The 1300 sections of the Companies Act 2006 came fully into force on 1 October 2009. Although the Act is not a revolution, it has worked to modernise and streamline much of the law applicable to companies.
However, if your company has Articles of Association that were drafted before October 2009 (which is almost certain to be the case), then you are missing out on many of these reforms which have been designed to make running your business easier.
For example, one of the major changes in the 2006 Act is to remove the whole concept of an authorised share capital, and to allow directors of private companies with only one class of shares to allot shares without obtaining shareholder approval. Special resolutions every time the company wanted to allot new shares are now therefore a thing of the past, and it can now simply be authorised by the directors. However, if your company’s current articles specify a certain authorised share capital (as indeed they were obliged to do under the old law), then this remains as a ceiling of the amount of shares that can be issued, and the old procedure still has to be followed.
There are other reforms too, such as the ability to hold board meetings over the telephone, the ability of the directors to change the company’s name and the removal of the requirement to have a company secretary.
The old Table A has also been replaced by much more user-friendly ‘Model Articles’, which are fully compliant with the 2006 Act, and are written in plain English.
Of course, the restrictions in the old articles of a company can be amended as and when one of these issues arises, but that is an untidy solution to the problem. Much easier, and much cheaper in the long run, would be to act now and adopt new Articles of Association for the company, which have been designed with the 2006 Act changes in mind, and will incorporate the new Model Articles.