THE COMPANIES ACT 2006

1
THE COMPANIES ACT 2006

• Benefits for private companies
• Colin Perry
• CBI conference, 7 November 2007

2
Bad news/good news

• biggest overhaul of company law since 1947 Act
• longest Act in parliamentary history
• complex transitional arrangements, phased
  introduction
• BUT
• easy to read, plain English, logical arrangement
• enables private companies to DIY (thus cutting
  costs)
• deregulatory

3
What is a private company?

• defined as any company that is not a public
  company!
• private companies cannot offer securities to the
  public
• limited by shares or by guarantee
• includes subsidiaries of public companies
• 2.4 million active companies in GB
• 99.5 of companies are private

4
Think small first

• guiding principle of the Company Law Review
  1998-2001 and of the 2006 Act
• previous Acts top down public companies first,
  then exemptions for private companies
• new Act starts with basic private company model,
  then adds provisions for large/public companies
• now pointless for private companies to register
  as plc

5
Simpler formation, registration

• minimal Memorandum no objects clause required
• existing companies objects entrenchment
  clauses treated as Articles, subject to amendment
  or deletion
• no requirement to state authorised capital limits
• Model Articles for private companies
• - default option if none registered (cuts costs)
• - simpler, shorter than old Table A
• - may be suitable for companies with single or
  controlling shareholder (e.g. subsidiaries,
  family companies)

6
Easier operating rules

• not required to have company secretary
• can avoid public disclosure of directors home
  addresses
• directors duties made transparent accessible
• loans to directors permitted, with shareholder
  approval
• electronic communication valid as written
  communication (show company no. and reg. office
  on emails, websites)

7
Less need for shareholder meetings

• no requirement for AGMs, unless requested by 10
  of shareholders (or 5 in some cases)
• no need to lay accounts or appoint auditors at
  meetings
• easier procedure for written resolutions by
  shareholders (gt50 or 75 approval instead of
  unanimity)
• board can resolve directors conflicts of
  interest without calling meeting

8
Flexibility in capital transactions

• private companies no longer prohibited from
  giving financial assistance for purchase of own
  shares
• reductions in capital court approval replaced
  by directors solvency statement
• (similar to current rules for redemptions out of
  capital)

9
Small companies accounting exemptions

• confirmation of audit exemption
• filed version of accounts may omit PL,
  directors report, directors remuneration
• simpler balance sheet for filed version

10
SMEs future deregulation?

• European Commission considering allowing States
  to
• exempt micro entities from accounting directives
• exempt medium-sized companies from audit
• abolish need for SMEs to account for deferred tax
• abolish need for SMEs to analyse turnover in
  accounts
• allow nil par value for shares

11
A European Private Company?

• Commission currently consulting on EPC as a form
  of private company registrable in any member
  state
• aim to reduce cost of registering companies in
  other states for large public groups as well as
  SMEs
• HOWEVER
• UK Limited is already corporate form of choice in
  Europe
• (30,000 German businesses have registered as UK
  Ltds)
• France has enacted a simplified private company
  law Germany is reforming its GmbH law
• Does British business support the EPC proposal?