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Newsletter February 2009 | ||||||||||||||||||
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Companies Act 2006 The Companies Act 2006 consists of almost 1,300 clauses and is the largest single piece of legislation ever in the United Kingdom. Its sheer size has meant that most of its clauses have been introduced in stages between 2006 and October 2009. A few of the key features affecting SMEs are given below: 1. Director requirements. The duties of directors to act in the best interest of the company have now been codified. Companies will need to have at least two directors, one of whom must be a named person (i.e. rather than a corporate nominee) and loan to directors under £10,000 are now legal. 2. The requirement for private companies to have a company secretary has been abolished. (However, there will still be a requirement for someone in the company to undertake certain of the company secretary’s duties, such as filing returns with Companies House). 3. Communication with shareholders can be by email rather than in writing. You will need to include your company registration number, place of registration and registered office address on all your emails and your website. 4. Directors will be allowed to file service addresses with Companies House rather than their residential address. 5. Annual general meetings become optional. Under the 1985 Companies Act, companies had been able to elect not to hold AGMs, but this now becomes the default position. However, members holding 10% of the voting rights will be able to request an AGM. 6. Under the Act, an SME for the purpose of accounting requirements is one that has a turnover of not more than £6.5m, a balance sheet total of not more than £3.26m and not more than 50 employees. The reporting limits in the Financial Reporting Standard for Small Entities (FRSSE) 2007 have been brought into line with these. Companies below this limit do not require an audit. 7. The restriction on private companies giving financial assistance for the acquisition of their own shares is being abolished. 8. There will be a new model for articles of association, (updated Table A), due for release in October 2009. The memorandum of association will no longer be an important document. Instead, objects of the business and certain limitations will be included in the articles. 9. The concept of authorised share capital will disappear. A major driver behind the Companies Act 2006 is to simplify the running of companies and to bring UK legislation in line with the rest of Europe. There is felt to be yet more scope for simplification, including an EU proposal for the introduction of the concept of micro companies, which would be fully exempt from reporting. A likely threshold could be 10 employees and a turnover of less than €1m.
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