Further changes to company law come into force on 1 October 2008 as a result of the next key stage in the implementation of the Companies Act 2006. An overview of some of the main changes is set out below:
- Company names: a person may now object to a company's registered name if it is the same as, or similar to, a name in which that person has any goodwill.
- Trading disclosures: While the current law in this area is mostly re-stated, the following changes are being made:
(i) requests for information – a company must respond to requests for information relating to the location of its registered office or any other place at which the company records are kept and the type of records kept at that place within five business days;
(ii) manner of display of registered name – a company must continuously display its registered name at its registered office except that where six or more companies share the same registered office they must each display their name for at least 15 seconds every three minutes.
- Directors' duties: Three further duties come into force on 1 October 2008. These are:
(i) duty to avoid conflicts of interest – a director has a duty to avoid a situation in which he has or may have an interest that conflicts with the interests of the company (this includes direct or indirect interests). Provided such interests have been disclosed to the board, and the board has the necessary powers to do so, the interests may be authorised by the board. For a more detailed overview of this duty, please see our previous article on directors' conflicts of interest;
(ii) duty to declare interests in proposed or existing transactions or arrangements – if a director of a company is in any way interested in a proposed or existing transaction with the company, he must declare his interest to the other directors. Again this applies to direct and indirect interests and the declaration must describe the nature and extent of the interest. A further declaration must be made if the situation changes. A director who fails to declare such an interest commits a criminal offence as well as a breach of his fiduciary duties. The old laws continue to apply in relation to interests arising before 1 October 2008;
(iii) duty not to accept benefits from third parties – a director must not accept benefits from third parties that he is offered by virtue of his position as a director. This duty is not infringed if acceptance of the benefit cannot reasonably be regarded as likely to give rise to a conflict of interest.
- Natural directors: companies must now have at least one director who is a natural person, although any company that did not have any natural director on 8 November 2006 has until 1 October 2010 to comply with this requirement.
- Minimum age for directors: all directors must be at least 16 years old and any directors under the age of 16 will automatically cease to be a director on 1 October 2008.
- Reduction of capital by private companies: in addition to court approved reductions of capital, private companies will be able to reduce their share capital by way of a special resolution supported by a solvency statement from the directors (i.e. without obtaining court approval). It will be an offence to make the solvency statement without having reasonable grounds for giving the opinions expressed in it.
- Financial assistance by private companies: the prohibition on private companies giving financial assistance in relation to an acquisition of shares will be repealed. Consequently, private companies will generally no longer be subject to the statutory prohibition on giving financial assistance, though assistance given by private companies going forward must not breach any other laws on maintenance of capital. The financial assistance prohibition will continue to apply to (i) financial assistance given by a public company or one of its subsidiaries (including a private company) for the purpose of an acquisition of shares in that public company and (ii) financial assistance given by a public company that is a subsidiary of a private company for the purpose of an acquisition of shares in that private company.