In this section we highlight some of the changes taking effect under the new Companies Act.

The registered name no longer has to be on the outside of a building.

Instead, the name must be displayed continuously in a way that it is visible to the naked eye, ie easily seen by a visitor to any office, place or location where the company does business.

Three special cases:

1...What if the company is run from someone’s home? No name display at the home is necessary.

2...If six or more companies share a location, the display of each name can be intermittent - a minimum of fifteen continuous seconds in every three minutes.

3...A dormant company is exempt from the rules.

Annual general meetings are no longer required, except for the removal of a director or auditor. The Articles must be amended to take advantage of this.

Shareholder resolutions in writing must comply with the rules in Sections 288-300 and 502. Other procedures set out in the Articles will not be valid. “Written” includes electronic format, including for signatures also.

When circulating the resolution, the company must also state how members may signify agreement and by when. The resolution will lapse if not passed by the period specified in the articles or, if none, 28 days from the circulation. It is passed when the necessary majority (50% for ordinary, 75% for special resolutions) has signified agreement – agreement cannot be revoked.

A copy with the written statement must still be sent to the auditors but not necessarily before or at the same time as to members.

Meetings can be called by the directors or by 10% of the membership (5% if no meeting called by members for over a year). Notice period is 14 days, unless the Articles require longer; shorter notice is allowed if 90% of members agree (it used to be 95%).

Actions taken by unanimous consent without a resolution are not open to challenge simply because the above procedures have not been followed (S 281(4)).

Duties of directors are now codified in the CA 2006, essentially to reflect the old common law, but with some significant changes. It is as well for directors to be reminded of these duties at appropriate intervals, for board minutes to record compliance with those which are especially relevant to a given issue, and for management and support staff to have regard to the duties when briefing directors.

The duties and the sections in the Companies Act are as follows:

1...To act within powers (S171)
2...To promote the success of the company (S172)
3...To exercise independent judgment (S173)
4...To exercise reasonable skill and care (S174)
5...To avoid conflicts of interest (S175)
6...Not to accept benefits from third parties (S176)
7...To declare interests in proposed transactions (S177)

5 – 7 above did not take effect until October 2008 – see below.

There are other duties as before, eg to file company reports and accounts, to consider interests of creditors in the face of threatened insolvency.

The old law is still there to assist with interpreting and applying the new codified duties.

The duties are owed to the company rather than to employees or members of the public, although the Companies Act entitles shareholders to bring actions in the name of the company for breaches of duty by the directors.

The duty to promote the success of the company is most significant. A director must act “in the way that he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole”.

Amongst other matters, the director is required to have regard to:

1...The long term consequences of any decision
2...The interests of the company’s employees
3...The need to foster business relationships with suppliers, customers and others
4...The impact of the company’s operations on the community and the environment
5...The desirability of the company maintaining high standards of business conduct
6...The need to act fairly as between members of the company

What is meant by success of the company is for the directors to decide in each case; thus it might be short-term dividend maximisation for one company and long-term increase in shareholder value for another.

This duty like the others governs director conduct at and away from board meetings.

A director is required to avoid a situation in which he has or may have a direct or indirect conflict with the interests of the company. Specifically, the duties are:

1...To avoid conflicts of interest (S175)
2...Not to accept benefits from third parties (S176)
3...To declare interests in proposed transactions (S177)

Breach of these duties could give rise to a variety of claims by the company, such as for:

1...an injunction to stop it,
2...the setting aside of a relevant transaction,
3...an account of the profit made by the director, or
4...damages

In the case of a private company, the other directors are empowered to give authorization to a director such that he will not be in breach. However, private companies existing before 1 October 2008 need prior shareholder approval for this authorization as well.

The office of company secretary is now optional for private companies. The directors may delegate to any other person the tasks and duties otherwise performed by a company secretary. Directors of a public company may take this step too if the office is vacant and there is no assistant or deputy.

A private or public company can execute deeds by one director signing in the presence of a witness.

Some companies may still find it useful to appoint a company secretary, in order to avoid the need to produce evidence of any one else’s authority to act on behalf of the company, for example in a regulatory context, where no director is available.

The time for filing accounts at Companies House is shortened to six and nine months for public and private companies respectively.

The address for directors to be recorded in the company’s registers and filed at Companies House is described as a service address (which could be “the company’s registered office”) rather than the residential address.

A private company is no longer prohibited from providing financial assistance for the purchase of its shares or those in its private holding company. Typically this takes the form of loans, guarantees and or security.

The whitewash procedure (shareholders’ resolution, directors’ declaration of solvency and auditors’ report) and the prospect of criminal prosecution for default will therefore only apply where a public company is involved when the assistance is given.

Where a plc in the group causes the prohibition to apply, re-registering that plc as a private company before the assistance is to be given would free up a proposed transaction from the procedure and the inevitable delays caused by it.

Directors of a private company proposing to give financial assistance must still be sure that (1) the assistance is in the best interests of their company, so as to comply with their statutory duty towards the company and (2) the assistance does not constitute an unlawful dividend. Lenders to the company will wish to ensure that these considerations are fully recorded.

The concept of authorised share capital is to be abolished and the directors will be able to increase capital by simply allotting new shares. For existing companies the authorised share capital set out in the memorandum will be a limitation capable of removal by ordinary resolution.

A statement of the company’s capital must be filed each time the capital is altered.

This will be possible unless the Articles say otherwise. A private company will be able to issue redeemable shares, unless the Articles say otherwise, and may delegate by ordinary resolution to the directors rather than the Articles to set the terms. The terms must be notified to Companies House within a month of allotment. The company and shareholder will be able to agree payment for redeemable shares being made some time after the redemption.

A statement of solvency by the directors will be required, taking into account all the company’s liabilities.

Where the Registrar has struck off a company which there has been reasonable cause to believe that it is no longer trading, application has to be made to the court for an order restoring the company, and all necessary filings have to be brought up to date.

Under CA 2006 it will be possible to ask the Registrar to restore a company, without the need for a court application. The application must be accompanied by confirmation that the company was trading when it was struck off, that the Crown has agreed to the restoration where company property has vested in the Crown as free assets (‘bona vacantia’), and that all required filings at Companies House are up to date.