The first provisions of the Companies Act 2006 ('the Act'), were enacted in November 2006 and since then the Act has gradually been implemented.

In October 2009, the final provisions of the Companies Act 2006 were implemented. Therefore it is an ideal time for those companies incorporated prior to October 2009 to review their memorandum and articles of association.

Many companies may find that their current memorandum and articles of association contain redundant provisions; for example, 21 day notice periods for meetings and unanimous consent for written resolutions of shareholders, as well as out of date references to sections of the Companies Act 1985. Such provisions can lead to confusion, especially as many will have been superseded by the Act.

The following are examples of some of the areas that have changed quite dramatically under the Act and should be considered carefully on a review of a company’s constitutional documents:

Objects

A company’s memorandum of association will contain its objects, which is a list of actions that a company is permitted to carry out. From October 2009, companies will not be required to state their objects, which will be deemed to be unrestricted unless a company specifically restricts them.  If a company currently incorporated wants to benefit from having unrestricted objects, it will need to amend, or even remove, its current objects clause.

Authorised share capital

A company will no longer need to have a maximum authorised share capital from October 2009. However, companies incorporated before October 2009 will continue to be subject to any authorised share capital stated in their memorandum, unless it is removed. 

Share capital

Companies currently need authority in their articles of association to sub-divide or consolidate their shares, or to issue redeemable shares. From October 2009, this will no longer be the case, as such authority is contained in the Act. However, if a company wishes to restrict the alteration of its share capital or the issue of redeemable shares it will need to ensure that it has specific restrictions in its articles.

Name change

Although shareholders will still be able to change the name of a company by special resolution, from October 2009 a company may provide an alternative procedure for changing a company’s name in its articles of association. For example, a Company may allow its directors to change the name without reference to its shareholders.

Directors’ conflicts of interest

Since October 2008 directors have been under a statutory duty to avoid having interests which conflict with that of the company. However, a company may want to provide an alternative to this statutory duty in its articles of association. The Act provides that anything done in accordance with a provision in the articles will not be considered a breach of this duty

It is important to seek advice when changing your constitutional documents as we can advise you on the options that are available and which are best for your company. Also, many of the provisions (some of which have been highlighted in this article) are subject to transitional provisions which apply to some companies but not to others, depending on when a company was incorporated.   

Corporate newsletter - Winter 2009