Company Law Reform In Full Swing
April 6 saw the continuation of the phased implementation of the Companies Act 2006.
Persons over 70 can now become or continue as directors of public companies (or their private company subsidiaries) without the approval of the company’s shareholders. This must be good news for directors in their late 60s wanting to continue as board members and for companies wanting to retain the knowledge and expertise of such directors.
The new Companies Act alters the way directors are required to declare their interests in company matters. From 6 April, directors no longer need to declare their dealings (and their family’s dealings) in a company’s shares nor will a company need to maintain a register of directors’ interests. Following on later will be the removal for directors to declare formally interests that are obvious and apparent to all fellow directors.
Curiously, the prohibition on companies paying remuneration to directors free of income tax is reversed. But before directors get too excited – the Revenue have made it clear that remuneration, however expressed, is subject to PAYE or income tax.
A person or company owning at least 90% of the shares will now find it easier to force the remaining shareholders to sell their shares to them so as to acquire 100% control.
Other changes affecting public companies will also take effect.
Following on in October 2007
The next raft of changes under the new Act come into effect in October and include a new codified list of directors duties that puts a duty on them to promote the success of the company. Complying with this duty means a longer evaluation process before making any company decision. Directors will need to consider a number of factors, such as the likely effect of the decision on the environment and on the company’s customers and suppliers.
A new statutory right for shareholders to sue directors on behalf of a company also starts in October and will probably increase the number of shareholder class actions. Many companies are concerned that they will increasingly be sued in unmeritorious claims wasting valuable management time and creating adverse publicity. However there are safeguards, including a requirement for shareholders to obtain court approval before taking any such action.
A reminder
Do remember that all company emails and other documents sent electronically and all websites must show the company’s name, place of registration, registered office and registered number. This law came into force on 1 January 2007 but many companies still are not complying.
The principal focus of the Companies Act 2006 is to introduce a simpler, more lightly regulated regime for private companies, although some changes will add to the work load of directors and secretaries. As it is the largest Act to ever pass through Parliament, affecting every aspect of corporate practice, companies need to prepare now, reviewing their organisation and systems and obtaining expert corporate law advice where necessary.
