Electronic Communication Rules For Businesses To Comply With The Companies Act 2006

Many companies are under the impression that they can send documents to shareholders by electronic means; however, there are various requirements stipulated in the Companies Act 2006 that need to be considered before they are able to email shareholders or upload company information to a website. This means that until such requirements are met, shareholders must manually sign and return documents in order to give the adequate consent.

Section 1168 of the Companies Act 2006 sets out electronic means as any form of communication sent initially and received by means of electronic equipment for the processing or storage of data.  The communication must be entirely conveyed and received by wire, radio, optical means or by any other electromagnetic means.  By using electronic communication companies can save costs through their reduced paper consumption and become more efficient.

In order to send electronic communications to its shareholders, a company will need to receive written consent from each shareholder that email can be used as a form of communication.  A request letter will need to be sent to each shareholder, to the address the shareholder has previously provided to the company, asking for agreement to receive documents or information in electronic form.  The shareholder must also be asked to supply an electronic address for this purpose.

If a shareholder refuses the request then they cannot be asked until one year has passed from the date of the refusal.  If a shareholder does not give permission to receive electronic communications from the company then emails will not be a binding form of communication between the company and the shareholder.

A company can send and supply information via a website only with the permission of the shareholders.  When asking for permission from the shareholders, the company must give the shareholders 28 days in which to respond.  The company will need to either pass a resolution or review their Articles of Association to make provisions for supplying information via a website. Following review of the Articles the company may make amendments which could permit the company to communicate with its members via a website where the Articles do not already allow this or permit the company to go further than the Articles.

Unlike with emails above, if a shareholder does not respond to the request, as long as the majority of shareholders approve the request, then the unresponsive shareholder will be deemed to have consented to receiving information via the website.

Every time a company sends information via its website, the shareholders must be alerted of the information on the website, they must also be supplied with the website address and instructions as to how to access the information.  If the documents are only going to be available on the website for a certain period of time, the shareholders must also be made aware of the time frame.

In order to communicate with a company’s shareholders via electronic communication, companies will require prior shareholder consent and possibly changes to the company’s Articles of Association.  For further information on compliance with the Companies Act 2006 discussed here or issues in relation to any other business matter please contact the Business Law team at Forbes on 0800 321 3258.

Pauline Rigby

About Pauline Rigby

Pauline Rigby is Head of the Corporate and Restructuring team at Forbes Solicitors. Pauline’s blogs cover a wide range of corporate issues, specifically areas including company formation, banking, joint ventures and shareholder matters, contractual matters and equity fundraising or investing.
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