Update your articles


06 February, 2008

The implementation of some of the provisions of the Companies Act 2006 (the Act) has been delayed. The original timetable for the Act had all of its provisions in operation by 1 October 08. However the Government announced in December 07 that implementation of some of the Act would be delayed until October 09 to give Companies House sufficient time to change its existing systems.

The remainder will be implemented during 2008, primarily April and October with the final provisions coming into force in October 09. The delay means that many companies which were considering updating their articles of association to take advantage of the new law are questioning whether it is now necessary, or if it should wait until October 09.

We recommend private companies should amend their articles of association to take advantage of the provisions that are already law and those coming into force later this year, despite further changes being required when the balance of the Act comes into force in October 09.

The Act has changed the rules concerning shareholders resolutions, company meetings and voting rights, with a considerable impact on company articles. Some of the changes include:-

  • removing the statutory requirement for a private company to hold an annual general meeting, although a company may still hold an annual general meeting if it chooses to;
  • reducing the statutory notice period required for shareholder meetings to 14 days, except in the case of AGM's for public companies where the notice period is 21 days; and
  • enhancing the rights of proxies

The Act provides a new statutory procedure for written shareholders' resolutions for private companies which all companies must follow. Where previously for a resolution to be passed by the company's shareholders in writing required unanimity, now a majority of 75% is required to approve a special resolution and a simple majority of eligible votes will be sufficient to pass an ordinary resolution. The interaction between older Articles of Association and the new process and rules can be different for each company. The easiest way to ensure the new rules are available is to update to the new form in effect from 1 October 07. Public companies are unable to use any form of written resolution procedure.

Further changes coming into force on 6 April 08 means that private companies will not have to have a company secretary. If companies choose to take advantage of this change they may need to amend their articles of association to do so.

In some instances the changes brought in by the Act override any conflicting provisions within the company's articles of association whereas in other instances the articles of association of the company will override the Act. We therefore recommend that companies consider updating their articles of association to take advantage of the deregulatory provisions contained in the Act. Reviewing them in this way also provides an opportunity for Directors, Secretaries and Shareholders of companies to familiarise themselves with them and fine tune any changes already made. If companies do not update their articles of association they will need to take particular care if trying to use the new streamlined rules under the Act as the articles get in the way by imposing further requirements that would not affect a new company.


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