Company Law

December 2009

The remaining provisions of the Companies Act 2006 were implemented on 1st October 2009. In the light of this final implementation, the documents contained in the Simply-Docs Corporate Folder are undergoing a process of redrafting in order to make them compliant with the new law.

Memorandum and Articles of Association

One of the most dramatic changes that occurred on 1st October 2009 was in relation to companies' constitutional documents. The memorandum of association is now of limited importance. All companies incorporated after 1st October 2009 will have a simple memorandum stating only that the subscribers wish to form a company. It will be of historical significance only. Companies are no longer required to state their objects and any objects clauses included in the Memoranda of companies incorporated before that date will automatically form part of the Articles of Association. Objects clauses can still be used to restrict a company's business.

Articles of Association have also been reformed. Most companies used Table A (or a modified version of it). Table A has been replaced by the Model Articles of Association. Old and new companies can choose to adopt the Model Articles or create their own.

The "Memorandum & Articles of Association" sub-folder includes the Model Articles for Private Companies Limited by Shares, Private Companies Limited by Guarantee and Public Companies Limited by Shares together with corresponding Memoranda. Companies incorporated prior to 1st October 2009 can pass the special resolution included in the sub-folder to adopt the appropriate Model Articles. Most Memoranda of Association state the authorised share capital of the company. The concept of authorised share capital has now been abolished and so the special resolution template also includes the deletion of the relevant paragraphs from the Memorandum in order to avoid those paragraphs automatically becoming part of the Articles of Association and causing confusion.

In the near future, Simply-Docs will be offering modified Articles of Association as part of the sub-folder.

Own Share Purchase out of Profits/New Issue

The process whereby companies may purchase their own shares out of distributable profits or a new issue of shares for the purposes of the own share purchase under the Companies Act 2006 is very similar to the old regime. The significant differences are that companies no longer require the relevant power in their Articles. They will have the power to purchase own shares automatically unless the Articles contain a restriction on doing so. The contract to purchase own shares may now be entered into before shareholder approval is granted but the contract must provide that no shares can be purchased until that approval is obtained. The special resolution to authorise the contract may now be approved by a written resolution (provided that the details of the contract are sent out before or at the same time as the written resolution is sent out to the members) or a general meeting (previously it could only be approved in a meeting). The holders of the shares to be purchased may not vote. New Forms SH03 and SH06 must be filed at Companies House within the relevant time limits.

A new, detailed Guidance Note has been included in the sub-folder which sets out the process step-by-step.

Own Share Purchase out of Capital

A new sub-folder has been created for own share purchases out of capital for greater ease of use. In a similar way to own share purchase out of distributable profits or a new issue of shares, the new regime has only a few changes from the old. Again, companies no longer require the relevant power in their Articles. They will have the power to purchase own shares automatically unless the Articles contain a restriction on doing so. The directors are no longer required to make a statutory declaration of solvency and are instead required to make a statement of solvency of the company. The statement must still be supported by an auditor's report confirming that it is not unreasonable in all the circumstances. New Forms SH03 and SH06 must be filed at Companies House within the relevant time limits.

A new, detailed Guidance Note has been included in the sub-folder which sets out the process step-by-step.

Redemption out of Profits

The process for redemption of shares out of distributable profits or a new issue of shares under the Companies Act 2006 is very similar to the procedure for own share purchases except that there will be no contract for purchase to be approved and only Form SH02 need be filed.

Redemption out of Capital

The process for redemption of shares out of capital under the Companies Act 2006 is very similar to the procedure for own share purchases again except that there will be no contract for purchase to be approved. However, the directors must still make a statement of solvency of the company supported by an auditor's report and approved by special resolution. Form SH02 is the only form that must be filed.

Share Capital Reduction

The Companies Act 2006 introduces a new solvency statement procedure for share capital reduction which no longer requires private companies to go to court. This procedure - which may be used as an alternative to the court approved route - requires a special resolution of the company's shareholders and a solvency statement made by the directors.

The Companies Act 2006 states that, in particular, a company may extinguish or reduce the liability on any of its shares in respect of share capital not paid up; or (either with or without extinguishing or reducing liability on any of its shares) cancel any paid-up share capital that is lost or unrepresented by available assets, or repay any paid up share capital in excess of the company's requirements.

The solvency statement must be made no more than 15 days before the date of the special resolution and must be available to shareholders when they vote on the resolution to reduce the company's share capital.

A copy of the special resolution, the solvency statement and a statement of capital in Form SH19 must be filed at Companies House.

A new, detailed Guidance Note has been included in the sub-folder which sets out the process step-by-step.

Corporate Registers

There have been some changes to the Corporate Register requirements. The Register of Directors that companies are obliged to keep under the Companies Act 2006 only needs to contain a service address, which can be the company's registered office. As a result, all companies must now keep a Register of Directors' Residential Addresses.

The Companies Act 2006 requires new information to be kept in the Register of Company Secretaries and the Register of Directors, particularly in relation to corporations or firms who are appointed to these offices. The Registers have been updated to reflect these changes.

Joint holders of a share are now treated as a single member with a single address and so the Register of Members has been updated accordingly.

The Register of Charges has also been updated.

Companies are no longer required to keep a Register of Directors' Interests and so this has been removed from the folder.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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