Companies Act 2006

On 1 October 2009 virtually all sections of the Companies Act 2006 that had not been implemented earlier came into force.  This tour de force of UK legislation (the largest Act on the statute book, now)  has reached the end of its marathon along the implementation timetable.  The main areas of change are in relation to the formation of companies, the memorandum and articles, share capital, and directors’ home addresses.  This is a helpful note that is on Law-Now (my firm’s website) which sets out the detail of the new regime.

Timing of changes to law on registration of charges

It might helpful to set out the timing of changes to the law of registration of charges.  The implementation timetable of the Companies Act 2006 is , after all, complicated.  The key date is 1 October 2009.  On that date Part 25 (Company Charges) of the Companies Act 2006 comes into force.  Until 1 October 2009, Sections 395 (Certain charges void if not registered) and 409 (Charges on property in England and Wales created by overseas company) Companies Act 1985 continue to apply. 

Until 1 October 2009, Companies Form 395 registrations, including Slavenburg filings, will continue to be made as usual. Once Part 25 comes into force on 1 October 2009, what you actually do to register charges remains the same.  Part 25 essentially restates Section 395: Section 395 CA 1985 becomes Section 860 CA 2006 and Companies Form 395 becomes Companies Form 860.

As for overseas companies, Part 25 only applies to companies formed and registered under the Companies Acts. It does not reproduce Section 409 CA 1985 which was the section that gave rise to the compromise known as Slavenburg filings.  From 1 October 2009, the registration of charges created by overseas companies will be regulated by the Overseas Companies Regulations 2008  (“OCRs”).  These are still in draft form and under intense discussion but the intention of the OCRs is to remove the need for Slavenburg filings. 

The Scottish register of floating charges introduced, though not yet implemented by the Bankruptcy and Diligence (Scotland) Act 2007 creates a further complication.  Its benefits are still the subject of debate but the register might be in place from 2010.  Any company, regardless of its place of incorporation, would be required to register a Scottish floating charge on the new Scottish floating charge register.  We might find we have problems of double registration, priority and a charge-holder not being able to show they have a charge over the whole or substantially the whole of a company’s assets.

Execution clause – single director from 6 April 2008

Do you need to have a look at your standard company execution signing block? Companies will be able to execute deeds on the signature of a single director that has been witnessed, from 6 April 2008.  The Companies Act 2006, section 44 makes the change.    Companies will continue to be able to execute on the signature of two directors, or one director and the company secretary. 

Companies Act 2006 – loan documentation

The Association of Corporate Treasurers have published a briefing note, “The Impact of the UK Companies Act 2006 on Loan Documentation.”   Bank Law Blogger is being deeply altruistic in telling you about this as she herself has written Issues for Lenders, only last month, but the ACT note goes into a bit more detail on derivative actions (when, I wonder, will we see our first one of these under the new Act from a disaffected shareholder?) and, more importantly, has a useful appendix on what ACT thinks Board procedures should be in relation to the newly codified duties of directors.

Companies Act 2006 change to implementation

The majority of the implementation of the Companies Act 2007 that had been planned for October 2008 will now be put back until October 2009.  The BERR have announced this and say that Companies House need the extra time to be ready for the changes being introduced by the Companies Act 2006. All October 2008 changes relating to incorporation, share capital, etc, which require Companies House to update their procedures, will be postponed until October 2009.

Provisions relating to directors’ duties and the abolition of the prohibition on financial assistance and anything else that does not require Companies House to be ready, will be subject to a short consultation to establish whether they should also be delayed until October 2009 or introduced, as originally planned, in October 2008. There will be a further announcement in December 2007. The planned changes for April 2008 will still be implemented in April 2008. 

Practicalities of CA 06 implementation

Companies House have published guidance on filing resolutions, access to the register of members and the changes to Tables A & C to assist with the implementation of the relevant parts of the Companies Act 2006 on 1 October 2007.

Banking bits of CA 06: 1 October 2007

Next Monday, some of the drier parts of Companies Act 2006 come into force.  Things that you might notice change from 1 October are:

• References to signed written resolutions will go.   From Monday, shareholders will “signify their agreement to” written resolutions.  You should notice these changes coming through in the conditions precedent of loan agreements.
• If you see any extraordinary resolutions being made in new documentation, it will be a mistake.  They disappear for ever on 1 October 2007 unless you spot them referred to in existing contracts or memorandum & articles.
• Memorandum & articles will generally disappear as a phrase, to be replaced by “the constitution“.  This is to encompass the wider definition of constituting documents under the Act, including resolutions and agreements required to be filed at Companies House and resolutions (shareholders, board, written) or other decisions come to in accordance with the constitution.
• Board minutes might have lengthier wording on how the directors have considered the various statutory duties imposed on them.  Opinions differ as to how much should be said about this in board minutes, so there will be some variation.
• Special resolutions will only require 75% of the total voting rights of eligible members (s 283(2) CA 06).  But it would be a brave bank that relied on a mere 75% majority for a resolution obtained for Rolled Steel (commercial benefit) purposes.  Or in financial assistance cases.

There is a misconception on auditors and written resolutions that from 1 October, mistakenly some people think you don’t have to send written resolutions to the auditors.  In fact, under the transitional provisions, you do have to.  The requirements of s 390(2) have been repeated in the provisions to apply to resolutions used before 6 April 2008.  On that date, s 502 CA 2006 comes into force, under which auditors are “entitled to receive all communications relating to a written resolution as must be supplied to a member”.