Companies Act 2006
Memorandum and Articles of Association
Making the most of upcoming changes under the Companies Act 2006
The Companies Act 2006 is due to have a major impact on a company's Memorandum and Articles of Association when the remaining provisions become law on 1 October 2009.
The changes mean that most existing Memoranda and Articles of Association will, at the very least, use language that is inconsistent with the new Act and, at worst, could include provisions which will become unenforceable under the new law. In addition, valuable new rights are available if a company adopts some of the powers under the new Act. Some of the issues surrounding the new law are:
- Existing documents will cross-refer to provisions in the Companies Act 1985 and to concepts that are no longer recognised by the new Act, which could cause damaging disputes.
- The concept of a company's authorised share capital can be removed so that the directors are free to issue any number of shares. We can advise on appropriate checks and balances on the exercise of this power.
- Directors' conflicts of interest can now be authorised by the board of directors, rather than by a shareholders' resolution.
- Directors will no longer be able to rely on the clause that is found in most Articles of Association that allows the board complete discretion to refuse to register a transfer of shares. This provision has come to the rescue of many companies faced with an unwelcome share transfer, but under the new Act the directors must provide a reason for any refusal, regardless of what is stated in the company's Articles of Association.
The emphasis of the new Act has been to simplify company law. Companies incorporated from 1 October 2009 will naturally be in the best position to take advantage of these new provisions, but existing companies can do so too although they will need to amend their constitutional documents in order to maximise the benefits they receive.
Now is the ideal time to review your company's constitutional documents and bring them into line with the new Act in time for when these provisions become law.
What we can do for you
If your Memorandum and Articles of Association do not contain any provisions that have been specifically drafted for your company, we can provide you with a new set of constitutional documents that comply with and take full advantage of the provisions of the new Act.
Cost: £450 plus VAT
Or if your Memorandum and Articles of Association contain provisions that have been tailored to your particular company, we can prepare a new set of constitutional documents that not only comply with the new Act but also contain the bespoke provisions found in your existing documents.
Cost: we will provide you with a no-obligation estimate of the cost once we have reviewed your existing constitutional documents.
- Reduction of future compliance costs
- Peace of mind that your company's constitutional documents are compliant with the new law.
- Confidence that the provisions in your Articles of Association are enforceable, saving you from having to second-guess which parts of your existing documents may have been rendered invalid or misleading under the new Act.
- The opportunity to take advantage of the provisions in the new Act that allow many company procedures to be simplified.
Find out more
Please contact Douglas Stewart now if you would like to know more about these services.