Fundamental changes to the law governing the formation and running of limited companies have been made by the Companies Act 2006.

The Act makes a distinction between larger and smaller companies and the most important changes affect smaller companies.

A White Paper issued in advance of the legislation stated that the objectives of the Act are:

1. To enhance shareholder engagement and a long term investment culture
2. To ensure better regulation and a “Think Small First” approach
3. To make it easier to set up and run a company, and
4. To provide flexibility for the future.

The changes include the following:

1. There is a comprehensive statutory statement of directors’ duties replacing common law/equitable duties.
2. The Memorandum of Association will now simply be an historical record rather than a documen affecting the day-to-day running of the company and all constitutional provisions will be contained in Articles of Association.
3. Companies will be able to communicate electronically with shareholders.
4. Auditors will be able to agree limitations of their liabilities to the companies they audit.
5. There will be no requirement for companies to specify their objects
6. A new regime for company and business names is established
7. There will no longer be an obligation to hold an AGM
8. The regime prohibiting private companies from providing financial assistance to purchase their shares will be abolished
9. There will no longer be a requirement to have a company secretary
10. There will be a separate version of “Table A” model Articles with small private companies in mind
11. It will be easier to pass written resolutions
12. The time for filing accounts and reports is down from 10 months to 9

The changes are being phased in during this year and 2008.

If you would like to know more about the changes, please contact David Holt