Companies Act 2006: the final push (I)
The remaining sections of the Companies Act 2006 are due to come into effect on 1 October 2009.
It is, therefore, important to be ready for the changes and the impact they will have on your company.
One of the principal changes, among others, that will come on stream on 1 October will affect the roles played by a company’s memorandum and articles of association.
Under the Act, a company’s memorandum will become a pared down document. For any company incorporated after 1 October 2009, all the memorandum will need to do is to contain a limited amount of information, stating that the subscribers want to form a company, providing the company name and setting out the initial share capital. The memorandum will still be an essential document when it comes to registering a new company but it will be fixed; it won’t evolve as the company itself develops.
What about existing companies? The information contained in the memorandum – the location of the registered office, the company’s objects, the statement of its limited liability, the share capital, the confirmation that it is a public company should that be case, etc – will be regarded as part of the company’s articles of association. When a company wants to amend or change its objects – the statements that set out a company’s activities – it can do so by altering the articles.
New model articles of association
The government, in an effort to simplify company constitutions, is introducing new model or template articles. There are separate model forms for private and public companies limited by shares (the old Table A regime covered all companies limited by shares). The idea is to meet the needs of smaller, owner-run businesses. Should a company want to include issues that are not covered by the model form, it can, of course, add them or create its own articles. Given that many public companies will want quite specific articles, the model form in their case is more of a draft document than a template.
What about existing companies? They simply retain their existing articles. They can, however, opt to update them, dropping any outmoded provisions and including new measures, such as the opportunity to have unlimited objects, a freedom that also comes into force on 1 October 2009, providing the appropriate resolution is passed.
If you would like any help or advice on the new rules, please don’t hesitate to contact us.