RSS feedsThe Companies Act may have been law since last November, but it is only now that many of its key measures are taking effect.
And while issues such as the business review have dominated the headlines surrounding the Act, it is many of the provisions affecting smaller businesses that your clients need to be made aware of.
As of New Year’s eve, your clients should ensure that their websites, business letters and order forms contain the company’s full name and its place of registration, company number and registered office.
These would normally be included anyway, but now those who don’t will be liable to a fine. Many people missed this provision first time around and although the ink may barely be dry on the Act it is already a point that is causing confusion.
Law firm Pinsent Mason gives this advice: ‘Rather than worry whether an email sent by a company amounts to a “business letter” or not, ensure that all emails sent on company business contain these details in the standard rubric at the end.’
Furthermore, clients listed on AIM, PLUS and on the full list should already have informed one of the regulated information services of details of the total number of voting rights for each class of issued share capital.
That’s the compliance out of the way. There is much in the Act that is designed to be enabling. As of this month, companies will be able to communicate with shareholders electronically provided, of course, they have passed a resolution or changed their articles to allow them to do so.
Again Pinsent Mason has useful advice: ‘A document or information can be supplied to a company in electronic form if the company has agreed to that method of receipt. Note that a company is deemed to have agreed to receive documents electronically where it has given an email address in a notice of meeting or proxy form.’
This is an example of the government living up to its pledge to think small first when enacting legislation. Trade and industry secretary Alistair Darling believes that businesses could save £50m by using electronic communications. It’s a not insubstantial chunk of the £250m a year Darling believes the Act will save business.
The Act delivers private companies a new model constitution and removes formalities for private company meetings including dispensing with the AGM, unless sought by shareholders, and ending the requirement for a company secretary.
And some measures that had caused concern have been toned down. ‘A welcome proposal is that all directors will be able to keep their home address private,’ says the CBI.
Even those measures that continue to raise eyebrows such as codification in statute of directors’ fiduciary duties which require directors to have regard to the long-term as well as the short-term interests of the company have clear benefits attached.
Developments of the Act will continue for 12 months beyond the original target date of 2007. While that gives companies a welcome breathing space on many of the provisions, it means many private companies won’t be able to take advantage of some of the deregulatory provisions.
But if we take the words of ministers and civil servants at face value, these developments will still face a stiff think small first test.
As Philip Bovey, the lawyer on the DTI’s companies bill team, recently told Accountancy Age’s Insider Business Club: ‘The existing law was drawn up for large public companies. They are no longer the typical company. The typical company is now the small private company and we have set out to start with their concerns and interests and we have got rid of a number of concepts which may not be real-life, day-to-day practice of small companies but which are fundamental to the Act.’
