Key changes from 1 October 2008 include the following:
Company directors: conflicts of interest: in a change to existing law, directors come under an express duty to avoid any situation in which their personal interests could potentially conflict with those of the company. The provisions are very widely drafted and could apply in a number of common situations, including the following identified by the GC100 lobbying group of FTSE 100 general counsel:
- if a director of a company (C) is a competitor in some respects of C;
- if a director of C is a major shareholder in C;
- if a director of C is a potential customer of, or supplier to, C;
- if a director of C owns property near to C's property, the value of which could be affected by the activities of C;
- if a director of C acts as an adviser (e.g. financial or legal) to C or a competitor of C;
- if a director of C is also a director of C's pension/employee benefit trustee company;
- if a director of C wants to take up a business opportunity that had been offered to, but declined by, C;
- if a director is in a situation where he can make a profit as a result of his directorship of C whether or not he discloses this to C; and
- if in each of the above situations, the director is a director of another company (B) and B has the relevant relationship with C or is in the situation described above.
Conflicts would have to be approved by the members of the company in order to avoid any breach of the new statutory duty, unless:
- in the case of a private company, the members have resolved that independent (i.e. non-conflicted) directors may approve or waive conflicts; this need not involve amending the articles, although this may be advisable in practice;
- in the case of a public company, its articles expressly authorise independent directors to approve or waive the conflict; or
- in the case of a private company incorporated on or after 1 October 2008, nothing in its articles requires member approval or prohibits approval by independent directors, in which case approval may be given by those directors.
Company directors: declaration of interests: as now, directors will be obliged to declare to the board any personal interest they have in an existing or proposed arrangement to which the company is a party. For the first time, however, there is an express obligation to declare not only the nature of the interest but also its extent.
Company directors: age and identity: every company will have to have at least one human director. A transitional provision allows companies who had no human director as at 8 November 2006 to comply with this stipulation by 1 October 2010. Persons aged less than 16 years will not be allowed to be directors from 1 October 2008.
Private company financial assistance: the Companies Act 1985 provisions prohibiting private companies from assisting the acquisition of their own shares or shares in their private holding companies are repealed. For the time being at least, public companies remain barred from giving any such financial assistance. Nor may private companies give assistance for the acquisition of shares in a public company parent. Note however that other restrictions on payments by private companies will remain, e.g. where these would constitute unlawful distributions or reductions of capital (see further below) and also in the case of certain payments to directors. These may continue to catch payments which would have constituted unlawful financial assistance.
Private company reduction of capital: a new procedure permits a private company to reduce its share capital without prior court approval so long as the members give approval by special resolution and provided all the directors make a declaration of solvency.
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