Companies Act 2006 – deferred reform

On 8 November 2006 the Companies Bill finally became the Companies Act 2006. Eventually the new Act will:

• simplify the administrative burden on smaller private companies, which make up the vast majority of the corporate population;
• facilitate shareholder engagement, particularly in quoted companies; and
• update and clarify the law in various areas, particularly in relation to directors’ duties.

But only a handful of the Act’s 1,200-odd sections and 16 Schedules came into force at the time of Royal Assent. The Government has said that the remaining parts will all be in force by 1 October 2008. Between now and then, around 70 sets of Regulations are expected to be published, filling in details that are not in the Act and – most importantly – specifying how various parts of the Act will affect existing companies. Until the key Regulations have appeared, it is difficult for companies to decide what changes may need to be made to constitutional arrangements and company secretarial procedures, or even to know when they should start familiarising themselves with the detail.

Please click here to view a note summarising those provisions of the Act that are likely to be most significant for companies and their advisers, grouped into the following topics:

1. Directors and corporate governance
2. General meetings, resolutions and shareholder rights
3. Capital maintenance and transactions benefiting shareholders
4. Auditors and accounts
5. Company administration
6. Further reform of company law

It also assesses the likely timetable for their introduction. As and when the picture becomes clearer, we will publish further articles and run client seminars on key aspects of the new Act.

Those parts of the Act which give the FSA power to make rules implementing the EC Transparency Directive (which must be done by 20 January 2007) came into force on Royal Assent. So far the FSA has only published ‘near final’ rules, and has promised to publish in December guidance on certain aspects of the new regime in a special edition of its newsletter, List!. Once this newsletter has appeared we will publish a further article describing the changes.

Provisions of the new Act that relate principally to takeovers and electronic communications between companies and their shareholders will also come into force by 20 January 2007. For further details of these change see our article “The Companies Act 2006: takeovers and electronic communications”, which can be found by clicking here.