Directors

Directors' addresses and other details

From 1 October 2009, registers of directors and particulars provided by directors will no longer need to state the names of other companies of which the director is or has been a director. Directors will have to disclose former names if used "for business purposes" within the previous 20 years; this could include, for example, changes of name on marriage.

From 1 October 2009, directors' private residential addresses will no longer appear on the public register. However, the addresses must still be provided to the Registrar of Companies. Furthermore, the company will still need to keep a register of those addresses, e.g. in case these are required by a regulatory authority. Service addresses may be given for the public register (which may be the company's registered office). The same will apply to company secretaries. Note, however, that addresses already provided to the Registrar of Companies will not be removed from the public record; there is already a procedure whereby persons at risk of violence may be able to have their addresses removed.

Directors will from 1 October 2009 have powers to make provision (out of distributable profits) for the benefit of employees of the company or subsidiaries on cessation or transfer of all or part of their undertaking. This will require members' approval unless the company's constitution excludes that requirement. Unlike the equivalent provisions in the 1985 Act, even if the company's articles permit such payments to be approved by the directors, a board resolution will not be enough to permit payments to employees who are also current or former directors, or shadow directors, as these will always require member approval. The Secretary of State will be empowered to make regulations disqualifying from directorship of a UK company anyone disqualified from acting as a director in another state. This will close an existing loophole.

Constitution and capacity

Constitution

The memorandum of association of a company incorporated on or after 1 October 2009 will be simply a short statement of the desire of the subscriber(s) to be incorporated, company name and type and initial share capital. The key constitutional document in all cases will be the articles.

Model form articles for both private companies (limited by shares and by guarantee) and public companies have been published. The model articles for private companies are designed for small owner-managed businesses and may not be suitable for all private companies unless adapted by express articles customised for each company. For example, the model articles do not permit the appointment of alternate directors or the issue of shares other than as fully paid up. Nor do they contain detailed provisions governing the approval of directors' conflicts of interest.

An existing company will have to continue to abide by its existing memorandum (including any restricted objects) and articles, including Table A etc., unless and until duly amended. Provisions based on many of the common default provisions of Table A have been included in the new Act. All provisions of the company's memorandum other than the basic details referred to above [link to memorandum of association paragraph] will be deemed to be part of the articles (including any restricted objects). There will be scope for confusion, as companies with identical articles but incorporated on different dates (pre- and post-1 October 2009) may be subject to different restrictions (e.g. on reduction of capital, issue of redeemable shares etc.).

It will be possible for companies to "entrench" certain provisions in their articles, i.e. to provide that certain provisions can be amended only with the approval of a majority exceeding 75%. Provision for entrenchment may only be made in the articles on formation or by an amendment of the articles agreed to by all the members. Notice of entrenched provisions (and of any later change in them) must be given to t he Registrar. It will not be possible to include articles which cannot be amended in any circumstances; a unanimous resolution or court order will have power to remove the entrenchment provisions (and their removal will have to be notified to the Registrar). However, transitional provisions will allow existing entrenched provisions which cannot in any circumstances be amended (e.g. because they are contained in a company's memorandum, although not required to be contained there) to remain inviolable unless changed by order of the court or other competent authority.

Members will be entitled to copies of the company's memorandum and articles free of charge.

Companies which amend their constitutions by way of private Acts of Parliament or certain other types of enactment (e.g. as an alternative to a scheme of arrangement) or whose constitutions are amended by way of a court order or by order of any competent authority (e.g. the Charity Commission in relation to charitable companies) will have to notify amendments to the Registrar.

Capacity and objects

Unless a company's articles specifically restrict the objects of the company, its objects will be unrestricted. The doctrine of ultra vires may finally become history. Existing objects will remain in force to limit the activities of a company unless and until removed by appropriate members' resolutions but will be deemed to form part of the articles. The amendment will not take effect until the Registrar registers the notice of amendment required to be submitted by the company.

Where a company does restrict its objects, the validity of an act done by the company is not to be called into question on the grounds of lack of capacity by reason of anything in the company's constitution. In favour of a person dealing with a company in good faith, the power of the directors to bind the company or authorise others to do so will be deemed to be free of any limitation under the company's constitution. For this purpose, a person will not be regarded as acting in bad faith by reason only of knowing that an act is beyond the powers of the directors under the company's constitution. Third parties will not be bound to enquire about limitations in the constitution. However, where:

  • a company enters into a transaction which is in fact beyond its capacity or the powers of the directors; and
  • the parties to the transaction include a director of the company or its holding company or a connected person,
  • the transaction will be voidable at the instance of the company.

Public companies - members and striking off

A public company will be permitted to have a single member (although it must still have at least two directors). A public company will (provided it has not already been re-registered as limited or unlimited) be able to re-register direct as a private unlimited company, instead of having (as at present) to convert first to a private limited company and then separately to an unlimited company. The reverse will not apply, however.

There will be a new procedure whereby (in line with existing practice) the Registrar will be able to process an application by a public company to re-register as a private limited company during the 28-day period in which dissenting members may apply to the court to cancel the resolution to re-register, provided the Registrar is satisfied that such an application cannot be made. If dissenting members do seek such an order, they must notify the Registrar.

Public companies which have ceased to trade will be able to use the informal application for striking off which currently applies only to private companies under section 652A of the 1985 Act.

Company and business names

Companies will be able to provide in their articles for methods of changing their names other than a special resolution under the legislation. If a name is changed under such an alternative method, the Registrar must be provided with a statement that the change was made in compliance with the relevant provisions. There are also provisions for changes of name to be made conditional on the occurrence of an event (but this will not allow names to be reserved in advance).

The provisions of the existing Business Names Act 1985 are incorporated into the Act and widened so that they will apply to any business other than individuals trading under their own surnames (plus forenames or initials) and partnerships (with no corporate partners) trading under names made up of the partners' names. The rules will apply to companies' registered names and any name used by an overseas company for business in Britain. Companies may be required by later regulations to provide their names and other specified details to those who may request them in the course of business.

Where a company changes its name, its articles will be deemed to be amended so far as references to the name are concerned, so that no actual amendment will be required.

Registration of charges

There are few substantive changes. So-called "Slavenburg" registrations relating to charges created over UK property by companies without a place of business in the UK will no longer be possible.

Miscellaneous

In general, companies will not incur criminal liability for breaches of the legislation where the only "victims" of the offence are the company or its members. Where others may potentially suffer, criminal liability will be imposed on the company.

The various provisions of the existing law which require statutory declarations by directors or others will be amended so that only statements of compliance (which could be in electronic form and which need not be witnessed) are required.

A Welsh company (i.e. a company which has notified the Registrar that its registered office is to be in Wales, rather than England and Wales) will be able to cease to be such and to provide that its registered office will be in England and Wales. This is not possible under the 1985 Act.

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