Companies Act 2006 reforms

 

The act is intended to be a complete code of company legislation. A brief summary of the most significant reforms is set out below.

 

What is already law?

 

Whilst most provisions of the act will come into force by October 2008, some come in to force sooner in order to comply with EU directives.

 

In January 2007, it became law for companies to disclose their registered name and number on company websites and order forms, and the introduction of provisions allowing companies to communicate electronically with shareholders and others. In addition, Official List, AIM and Plus Markets companies are required to announce their issued share capital and voting rights.

 

What happens next?

 

Since February 2007 there has been a consultation exercise running to address how the rest of the act is to be implemented. It will then allow time for businesses to plan for the commencement of the act, with a view to bringing all parts of the act into force by October 2008. The preparatory period for the bulk of the provisions will give companies time to prepare for its implementation, but delays private companies benefiting from certain de-regulatory provisions of the act, such as the abolition of the financial assistance rules and a simpler method for effecting capital reductions.

 

Help and guidance

 

Explanatory notes on the act will be published by the government, along with a plain English guide for directors. This will hopefully provide advice on how certain aspects of the new regime will apply in practice.

 

The main emphasis for private and public companies

 

The intention of the act for private companies is to introduce a simpler less regulated compliance regime. However, for public and quoted companies, there are new requirements principally designed to ensure greater timeliness and transparency of company information and proceedings, as well as accountability, and to give all shareholders, including indirect shareholders, a greater opportunity to participate in company business.

 

What can be done now?

 

There is very little that companies have to do now. However, steps can be taken to take advantage of the deregulatory benefits of the act. Transitional arrangements will make it as easy as possible for companies to take up the benefits.

 

The Department for Trade and Industry is inviting comments on the act, and a full consultative document can be found at http://www.dti.gov.uk/files/file37972.pdf which will give you contact details for comments.

 

 

By Martin Huckle