COMPANIES ACT 2006

RUNNING A COMPANY?…then The Companies Act 2006 will affect you. The new legislation is intended to make setting up and running a company as easy as possible and to help small private companies to operate flexibly.

KEY ELEMENTS:

COMPANY SECRETARY

Not necessary from 6 April 2008, as the appointment is now optional.

SHAREHOLDER MEETINGS AND RESOLUTIONS

not needed from 6 April 2008
most company decisions now taken without need for shareholders’ meeting
written shareholders’ resolutions can be signed by majority, not all.

DIRECTORS’ RESPONSIBILITIES - have been clarified and include:

to act within their powers
to promote success of company
to exercise independent judgement
to exercise reasonable care, skill and diligence (higher standards are imposed for professionals)
to avoid conflicts of interest

NEW COMPANIES - should be easier to set up from 1 October 2009 (provisional date):

no need for Memorandum  of Association stating the authorised share capital and objects clause (what company is set up to do)
still need to have Articles (containing provisions on how company can operate), but a new simplified style can be adopted

THE NEWS IS NOT ALL GOOD:

LESS TIME FOR PRIVATE COMPANIES TO FILE ACCOUNTS

The current deadline is ten months from end of accounting period. For accounting periods starting on or after 6 April 2008, this reduces to nine months. This may impact on when information needs to be available for your accountants and/or auditors.

BIGGER PENALTIES ON LATE FILING OF ACCOUNTS

Applies to accounting periods starting on or after 6 April 2008. Where accounts are filed late after 1 February 2009, penalties will range from £150 for filing not more than one month late up to £1500 for more than six months late. Where accounts for two successive periods starting on or after 6 April 2008 are late, the penalty for second offence is doubled.

APPROVAL OF DIRECTORS’ SERVICE CONTRACTS AND LOANS

With immediate effect, make sure all directors’ service contracts that guarantee employment for more than two years are approved in advance by shareholders. Also applies to directors’/connected parties loans exceeding £10,000.

NO EXEMPTION FROM CONSOLIDATED ACCOUNTS FOR MEDIUM GROUPS

This is a serious practical issue for groups that have previously not needed to consolidate but will now be caught.

RECORD KEEPING

From 1 October 2007, this was expanded to include further company records, such as as all minutes and resolutions, which will need to be kept for ten years.

The Companies Act 2006 represents the most extensive reform of company law undertaken in recent times, and its implications for the way new and existing companies will operate are far-reaching.

If you require further information, or would like to discuss any specific aspects in more detail, please contact Claire Clift on 01242 252555 or email This e-mail address is being protected from spambots, you need JavaScript enabled to view it