The Companies Act 2006 replaces almost all of the Companies Act 1985 and 1989.  The Act comes into force in stages, with full implementation by October 2008.  Most of the new Act has the same or very similar affects as the old Acts and existing case law. 

One important change now implemented is that directors must have regard to the impact of their company’s operations on the community and the environment.  It is far from clear how, and to what extent, this will be enforced.  It is our view that a company operating without an environmental policy could be in breach of this regulation.

The Department for Business Enterprise & Regulatory Reform (DBERR formerly DTI) has now issued a summary and a more detailed statement outlining the affects that the new act will have on small private limited companies.  A brief summary of the main points of the new Act that are relevant to small businesses is given below.

1 January 2007
The important change implemented in January 2007 was that all emails and websites must include the company’s name, number, registered office and place of registration (business letters are already required to do so).  For websites this can be met by ensuring an about us button is always displayed and having the relevant details recorded on the about us page.  Some simplifications have also been enacted including being allowed to circulate resolutions by email.

1 October 2007
The Companies Act 2006 (the Act) sections 170 – 178 set out the legal responsibilities and general duties of company directors, and are known as the Statement of General Duties of Directors. This is based on established common law principles and case law, but also includes important reforms which affect all directors – executive or non-executive – in every company, large or small.

The main principles are:
 
1. The general duties mean a director must act in the interests of the company and not in the interests of any other parties – including shareholders.
2. Duty to act within the company’s powers.
3. Duty to promote the success of the company.  Directors are also required to have regard to a number of specified factors, as follows:
• the likely consequences of any decision in the long term
• the interests of the company’s employees
• the need to foster the company’s business relationships with suppliers, customers and others
• the impact of the company’s operations on the community and the environment
• the desirability of the company maintaining a reputation for high standards of business conduct and
• the need to act fairly as between all members of the company
4. Duty to exercise independent judgement
5. Duty of skill, care and diligence
6. Duty not to accept benefits from third parties
7. Duty to declare an interest in a proposed transaction or arrangement

Other measures that came into force on 1 October 2007 include a simplification of some shareholder resolution procedures and there is no longer a need for every company to hold annual general meetings.

The main relevant changes that will be implemented in the future are:

6 April 2008
No longer a requirement to appoint a company secretary.
Accounts filing deadline will be reduced from ten to nine months.

1 October 2008
Duty on directors to avoid conflicts of interest
Simplification of some share transactions.
Directors’ home addresses can be removed from the public record.
New simplified format for the documents required when forming a limited company.
Concept of Authorised Share Capital will no longer exist.
The minimum age at which someone can be appointed as a director will be 16 years.
It will only be possible to appoint a corporate director so long as there is at least one other director who is a natural person.