Company articles of association: changes to Table A on 1 October 2007

On 1 October 2007 the Table A model articles under the Companies Act 1985 will be amended, principally to remove or modify provisions that conflict with sections in the Companies Act 2006 that are coming into force from that date – in particular, the new rules on resolutions and meetings in Part 13.

From 1 October there will be two versions of Table A - one for public companies, and one for private – which will apply by default to companies registered on or after 1 October 2007. But any company that has adopted Table A in whole or in part before 1 October 2007 will not be affected unless its members expressly choose to adopt the new amendments.

Table C under the 1985 Act, which prescribes the basic articles for companies limited by guarantee without a share capital, and which incorporates by reference the majority of Table A subject to certain modifications, will also be amended so that it refers to the new version of Table A for private companies.

The new Tables are not intended to align Table A with the new model articles to be made under the 2006 Act, which will be the default articles for companies registered on or after 1 October 2008. They are designed simply as an interim measure until the new model articles become the default.

The changes to Tables A and C are set out in the Companies (Tables A to F) (Amendment) Regulations 2007 (the regulations). DBERR has also published “redlined” versions of the two amended Tables, showing the changes that will be made.

General approach

The approach taken in amending Table A has been to amend only where necessary to avoid actual conflict between Table A and the 2006 Act. Generally, where the 2006 Act allows a company to modify the effect of a statutory provision in its articles, Table A has not been amended. For example, section 319(1) allows a member to be elected chairman of a general meeting by means of a resolution passed at that meeting, but under section 319(2) this is subject to any provision in the articles as to who may or may not be chairman. Regulations 42 and 43 of Table A, which stipulate that the chairman must be the chairman of the board or, in his absence, another director or, failing that, a member elected by the meeting, has therefore been left unchanged.

Specific changes

The regulations set out amendments to Table A that are applicable:

• to all companies limited by shares;
• to private companies only; and
• to public companies only.

Amendments applicable to all companies limited by shares

Interpretation

Regulation 3 amends regulation 1 of Table A so that the definition of "the Act" includes the Companies Act 1985 and the provisions of the 2006 Act that are for the time being in force.

General meetings

Part 13 of the 2006 Act, and particularly sections 301-323, contains provisions relating to “general meetings”. Section 336 requires public companies to hold an “annual general meeting” within six months of the end of the company’s financial year, but private companies are not required by the 2006 Act to hold any meetings. However, a resolution to remove a director using the statutory power in section 168 (the successor to section 303 of the 1985 Act), or an auditor, before the expiration of his term of office can only be passed at a meeting of which special notice is given. General meetings that are not AGMs are referred to in the 2006 Act simply as “other general meetings”; the term “EGM” is not used.

Accordingly, regulation 36 of Table A, which states that all general meetings that are not AGMs are called EGMs, is deleted, and all other references to “extraordinary general meetings” are also removed.

From 1 October 2007 it will therefore be strictly incorrect to refer to “extraordinary general meetings” or EGMs, although companies may continue to do so, particularly where their articles contain an equivalent to regulation 36.

General meetings convened on a members’ requisition

Section 368(4) the 1985 Act allows the directors 21 days from the deposit of a members’ requisition notice to convene (i.e. send out notices calling) an EGM, which must be held within three months (around 90 days). When Table A was introduced in 1985, regulation 37 shortened this deadline by stipulating that the meeting must be held on a date not later than eight weeks (56 days) after receipt of the requisition notice. However, in 1990 subsection 368(8) was introduced, which states that no more than 28 days must elapse between the date of the meeting notice and the actual meeting. That part of regulation 37 therefore became a trap for the unwary, as it purported to allow directors a longer notice period than subsection 368(8) permits.

These two subsections are replicated in section 304(1) of the 2006 Act, so the Government has taken the opportunity to remove the offending words in regulation 37 so that they no longer conflict with the statutory requirements.

Written resolutions

Section 281(1) of the 2006 Act provides that a private company can pass a members’ resolution in writing only in accordance with the Act. Public companies are not permitted to use written resolutions. From 1 October 2007 provisions in articles - such as regulation 53 of Table A - that purport to allow shareholder resolutions to be passed in writing will therefore become ineffective: a resolution purportedly passed after that date in reliance on such a provision is likely to be invalid unless it is passed unanimously and the conditions are satisfied for it to be treated as informal consent in accordance with Duomatic.

