Are you ready for the changes the Companies Act will bring?
The following key provisions of The Companies Act 2006 come into effect from 1 October 2008.
Companies (except dormant ones) must display their registered name at their registered office and any other location at which they carry on business. They must also still display their company name and number on their business letters, emails, notices, official publications and websites. However, they do not need to display it on every page of their website; it must just be easily found and read.
Both existing and newly incorporated companies must have at least one director who is a natural person (as opposed to another company or an LLP), with a minimum age of 16. This is to ensure that there is at least one person who is accountable for the company's actions. Any company without a director who is a natural person on 8 November 2006 (the date on which the Act received Royal Assent) has until 30 September 2010 to appoint one.
Directors will be under the following duties regarding conflicts of interest, in addition to the four statutory directors' duties which came into force on 1 October 2007:
Avoid a situation in which he has an interest and which conflicts directly or indirectly with the interests of the company. The exceptions are if the situation cannot reasonably be regarded as likely to give rise to a conflict or if the matter has been authorised by the other directors and (for a private company) is not prohibited by anything in the company's constitution.
Avoid accepting a benefit from a third party as a result of his/her position as a director or for doing (or not doing) anything as a director. Again, the duty is not infringed if the acceptance of the benefit cannot reasonably be regarded as likely to give rise to a conflict of interest. However, in this case, the other directors cannot authorise the benefit and authorisation can only come from a resolution of the members. It is not an automatic defence that the director acted in good faith.
If the director is directly or indirectly interested in a proposed transaction or arrangement with the company, he must now declare the nature and extent of that interest (rather than just the existence of that interest) to the other directors before the company enters into the arrangement.
Share capital reductions
Private companies can now reduce their share capital by special resolution supported by a solvency statement made by the directors and submitted to Companies House, instead of the previous requirement to pass a special resolution and obtain court approval. Any reserve arising from the reduction will be treated as realised profit and may be distributable.
This change will make it easier and cheaper for a private company to reduce its share capital. However, it is a criminal offence (incurring a fine and/or up to two years' imprisonment) for a director to make a solvency statement without having reasonable grounds for the opinions expressed in it.
Bridget Juckes, Head of Business Services
0117 929 2811