Recent changes to the Companies Act 2006 - brief overview
Author: Andrew Sutton, Company Commercial Partner
Posted: 2009-02-15

Some key changes which recently came into effect on 1st October 2008 in relation to Company Names, Annual Returns, Company Directors, Directors Duties and the abolition of the prohibition on Financial Assistance should be noted by those in business. Andrew Sutton, a Partner in the Company and Commercial Group provides a brief overview.

- The 1st October 2006 saw the introduction of the Companies Names Adjudicator and The Company Names Tribunal, a part of The UK Patent Office. See www.ipo.gov.uk/cna for full details. The service is intended to provide an option for those people or organisations who have a reputation or goodwill in a name to take action against a third party who opportunistically registers a company name to take advantage of that goodwill and/or reputation.

- There has been a slight change in the rules governing how and where a company must display it's name. From 1st October 2006, a company will have to display their name anywhere they do business but will no longer have to put it on the outside of the premises. The regulations are such that the Company name must be able to be read with the naked eye and it must be positioned in a way that it is easily seen by any visitor to the premises. This is a departure from the position under the 1985 Act which specifically stated that names had to be on the outside of such premises.

A company is required to have its registered name displayed at its registered office and also at the place where its company records are stored.

- Those readers getting Annual Returns to be made up to a date or, or after, 1st October 2008 will put in practice provisions of the Act allowing companies to restrict access to their Register of Members. You will see a reduced requirement for information than you will by now be used to. Don't forget to make sure that your Annual Returns are filed in time!

- A couple of key changes here. Firstly, there is now a minimum age of 16 for company directors. If you have a director under the age of 16 on 1st October 2008, his, or her, appointment will automatically terminate. If this leaves your company without a director, this needs to be remedied by making another appointment.

Secondly, from 1st October 2008, all companies must have at least one natural person as a director. There is a grace period under the transitional provisions until October 2010 allowing those companies that only had a corporate director on the date the Act received Royal Assent (8th November 2006 for quiz fans).

- Those of you that have been through an acquisition or disposal of a company may be familiar with the previous prohibition on a Company giving 'financial assistance' for the acquisition in shares in itself. Financial assistance covers a wide range of things but as an example, would include the company in which a purchaser is acquiring the entire/part of the issued share capital using funding from the Bank, then granting the Bank a guarantee backed by a Debenture to secure the lending by the Purchaser of the shares. There was a relatively complex procedure known as the 'whitewash procedure' which could be used to permit the giving of financial assistance but this inevitably added to the costs of a transaction and, in some cases, the time taken to complete. From 1st October 2008, the prohibition was lifted for private companies. I have already seen how this can help in a transaction and whilst Banks, in particular, may still require some form of protections in scenarios similar to that above, I think that it should make transactions run more smoothly.

- The Act codified and placed on the statute book what were common law duties on persons holding the office of director. On 1st October 2008, the provisions relating predominantly to conflicts of interest came into force. This should not cause a problem for those with strong corporate governance procedures in place. A more detailed article will follow on this topic shortly.

Back