Company Law Club Newsletter 2008-02
Companies Act 2006. Provisions effective from 6th. April 2008
Provisions affecting the following areas came into effect on 6th. April 2008:
Company secretaries and execution of documents
Accounts and audit
Share transfers
Distributions (distributions in kind)
Arrangements, reconstructions, mergers, divisions and takeovers
(not covered in this Newsletter)
Company secretaries (Part 12) and execution of documents
(Part 4)
Private company not required to have a secretary (sec270)
As from 6th. April 2008 a private company is not required to have a secretary
(though it may do so). If there is no secretary, anything authorised or required
to be given or sent to, or served on the company by being sent to its secretary
may be sent to (etc) the company itself, and if addressed to the secretary is
treated as addressed to the company. Anything required or authorised to be done
by or to the secretary may be done by or to any director or a person authorised
generally or specifically by the directors.
A PLC is still required to have a secretary and the rules as to qualification
are repeated in the new Act.
Execution of documents
Under the old law, a document (such as a deed, lease or conveyance, etc.) could
be executed by a director or secretary or any two directors. As a private company
may now not have a secretary, and may have only one director, this has been
amended by sec44 of the new Act to enable a document to be executed by any two
authorised signatories (directors or secretaries) or by a single director whose
signature is attested by a witness.
Company accounts (Part 15)
The new company accounts provisions of Part 15 of the 2006 Act completely replace
Part 7 of the 1985 Act. The sections have been reordered and redrafted with
a view to making it easier for companies of whatever size to find the requirements
relevant to them. In the 1985 Act, the provisions applying to small companies
were generally expressed as modifications of those applying to large companies.
The new Act is arranged on the opposite basis: where provisions do not apply
to all kinds of company, those relating to small companies appear before the
provisions applying to other companies. For a summary of the law go to the topic:
Must a company keep accounts?
The main substantive changes are:
· A reduction in the time limit for private companies to file their
accounts from ten to nine months after the company's year end (sec442)
· A reduction in the time limit for public companies to lay full financial
statements before the company in general meeting and file them from 7 months
to 6 months after the year end (sec442)
· New requirements for quoted companies to publish their annual accounts
and reports on a website (sec430).
Audit
Part 16 of the new Act brings together various provisions on the audit of companies
from the 1985 Act. It also introduces a number of significant changes to the
law on auditing. Much of the law in this area reflects EU Company Law Directives.
These changes are outlined in a new topic
on the Company Law Club website.
Share transfers
Sec771 is a new provision that applies when a share transfer is refused by the
company. Very many private companies have a restriction on share transfers in
the following terms:
The directors may, in their absolute discretion and without assigning any reason
therefor, decline to register the transfer of a share, whether or not it is
a fully paid share, and the first sentence of Article 24 of Table A shall not
apply to the company.
Sec771 provides:
(1) When a transfer of shares in or debentures of a company has been lodged
with the company, the company must either-
(a) register the transfer, or
(b) give the transferee notice of refusal to register the transfer, together
with its reasons for the refusal,
as soon as practicable and in any event within two months after the date on
which the transfer is lodged with it.
(2) If the company refuses to register the transfer, it must provide the transferee
with such further information about the reasons for the refusal as the transferee
may reasonably request. This does not include copies of minutes of meetings
of directors.
(5) This section does not apply-
(a) in relation to a transfer of shares if the company has issued a share warrant
in respect of the shares (see section 779);
(b) in relation to the transmission of shares or debentures by operation of
law.
Distributions
Part 23 mainly restates the provisions on distributions in Part 8 of the 1985
Act. The only substantive change is to the rules on distributions in kind in
sec845 and sec846. The new rules are designed to deal with the difficulties
created by the decision in Aveling Barford Ltd v. Perion Ltd [1989] BCLC 626.
Since this case, it is unclear when intra-group transfers of assets can be conducted
by reference to the asset's book value rather than its market value.
Sec845 provides that, where certain conditions are met, the amount of any distribution
arising from the sale, transfer or other disposition by a company of a non-cash
asset to a member of the company should be calculated by reference to the book
value of that asset. Thus, if an asset is transferred for a consideration not
less than its book value, the amount of the distribution is zero, but if the
asset is transferred for a consideration less than its book value, the amount
of the distribution is equal to that shortfall (which will therefore need to
be covered by distributable profits).
Sec846 replaces sec276 of the 1985 Act which applies where a company makes a
distribution of or including a non-cash asset and allows a company which has
revalued assets showing an unrealised profit in the accounts, to treat that
profit as a realised profit where the distribution is one of, or including,
a non-cash asset.
Arrangements, reconstructions, mergers, divisions
and takeovers
Parts 26 (Arrangements and reconstructions) and 27 (mergers and divisions of
public companies come into effect on 6th. April 2008. Part 28 (takeovers, etc)
came in on 6th. April 2007. These are not covered by this Newsletter.
|
