For existing companies which have an authorised share capital, the statement of the authorised share capital that moves from the memorandum to the articles (as described in Company formation and constitution above) will act as a limit on the powers of the directors to allot shares unless or until removed from the articles.
There is a new requirement to file a statement of capital (form SH19) at Companies House whenever a company changes its share capital.
- Northern Ireland companies
The 2006 Act applies to Northern Ireland companies, unlike the 1985 Act (see Part 45 of the 2006 Act). The Companies Registrar in Belfast will be used for Northern Ireland company filings (as part of Companies House).
The remainder of the 2006 Act definitions will come into force, for example, the definition of subsidiary in section 1159. The location of all of the definitions in the 2006 Act can be found in Schedule 8 of the 2006 Act.