The main legislation regulating companies is the Companies Act 1985 and the Companies Act 1989. The 1989 Act added to and amended the 1985 Act, but this is now being superseded by the Companies Act 2006.
The 1985 and 1989 Acts have been changed in order to meet four key objectives:
- To enhance shareholder engagement and a long term investment culture;
- To ensure better regulation and a 'Think Small First' approach; lst
- To make it easier to set up and run a company; and
- To provide flexibility for the future.
Following the establishment of a Company Law Review Group in 1998 to consider in detail the modernization of company law, The subsequent report of this group formed the basis of a White Paper for consultation in March 2005 and eventually the new Companies Act was passed in November 2006.
Some of the key effects resulting from the Act include the following.
(a) Applying to all companies:
. A clear statement of directors' general duties clarifies the existing case law based rules
. Companies will be able to make greater use of electronic communications for communications with shareholders.
. Directors must be at least 16 years old, and all companies must have one natural person as a director – i.e. they cannot have all corporate directors.
. There will be improved rules for company names.
. Companies will no longer be required to specify their objects on incorporation.
. Directors will automatically have the option of filing a service address on the public record (rather than their private home address).
(b).Applying to private companies:
. As part of the "think small first" agenda, there will be a separate, comprehensive code of accounting and reporting requirements for small companies.
. Private companies will not be required to have a company secretary.
. Private companies will not need to hold an annual general meeting unless they positively opt to do so.
. It will be easier for companies to take decisions by written resolutions.
(c) .There will be separate and simpler model Articles of Association for private companies.
There will be simpler rules on share capital, removing provisions that are largely irrelevant to the vast majority of private companies and their creditors.
Benefits to shareholders:
. There will be greater rights for nominee shareholders, including the right to receive information electronically or in hard copy if they so wish
. There will be more timely accountability to shareholders by requiring public companies to hold their AGM within 6 months of the financial year-end.
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