Newsletter 2011 Issue 01

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Statutory instruments

Other news

Statutory instruments

The Companies Act 2006 (Consequential Amendments and Transitional Provisions) Order 2011/1265

This makes some amendments to the Companies Act 2006 affecting the minimum share capital of PLCs and to open ended investment companies, together with some minor legislative tidying up.

Authorised minimum for PLC share capital

Under the 2006 Act, public companies must satisfy the “authorised minimum requirement” – a requirement that the aggregate nominal value of the company’s allotted share capital is not less than a monetary amount called the “authorised minimum”.

A new public company must initially satisfy the authorised minimum requirement by reference either to sterling shares or euro shares (and not both). The sterling amount of the “authorised minimum” is £50,000 and the euro amount is currently €57,100. After that, there is no constraint on the denomination of a public company’s share capital. Public companies can have share capital denominated in any currency, and their share capital can be denominated in a single currency or a mix of currencies (section 542(3)). However, when a public company reduces its share capital, there is a check as to whether it still satisfies the authorised minimum requirement, and there needs to be a way of working out whether it does. If the company has its capital denominated entirely in sterling or entirely in euros, it is simply a case of checking that the value is not less than the sterling amount or (as the case may be) the euro amount mentioned above. For cases where the company’s share capital is denominated in more than one currency (whatever those currencies may be) section 766 allows the Secretary of State to make provision by regulations for the application of the authorised minimum requirement, and this is currently dealt with in the Companies (Authorised Minimum) Regulations 2009 which lay down rules for assessing whether aggregate values are equivalent to the prescribed sterling or euro figure. However, there is no power to deal with the case where there has been a reduction of share capital that leaves the company with shares denominated entirely in one currency other than sterling or euros. The amendments contained in article 28(2) address this omission by enabling regulations to be made that deal with this potential situation.

Open-Ended Investment Companies

Schedule 2 to the Order makes consequential amendments to the Open-Ended Investment Companies Regulations 2001 to ensure that the regime applicable to Open-Ended Investment Companies is compatible with the new company law regime and extends those Regulations to cover Northern Irish Open-Ended Investment Companies.

Tidying up

The main purpose to make consequential amendments to legislation which contains references to earlier enactments which have now been superseded, repealed or revoked by the 2006 Act. This Order also revokes explicitly the Companies (Single Member Private Limited Companies) Regulations 1992, and the Companies (Single Member Private Limited Companies) (Northern Ireland) Regulations 1992.

The Order also corrects an error made in relation to the repeal of the Companies Consolidation (Consequential Provisions) Act 1985, the provisions of which need to be replaced by provisions consistent with those in the 2006 Act.

The Companies Act 2006 (Annual Returns) Regulations 2011/1487

These Regulations amend the requirements for a company’s annual return with regard to shareholder information; and the SIC code that companies may use to describe their principal business activities.

Shareholder details of traded companies

Since 1.9.10 The FSA Disclosure and Transparency Rules in DTR5 have required traded companies to disclose major shareholder details, which are now stored on the National Storage Mechanism at www.hemscott.com/nsm.do. As a result the 2006 Act is amended so that no disclosure of shareholder details is required in the annual return of a company which was covered by the obligations under DTR5 throughout the period covered by the return.

Change of SIC code

Companies are now required to use the latest version of the SIC code (United Kingdom Standard Industrial Classification of Economic Activities). The code is used to classify business establishments by the type of economic activity in which they are engaged. The latest version is SIC 2007 which is identical to the EUROSTAT System, NACE and the United Nations system ISIC. More details.

The Companies (Reporting Requirements in Mergers and Divisions) Regulations 2011/1606

These regulations amend the information required from companies in connection with mergers and de-mergers.

EU Directive 2009/109/EC (“the amending directive”) is aimed at simplifying the processes involved in the Third Company Law Directive on public company mergers, and the Sixth Company Law Directive dealing with divisions of public companies. It also contains a small number of amendments to the Second Company Law Directive on formation and capital of public companies, and to the Cross Border Mergers Directive.

These changes fall into two broad categories: enabling companies to take advantage of new technology and removing over-regulation.

The amendments being made expand the range of circumstances in which a company is able to dispense with certain requirements when undertaking a merger or division. In particular the requirements for an experts’ report on the restructuring, a statement by directors justifying the restructuring, an update of the company’s accounts, approval by general meeting, and updates of any changes since the restructuring was proposed.

Companies House will produce forms associated with the amendments and guidance on how to complete the forms.

The Statutory Auditors and Third Country Auditors (Amendment) Regulations 2011/1856

These regulations primarily affect the Professional Oversight Board of the Financial Reporting Council, the UK Recognised Supervisory Bodies for statutory auditors, and a small number of auditors, mostly established in third countries. The regulations make technical changes to the regulation of third country audits by registered third country auditors and UK statutory auditors. 

The Overseas Companies (Execution of Documents and Registration of Charges) (Amendment) Regulations 2011/2194

New rules on the registration by overseas companies having charges on assets in the UK. Essentially, because there are some problems in the system, the requirement for such companies to register charges at Companies House has been abolished (!) but the company will still have to keep its own register of charges.

Registration of charges at Companies House

There are currently nearly 10,000 overseas companies that have registered particulars of a UK establishment (registered overseas companies ). At present, registered overseas companies are required to register with the registrar of companies any charges they create over property in the UK at the time the charge is created. The registration process is much the same as for UK companies. The requirement to register such charges at Companies House is abolished.

