Companies Act 2006 - Key points

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The final provisions of the Companies Act 2006 came into force in October 2009. The Act heralded by biggest shake up of British company law in over a generation. Some of these changes related directly to the preparation of financial information and the position of auditors and were well documented in the accountancy journals and professional updates. However, many of the more general changes to company law that were less well publicised to the accountancy profession also impact directly upon the work undertaken by accountants in small and medium practices. In this presentation (which was originally delivered to accountancy firms and their professional bodies during 2010) company law specialist Martin Frost of Denison Till solicitors highlights some of the key changes the 2006 Act introduced. Martin points out where accountants and their director and company clients can take advantage of the new provisions to reduce bureaucracy and costs. He also flags up where the bear-traps lie for the unwary!

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  • A huge piece of legislation (hold up the Act)
    Introduced on approximately 12 occasions over 3 years . . . Nightmare
    Leads to confusion
    The Better Regulation Executive (formerly an agency of the DTI and then BERR and now BIS)
    Fiendishly complex
  • Andrew mentioned substantial property transactions earlier. An important change in this area concerns loans to directors.
    There are new rules for both private companies and public companies and their subsidiaries. The latter are complex and I will not address them today.
    For private companies lending to directors above the de minimis is no longer illegal but it does require shareholder consent. [SS.330 to 342 CA 1985 reformed and restated in SS.197 to 214 CA 2006]
    We have another new procedure to follow.
  • Companies Act 2006 - Key points

