After many years of consultation, the government has finally introduced the Companies Act 2006. It is the longest Act ever passed by Parliament and weighs in at a massive 1300 sections and 16 schedules (and it makes a very useful doorstop). It will be supplemented with a raft of secondary legislation, details of which have not yet been released. The Act will come into force in various stages, from December 2006 until October 2008.
The government has adopted a "think small" policy, putting basic provisions in for private companies and then building on them for public and quoted companies. The abolition of financial assistance for private companies will simplify share purchases, which often have to be secured by the company being bought.
Private companies will no longer need to have a company secretary (although they can continue to have one if they wish). The post will be replaced by that of "authorised signatory", who will be able to sign documents on behalf of the company. They will also not be required to hold AGMs every year, unless they positively decided to do so. This reverses the current situation, where companies can "opt out" of having an AGM by elective resolution. Extraordinary General Meetings (EGMs) will also have to be held less often as, under the 2006 Act, written resolutions can be passed by a simple majority or 75% majority (depending on the type of resolution being passed).
As with most legislation, the devil will be in the detail. The next few years will be testing for lawyers and clients alike as they and the courts get to grips with the new legislation and adapt their business practice to take account of the new rules.
Published - April 2007
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