Alert

Who does this affect?

All UK public and private companies and limited liability partnerships.

What do you need to do?

Assess the impact of the changes on your company, in particular consider updating the company's articles to take advantage of new rights under the Act.

Author
Emma Malkin  
Senior Associate

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Rowan Russell  
Partner
T +44 20 7778 7180

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Robert Hanley  
Partner
T +44 20 7778 7189

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The UK Companies Act 2006 has been implemented in stages. In previous alerts in September 2007, April 2008 and October 2008, we outlined some of the provisions that have come into force over the past two years. This alert briefly describes the most significant changes coming into force on the final implementation date of 1 October 2009.

Company formation and constitution

There are considerable changes to the formation of companies from 1 October 2009, and to the constitution of both new and old companies. The memorandum of association of a new company formed under the Act will contain only details of the initial subscribers and the shares. It will not be possible under the Act to amend the memorandum; it will be a historical record only and will not form part of the new company’s constitution. New companies formed under the Act will have unlimited objects unless a limitation is inserted in the articles. Provisions in the memorandum of an existing company, including the objects clause, will be deemed to form part of its articles and most companies will wish to amend their articles to remove any limitations on the company’s business or operations contained in their objects clause.

Three different forms of model articles have been produced under the Act to replace the Table A articles of the 1985 Act:- for a private company limited by shares, a private company limited by guarantee and a public company. The model articles are much shorter (53 articles for a private limited company compared to 118 under Table A), but the downside of this is that directors will need to be familiar with provisions in the Act which under Table A were repeated in a company’s articles. The model articles are suitable for small owner-run companies, but larger private companies and public companies will need to use tailored versions of the model articles or specifically drafted articles.

Existing companies should consider updating their articles to remove redundant provisions and to take advantage of new rights under the Act.

Other key changes in this area are:-

• Companies will no longer be required to have an authorised share capital - an existing provision will be treated as a limitation in the articles but can be removed by ordinary resolution.

• On formation, and every time there is a change to the company’s share capital, a statement of capital must be filed with the Registrar at Companies House.

• Private companies with only one class of shares can allot shares without a members’ resolution - existing companies will need to pass a members’ resolution to give directors this power.

• Any type of company can be formed by a single person.

• Directors can use a service address for the public register at Companies House; their home address will be filed on a private register.

• A company may provide a method for changing its name in its articles in addition to the method in the Act.

• Companies House forms have changed - the substance remains largely unchanged but they now have letter and number identifiers which do not relate to the relevant section numbers in the Act eg a form 395 to register a mortgage becomes form MG01. The new forms must be used from 1 October.

Registration of charges

There is no substantive change to the registration of charges created by UK companies, other than the replacement of the form 395 referred to above.

There is a major change in relation to security created by non-UK companies over UK assets, as the requirement to register security created by non-UK companies which may in the future have a UK establishment (the infamous ‘Slavenburg’ filings) ends on 1 October 2009. Regulations made under the Act require the registration of security documents only where they are created by those non-UK companies which have registered a UK establishment at Companies House, the security is of the specified types and the charged property is in the UK at the date of creation of the charge. Uncertainty as to where intangible assets are situated may lead to some precautionary registration, but this still represents a considerable improvement on the much-criticised position under the 1985 Act.

Other changes and further information

This Alert is only a brief summary of some of the provisions coming into force on 1 October 2009. There are a number of other provisions of the Act and regulations made under the Act coming into force which include those relating to:

• Share capital - simpler procedures are introduced for various actions in relation to share capital such as redenominating share capital or any class of shares from one currency to another, sub-dividing or consolidating share capital, varying class rights, issuing redeemable shares and making share buy-backs (some relaxations are only available to private companies).

• Limited liability partnerships - regulations apply appropriate provisions of the Act to LLPs. However the provisions in the Act relating to directors’ duties do not apply to LLPs, nor is there any requirement to register any charge over UK assets given by a non-UK registered LLP.

For further information and advice, please contact our London office.