Accordingly, regulation 53 of Table A is deleted from both sets of Table A articles (and, by implication, from Table C, which will incorporate the amended Table A by reference).

Extraordinary resolutions

Under the 2006 Act there are only two types of shareholder resolutions: ordinary (section 282) and special (section 283). The provisions in section 378 the 1985 Act dealing with extraordinary resolutions (which are usually required in connection with a variation of class rights, or a resolution to distribute assets on a winding-up) have not been replicated. The Third Commencement Order made under the 2006 Act does, however, contain saving provisions that stipulate that any reference to an extraordinary resolution in articles or an agreement will continue to have effect and be construed in accordance with section 378 of the 1985 Act as if it had not been repealed.

Regulation 117 of Table A is amended so that, to distribute assets on a winding-up, a liquidator now requires the sanction of a special resolution. Adopting the same approach, in the 2006 Act a variation of class rights now also requires a special resolution.

Amendments applicable to private companies limited by shares only

Notice of general meetings
Article 38 of Table A, which sets notice periods for general meetings and allows for short notice, is amended to delete references to "extraordinary" and "annual general meetings" as these terms no longer have meaning in relation to private companies. The requirement in that article for all general meetings to be called on at least 21 clear days’ notice has been changed to 14 clear days to bring it into line with section 307 of the 2006 Act, which specifies a minimum of 14 days’ notice for all general meetings other than public company AGMs.

The threshold required to consent to short notice is reduced from 95% to 90% in order to take advantage of the lower threshold permitted by section 307(6) of the 2006 Act.

Proceedings at general meetings

Under section 318 of the 2006 Act the quorum for a general meeting is two qualifying persons, save that where the company has only one member the quorum requirement is one. A qualifying person is a member, a corporate representative, or a proxy for a member.

Article 40 of Table A is therefore amended so that the prescribed quorum of two does not apply to single member companies.

Appointment and retirement of directors by rotation

Neither the 1985 nor the 2006 Act provide for directors to retire by rotation, but for many years Table A has included provisions requiring retirement by rotation – principally so that shareholders are not stuck with the directors selected by the original subscribers. In practice, these provisions are often excluded.

As part of its efforts to simplify private company procedures, the Government has decided to delete from Table A for private companies the provisions for retirement by rotation in regulations 73 to 75. Consequential amendments are also made to regulations 76 to 79, and regulation 80 (re-appointment of director who retires) is deleted.

The retirement by rotation provisions have, however, been retained in the Table A for public companies.

Amendments applicable to public companies limited by shares only

General meetings
Consistently with section 307 of the 2006 Act, regulation 38, which currently requires at least 21 clear days’ notice for an AGM and an extraordinary general meeting called for the passing of a special resolution, has been amended to require 21 days’ notice only for AGMs.

Practical implications

• New companies registering on or after 1 October 2007 will need to consider whether to make additional changes to the amended Table A in order to benefit from the new provisions of the 2006 Act – for example: conferring additional rights on proxies specifying when and how the company can send documents to its members by email, website publication or other electronic means, when such documents are deemed to be delivered, and how they are authenticated lowering from 5% the percentage of voting rights needed to require circulation of a written resolution changing from 28 days the period for agreeing to a proposed resolution circulated in writing.

Existing companies that are considering adopting the amended Table A will also need to consider these issues. Even if they are not contemplating wholesale adoption of the revised Table A, they may want to make changes that will allow them to take advantage of the new regime – in particular, the shorter notice period for AGMs and special resolutions.

• When drafting articles and agreements that need to refer to both the 1985 and 2006 Acts, it may be possible to use the amended definition of “the Act” in regulation 1 of Table A:

“the Act” means the Companies Act 1985 including any statutory modification or re-enactment thereof for the time being in force and any provisions of the Companies Act 2006( ) for the time being in force.

Useful links

Click here for the regulations
Click here for a redline showing the changes to Table A
Click here for the Third Commencement Order under the 2006 Act
Click here for the draft model articles under the 2006 Act (published in August)
Click here for our recently updated Overview of the 2006 Act, including the new rules on resolutions and meetings.