The explanation given is:

As the registration requirement applies only if the property was in the UK at the time the charge is created, the public record does not provide the same assurance for registered overseas companies as it does for UK companies. This is a particular issue for intangible property as its location may be uncertain. Given the severity of the sanction of invalidity, well-informed lenders will seek to register the charge if there is any doubt.

However, it may be difficult for a lender to discover whether an overseas company has registered a UK establishment - this is because the name under which it registers a UK establishment may be different to the name under which it is incorporated. This is a particular problem for companies from countries that do not use the Roman alphabet and also for a company that has changed its name. In the light of these problems, the Regulations remove the requirement for charges over UK property created by registered overseas companies to be registered with the registrar of companies.

The overseas company's own register of charges

Company law also requires UK companies to keep a register with brief details of all its charges and provides that this register and copies of all instruments creating registrable charges must be kept available for public inspection either at the company’s registered office or at an alternative inspection location in the same jurisdiction notified to the registrar of companies. Registered overseas companies are subject to similar requirements but the register is restricted to their registrable charges and the location where the register and the copies of instruments must be kept available for inspection is a location anywhere in the UK that has been notified to the registrar of companies.

The Regulations revise these requirements so that registered overseas companies are required:

  • to keep available for inspection a register of their charges over land in the UK, charges over ships, aircraft and intellectual property registered in the UK, and floating charges (except any whose terms expressly exclude property in the UK);
  • to make available for inspection copies of instruments that must be entered on their register and of any charge over assets in the UK.

The Regulations do not amend the existing requirement that these documents be kept and be available for inspection at a place in the UK that has been notified to the Registrar, but they also provide for the alternative of electronic inspection.

The Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) (Amendment) Regulations 2011/2198

This SI amends the Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2008. It replaces the previous classification of audit and non-audit services, which large companies and groups must use to disclose the fees they have paid their auditor or associates of their auditor. The new classification is intended to link more clearly to that under Council Directives 78/660/EEC (the 4th Company Law Directive) and 83/349/EEC (the 7th Company Law Directive) and to that in the revised Ethical Standards for Auditors, produced by the Auditing Practices Board.

Other news

Companies House Web Incorporation Service

On 6th April 2011, Companies House launched a new web incorporation service in conjunction with the government's website for business, www.businesslink.gov.uk.

The new service will allow customers to set up a simple private limited company, with model articles, for a statutory fee of £18. More details are available on the Companies House website.

Electronic company name changes

Registration of a change of company name can also be done electronically by webfiling. The company still has to pass a special resolution (or use some procedure authorised by its articles).

Changes to Companies House fees

Companies House has changed some of its fees from 6th April 2011. Details are available on the Companies House website.

Amending information filed at Companies House

Companies House has introduced a new service which allowing a company to submit an amendment form (known as a "second filing"), of some forms which contained inaccuracies. For example, if an incorrect date of birth had previously been registered on a “notice of an appointment as a director” (Form AP01) then another AP01 can be "second filed" with the correct date of birth on it. However the second filed form must be accompanied by either a form RP04 or LL RP04. Both second filings and amending documents may be delivered only on paper.

A second filing of a form may be filed only if the original form was properly delivered and registered and where inaccuracies remain on the form and register. Where the original form was not properly delivered a replacement document may possibly be filed if accompanied by form RP01. If a second filing is registered it does not enable the original form (or inaccurate information contained within it) to be administratively removed by Companies House.

The facility is only available for the following forms:

Companies:

  • AP01, AP02, AP03, AP04 – Appointment of director, corporate director, secretary or corporate secretary.
  • CH01, CH02 ,CH03, CH04 – Change of director’s, corporate director’s, secretary’s or corporate secretary’s details.
  • TM01, TM02 – Termination of appointment of director or secretary.
  • SH01 – Return of allotment of shares
  • AR01 – Annual Return

LLPs:

  • LL AP01, LL AP02 – Appointment of member, Appointment of corporate member.
  • LL CH01, LL CH02 – Change of member’s details, Change of corporate member’s details.
  • LL TM01 – Termination of appointment of member.
  • LL AR01 – Annual Return

The Companies House website has further details.

Companies House Annual Report and Accounts 2010-11

The Companies House annual report is available on the Companies House website.

It shows there were 2,455,000 companies on the register, 401,000 new incorporations during the year, 349,000 dissolutions and a total of 8,879,000 statutory documents filed.

Consultation on audit exemptions and change of accounting framework

The government seeks views on proposals to reduce the number of UK small and medium sized enterprises and subsidiaries required to undertake an audit. Also seeks view on a change in the law to allow companies more flexibility to change their accounting framework from International Financial Reporting Standards (IFRS) to UK Generally Accepted Accounting Practice (GAAP). Responses by 29 December 2011.

Proposed simpler reporting for smaller businesses

Proposals to simplify the financial and corporate reporting requirements for the smallest businesses are the subject of a discussion paper published by the Department for Business, Innovation and Skills (BIS) and the Financial Reporting Council (FRC). The paper sets out ideas to reduce the amount of reporting micro-entities would be required to undertake. The government says this could benefit around 5 million businesses and result in considerable cost savings in relation to the preparation of their accounts.