Companies Act 2006: Time to Review Your Constitution

The Companies Act 2006 will affect all charities which are established as companies. The bulk of its provisions will come into force in three stages with the aim that it is fully implemented by October 2008. The new Act will replace the existing Companies Act 1985 in its entirety and introduces a new, “Think Small First” approach to company law. In theory, this should be a welcome change for charitable companies since, under the existing legislation, companies limited by guarantee have always been dealt with as something of an after-thought to larger share companies.

The new Act includes some provisions which could lighten the administrative burden for charitable companies by, for example, making it easier to hold meetings (a reduction in the minimum notice period for general meetings), to sign documents (a relaxation in the rules on who can sign on behalf of the company) and to make decisions (a relaxation of the procedure for taking decisions by written resolution). However, it’s important to note that any such changes will not apply automatically to existing companies. If the Articles of a charitable company conflict with the provisions of the new Act because, for example, they expressly require a written resolution to be signed by all directors to be effective, then the current Articles will continue to apply unless and until changes are made by a special resolution of the company members in the usual way.

Other significant changes to be introduced in the Act for charitable companies include:-

• a provision to allow private companies (which includes charitable companies) to dispense with their company secretary unless their Articles still require one. Although, before doing this the board of trustees must, of course, ensure that the duties of the secretary can be adequately fulfilled by somebody else;

• the possibility for a director to apply for a non-disclosure order to allow him/her to withhold his/her residential address from the public register; and

• a statutory definition of the duties which a director owes to a company. Previously, these duties have only been derived from case law. A company may choose to include additional duties in its Articles which go beyond the statutory duties set out in the Act.

Can we Help?
If your charity is a company now is the ideal time to be thinking about a review of your Memorandum and Articles of Association. Some of the provisions in the new Act could make a significant difference to the effective running of your charity but you may not be able to take advantage of them without a change to your existing M&A. With our experience of both company and charity law the Charities Team at Foot Anstey is well placed to guide you through this process. Please contact either James Evans (01392 685243) or Anna Roderick (01392 685367).