Companies Act 2006 - General Provisions

General Provisions

The Act contains various provisions which affect all companies irrespective of their status:

• Company formation - the procedure for incorporating companies will be modernised to facilitate incorporation over the Internet. It will become possible for a single person to form a public company.
• Constitutional documents - a company's articles of association will become its main constitutional document, and the company's memorandum will be treated as part of its articles. New model articles for private companies to be made under the Act are intended to reflect better the way that small companies operate, and will replace the existing Table A. Existing companies will be permitted to adopt the new model articles in whole or in part.
• Corporate capacity - under the new Act a company's capacity will be unlimited unless its articles specifically provide otherwise, thus greatly reducing the applicability of the ultra vires doctrine to corporate law and removing the need for an excessively long objects clause in the Memorandum of Association.
• Execution of documents - Formalities for execution as a deed are to be further revised, so that a single director can execute a document as a deed on behalf of the company by a simple signature in the presence of a witness.
• Share capital - the requirement for an authorised share capital will be abolished. Companies will be able to redenominate their share capital from one currency to another without an order of the court.
• Distributions in kind - The Act addresses the current uncertainty in the law in relation to the transfer of non-cash assets by a company to a shareholder, and whether this should be treated as a distribution.
• Shareholder meetings - The Act enables shareholder meetings to be held more quickly. Special resolutions now require only 14 days' notice unless proposed at an AGM.
• Shareholder communications - The Act made it easier for companies to communicate electronically (e.g. by email or by website) with their shareholders by express agreement (which agreement can be obtained under the articles, or by the shareholder failing to indicate that they do not wish to communicate via the website, as well as by more conventional methods).
• Auditor's liability - auditors are now permitted to limit their liability for claims in negligence, breach of trust or breach of duty so long as:
  • the shareholders have approved the limitation in advance.
  • the court considers the limitation of liability to be 'fair and reasonable'

This change was made after intensive lobbying by the accounting profession in the United Kingdom.

• Company Names Adjudicator - Section 69 of the Act provides for the appointment of a Company Names Adjudicator. A Company Names Tribunal was established on 1 October 2008 through which the Company Names Adjudicator will administer his powers via the UK Intellectual Property Office under the tribunal. Section 69 has expanded the grounds under which any person can object to a conflicting company name registration under the Act.