I venture with trepidation into relatively virgin territory for this blog. We tax people have to know bits of company law now and then, but for many of us our last concerted study of the subject was when (if) we did accountancy exams, which for some of us was a very long time ago indeed. Nonetheless, Companies Act 2006 is now fully implemented, and has introduced a number of significant changes for private companies, which I guess it is useful to have listed for ease of reference.
MEETINGS AND RESOLUTIONS
Written resolutions
To pass a resolution of the company (a 75% vote for a special resolution, required to change the company's constitution, or a 50%+ vote for an ordinary resolution) it was formerly necessary to hold a formal meeting to vote on the resolution. In recognition of the fact that many such meetings took place only in the imaginations of all concerned, it is now possible to pass a written resolution, requiring the same percentage vote as previously but not now requiring a meeting, simply a circulation of the proposed resolution. This is a sensible practical change to recognise commercial realities.
Annual General Meetings
The requirement for all companies, however small, to have an AGM similarly led to numerous utterly fictitious meetings being deemed to have taken place. Allowing companies to dispense with AGMs if they so wish is another sensible change along the lines of the previous example.
Standard 14 days' notice of shareholders' meetings
For those who still need, or prefer, to have formal meetings, those worries about whether enough notice had been given for the particular kind of meeting are a thing of the past, as there is now a standard 14 day notice period. The ability for all shareholders to sign a consent to short notice of a meeting remains in place.
COMPANY OFFICERS
Company secretary
Is now an optional post for a private company, which will avoid sole directors and shareholders racking their brains to find a suitable company secretary.
Directors
Must now be aged at least 16, and all companies must have at least one human director (i.e. not corporate, as opposed to not extra-terrestrial!)
Can now legally borrow money from a company of which they are a director.
FILING OF ACCOUNTS AND RETURNS
Filing deadline
The period for filing private company accounts is now 9 months from the end of the month in which the accounting period ends, as opposed to exactly 10 months from the accounting date (the bane of the lives of those with a 30 April year end).
Small & medium-sized company definitions and audit exemption thresholds
The definitions of small and medium-sized companies for filing purposes are now as follows:
Turnover Balance sheet total Employees
A small company must meet at least 2
of these tests: <£6.5m <£3.26m <50
A medium-sized company must meet at
least 2 of these tests: <£25.9m <£12.9m <250
To be exempt from the requirement for
an audit a company must meet 2 tests: <£6.5m <£3.26bn
Charitable companies
Charitable companies are now subject only to the normal audit exemption.
Shareholder information
Reduced information on shareholdings is now required, both in the Register of Members and on the Annual Return.
Late accounts filing penalties
Months late Penalty
Up to 1 £150
1 to 3 £375
3 to 6 £750
6 or more £1,500
The above penalties are doubled in the second year if there are two consecutive years of late filing.
COMPANY CONSTITUTION ON INCORPORATION
The Memorandum of Association is now a much shorter document, supplemental to the Articles of Association, which can now be based on on of 3 sets of Model Articles as well as based on Table A (as revised for the purpose).
New companies limited by shares are now required to file a Statement of Capital.
CAPITAL REDUCTION
It is now possible for a company to reduce its share capital by way of a Solvency Statement procedure, as well as by way of a purchase of own shares.
FINANCIAL ASSISTANCE FOR THE PURCHASE OF A PRIVATE COMPANY'S OWN SHARES
This is now legal, avoiding the requirement for an expensive and complex 'whitewash' procedure in such cases.
RESTORATION OF DISSOLVED COMPANIES
Is now possible in certain circumstances without recourse to the Courts.
If any of the above is absolute rubbish I will plead taxation practitioner's ignorance of company law, but I believe it all to be a correct summary of the brave new world of company law.
Mark Simpson
24 May 2010
Comments