|
 |
|||||||||||||||||
|
Companies Act 2006 - Update for Charitable Companies At 1,300 sections, the Companies Act 2006 was the biggest Act ever when it was enacted on 8 November 2006. The Act is expected to be enacted over the next 18 months in several stages. It deals in the main with the administration of companies and could therefore, on a practical day to day level, have more impact on charitable companies than the Charities Act 2006. The following is a summary of the main provisions of the Act which will affect charitable companies, in order of commencement
Already in Force · These provisions allow companies to send and receive documents and information to their members in hard copy or electronic form. This will be of most use to charitable companies with a large membership, who currently have to circulate notice of their AGM and accompanying papers by post, sometimes to hundreds of members. · The new rules will permit companies to give notice of their AGM by email, fax or by publishing the notice on their websites. If the notice is published on the website, the company will have to contact the members (e.g. by email) to let them know it is there. · Before giving electronic notice for the first time it will also have to write to the members to ask for their consent to communicate with them by email. · If a member does not reply to the company's letter within 28 days, he or she will be deemed to have consented and the company can communicate with him or her by electronic means. If a member replies stating that he or she will not consent, the company will have to continue to communicate with him or her by post. In addition, even if he has consented to receive electronic communications, a member has the right to request a hard copy of any document distributed electronically. · In order to ensure that they communicate with their members in the correct way, companies will have to make a clear record of those members who have consented to electronic communications and those who have not. They should also make sure that they obtain email addresses for their members. Despite this, however, the new rules should provide major savings for charitable companies with a large membership as well as being more environmentally friendly.
· Companies are used to the stationery requirements for companies, which require all business stationery and invoices to includes the company's name, registration number, place of registration (i.e. England and Wales), address of the registered office and, if exempt from using the word “limited”, the fact that it is a limited company.· This information must now also be included on a company's website and in emails (if they are equivalent to business letters). We would advise companies to include this information in the footers to their websites and on the “About us” page.
· Company directors, including charity trustees of charitable companies, are to be subject to a list of seven statutory duties: o To act within their powers o To promote the success of the company; o To exercise independent skill and judgement; o To exercise reasonable care, skill and diligence; o To avoid conflicts of interest (due to come into force on 1 October 2008); o Not to accept benefits from third parties; o To declare interests. · There is some debate as to whether these duties (particularly the duty to promote the success of the company) will conflict with the duty of a charity trustee to act in the best interests of the charity.
· A company will have to have at least one director who is a natural person.· Therefore, if two charitable companies merge by way of Charity A becoming director and trustee of Charity B, a natural person will have to be appointed as a director and trustee alongside Charity A.
· Members will have a statutory right to appoint a proxy regardless of what company's company’s Articles say. The proxy will be able to attend and vote at meetings of the company. If company has a large membership, we recommend that it draws up a proxy form as soon as possible (if it does not already have one), to ensure that it is not caught out by the changes. It may also wish to amend its Articles to include a proxy provision, for clarity.· The requirement to hold an AGM is abolished for all private companies, including charitable companies limited by guarantee. It is likely that this provision will be overridden by an express requirement to hold an AGM in a company’s Articles and charitable companies wishing to take advantage of the relaxation may wish to consider amending their Articles. · Written member’s resolutions will no longer require the signatures of all of the members. Instead, provided all members are notified of the changes and the resolution is passed within 28 days of being issued, the resolution will only need to be signed by a simple majority of members (for an ordinary resolution) or by at least 75% of the members (for a special resolution). This should simplify procedures for charitable companies with a low number of members considerably. · The notice period for calling a general meeting (AGM or EGM) is reduced to 14 days. Again this provision is subject to any contrary provision in a company’s Articles. · The percentage of members required to consent to the calling of a general meeting on short notice reduces to 90%, unless the Articles provide for a higher percentage. Due to come into force on 6 April 2008 The deadline for filing accounts with Companies House will be reduced to 9 months from the end of a company’s financial year.
· The requirement for a company to have a Company Secretary will be abolished, although they will be able to opt to have a Company Secretary. · Companies which take advantage of this provision will still need to ensure that they have an individual responsible for their filings. A company will be able to execute documents by way of one Director signing in front of a witness (as well as the current form of execution by two directors or a director and the secretary). Due to come into force on 1 October 2008 · The Memorandum and Articles of Association will be replaced with one document, the Articles of Association. The Memorandum will reduce to a short form, detailing the names of the subscribers, which is filed on incorporation. Existing companies will not have to change their Memorandum and Articles to accommodate this; the provisions currently in the Memorandum will be deemed to be in the Articles. · New model Articles will be produced which will apply as default Articles unless specific ones are adopted. Existing companies will not be forced to adopt these. If you require advice on any of the above or guidance on the Act, please contact Richard Fox at Leathes Prior on 01603 610911. | ||||||||||||||||||
