When last year the Department of Trade and Industry announced the biggest reform of UK company law since 1985 (the year of the last Companies Act), one of its stated intentions was to cut the amount of red tape applicable to small private limited companies by reducing the number of provisions applicable to those companies. Whether it says more about our legislators or lawyers (!), what we have ended up with in the Companies Act 2006, which received Royal Assent from Her Majesty on 8 November, is the longest Act of Parliament in the history of Westminster, running to 1300 sections and 16 schedules spread over 760 pages!
Rather than take up the entire content of the next five years’ editions of info with a detailed summary of the Act’s provisions, editorial constraints force me to disappoint you by only being able to offer you a tempting glimpse at the changes to company life that the new Act will shortly introduce (the Act’s provisions will enter into force in stages between 1 January 2007 and 31 October 2008). So, very briefly and ignoring changes that will only be relevant to UK public limited companies, some of the more significant changes will be:
- For the first time in English legal history, there will be a statutory code of directors’ duties (plus ca change for our French cousins!). This will include a duty to take into account in Board decision-making the impact of those decisions upon the community and the environment.
- Private companies will be able to elect to dispense with the office of Company Secretary.
- Annual general meetings of shareholders will be optional for private companies and the auditors will no longer need to be reappointed annually by shareholders.
- Authorised share capital (i.e. the maximum number of shares that the directors can issue with shareholder approval) is abolished, so that companies proposing to issue new shares will in future only have to worry about obtaining prior approval from shareholders for the issue itself, rather than for both the issue and any necessary increase in the level of authorised share capital.
- Subject to getting prior shareholder approval, all companies will be able to send official communications to their shareholders via email.
The above is only a small selection of the many changes being introduced into corporate life by the new Companies Act over the next two years. Its interpretation should provide a living for we company lawyers for a substantially longer period!