    1. 1. 2006 and All That – A few things all accountants need to know about the Companies Act Martin Frost – Partner (Corporate)
    2. 2. The Companies Act 2006 • Longest Act is British history • To “reform and restate” company law • Replaces and repeals the Companies Act 1985 • Final provisions came into force on 1st October 2009
    3. 3. Key points • Modernises company law (e.g. Facilitate the use of electronic communication) • New code of directors duties • Simplifies and deregulates (particularly for private companies) • No need for AGMs • No need for Company Secretaries • Abolishes “financial assistance” restrictions
    4. 4. What does this mean for accountants? • A number of very specific changes to the law relating to financial information and auditors including: • Rules governing preparation of accounts • Auditors liability agreements • Signing audit reports • Filing deadlines • But many general changes will also impact on accountants • New rules and procedures • New terminology and concepts • New opportunities and new dangers
    5. 5. Offences, Fines and Penalties • In 2008 Companies House took over £73m in penalties • About 2,000 directors prosecuted each year • 220 offences under CA 2006 (49 new offences) • Companies House compliance team substantially increased • Companies House to become more aggressive?
    6. 6. Offences, Fines and Penalties Late Accounts Penalties Length of delay (measured from the date the accounts are due) Private company Public company Not more than 1 month £150 £750 More than 1 month but not more than 3 months £375 £1,500 More than 3 months but not more than 6 months £750 £3,000 More than 6 months £1,500 £7,500
    7. 7. Offences, Fines and Penalties Late Accounts Penalties • Double Trouble! • The late filing fees will be doubled in cases where: • The accounts are filed late under the Companies Act 2006; and • The previous year’s accounts under the 2006 Act were also late.
    8. 8. Offences, Fines and Penalties • New general offence of filing false, deceptive or misleading documents at Companies House (s.1112) • Beware clients’ “self-help” solutions in shareholders disputes
    9. 9. New Companies House forms • Approx 200 new forms • Can be downloaded from Companies House website (www.companieshouse.gov.uk) • Replace existing forms • Incorrect format will be rejected!
    10. 10. New Companies House forms • Prefixes to identify type of event (i.e. AP, AD, SH etc) • Designed to be more user friendly • Longer • Many forms require more information • Must use black ink!
    11. 11. New Companies House forms: The “Statements of Capital” minefield • New concept appearing on many new forms (including annual returns and share returns) • Can prove particularly difficult where a company has: • Multiple classes of shares with differing rights • Complex financial history to the shares (e.g. share premium accounts, different amounts paid on the same class of share) • Lack of clear guidance and further amendments to the legislation and forms may yet be required • Until then BIS advise companies and their advisers to “do what they can” to complete the forms!
    12. 12. New Companies House forms: The “Statements of Capital” minefield • Companies House have produced further guidance and sample wording on their website for companies with “simple” share structures that have Model Articles • Institute of Chartered Secretaries and Administrators have also published helpful advice on their website (www.icsa.org.uk)
    13. 13. Single Alternative Inspection Location (“SAIL”) • Alternative to keeping certain records at Registered Office • Single location for all statutory records • Same part of UK as the company is incorporated in • Must notify Companies House • Address of SAIL • Records kept there • Have notice visible to visitors
    14. 14. Directors residential addresses • Directors can now provide service addresses • Still required to provide residential address to Companies House but this does not appear on the public record • Make sure you fill the forms in correctly! • Limited use for existing directors
    15. 15. Changed format for statutory books • Register of Members should only include service addresses • Separate Register of Directors’ Residential Addresses • No longer a requirement for Register of Directors Interests • Various minor changes to information to be recorded • Time to invest in new templates?
    16. 16. New format of Memorandum & Articles • Three sets of new “Model Articles” replace “Table A” • New short form Memorandum • Cannot be amended after incorporation • For existing companies all provisions of the Memorandum now “deemed” to form part of the Articles • Articles (as amended) now constitute constitution
    17. 17. New format of Memorandum & Articles • Take extra care when amending existing Articles • Don’t delete “invisible” deemed articles by mistake • Make sure the Articles continue to have a limited liability statement … … otherwise the shareholders liability is unlimited!!
    18. 18. New rules of issuing shares • New default position on issuing shares • For companies incorporated after 1st October 2009 with only one class of shares: • Directors automatically authorised to issue shares • No requirement for shareholder authority • No limit on time or number of shares • Authorised share capital abolished for post-1.10.09 companies
    19. 19. New rules of issuing shares • How do your standard shelf companies deal with this? • Make sure your clients know the new rules • Can amend the Articles to set out the position you want • More important than ever to get a shareholders agreement
    20. 20. Notices & Resolutions (Part 13) • Amended statutory requirements for wording to appear on notice forms (i.e. appointing proxies for AGMs) • New statutory written resolution procedure (which overrides any conflicting provisions in the Articles) • Directors initiate the process • Passed as soon as the relevant majority approves • No need for unanimous consent
    21. 21. Loans to directors now permitted (s.197) • No longer illegal for companies to • Make loans to director; or • Provide guarantees to support loans to directors provided shareholder approval is obtained • Must also circulate “memorandum of lending” • Nature of transaction • Amount and purpose of loan • Extent of company’s liability
    22. 22. New out of court share capital reduction (Part 17 Chapter 10) • New procedure to enable reduction of share capital without having to go going to court • Includes share premium and capital redemption account • Requires • Solvency statement from the directors • Special resolution of shareholders • Excess share capital converted to distributable reserves • Can then be distributed back to shareholders • Very useful in practice
    23. 23. Conclusion • Make sure you refer to the correct law • Can’t simply recycle last year’s documents • Take advantage of the new provisions • Avoid the bear-traps • And if in doubt … …contact your friendly neighbourhood corporate lawyers!
    24. 24. Denison Till solicitors • A leading Yorkshire-based commercial law firm operating nationally and internationally • Specialist departments comprising: corporate and commercial, commercial property, employment, dispute resolution, construction, ecclesiastical, family, wills & trusts
    25. 25. What people say about us … The Legal 500 “The outstanding lawyers at Denison Till treat you like a human being rather than just a case, which is extremely reassuring. They are absolute heroes”. Chambers & Partners “Exceptionally organised and receptive. This York group keeps abreast of fast-moving market trends”. Client comment “Like a top-flight Leeds practice, but at York prices”.
    26. 26. Contact details Denison Till Stamford House Piccadilly York YO1 9PP Tel: 01904 611411 Fax 01904 646972 www.denisontill.com Martin Frost Partner mfbf@denisontill.com

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