1st October 2008

The following provisions of the Companies Act 2006 will come into force on 1st October 2008:

• Objection to Company Names – Sections 67 to 74
• Trading Disclosures – Sections 82 to 85
• Corporate directors and under-age directors – Sections 155 to 159
• Provisions relating to the directors’ ‘conflicts of interest duties’ – Part 10
• Share capital reduction through the solvency statement route – Sections 641 to 644
• Control of political donations and expenditure, provisions relating to an independent candidate – Sections 362 to 379
• Power of court to grant relief in certain cases – Section 1157 

Other changes coming into force on 1st October 2008

• Repeal of the restrictions on financial assistance for acquisition of shares in private companies – Sections 151 to 153 and 155 to 158 (1985 Act)
• Changes to the requirements of annual returns (1985 Act)
• Limited Liability Partnership changes to bring accounts content in line with the company regulations.

Who can object to a company name?
Any person or company can object to a company name.

What could be the grounds for such an objection?
A complaint can be made if the new name either interferes with a registered name in which the complainant has goodwill or if it is so similar that it would suggest a connection between those names.

Who should I address my objection to?
An independent adjudicator will deal with the objection.

What will happen if the objection is upheld?
The adjudicator may make an order to direct the respondent company to change its name. If the company fails to comply with the order the adjudicator may choose a new name for the company.

Where are companies required to display their registered name?
Companies (other than dormant companies) will still be required to display their registered name at their registered office and inspection place and any other location at which it carries on business.

However, where any of these place is shared by 6 or more companies, each company is only required to display its registered name for at least 15 continuous seconds at least once every 3 minutes.

Companies are still required to display their company name on their communications such as business letters, notices, official publications, and websites.

Business letters, invoices, order forms and websites
Companies are still required to display other details such as their registered number and the address of their registered office.  However, companies are not required to place this information on every page of their website but it must be somewhere it can be easily found and read.

This information must be displayed on electronic documents including emails relating to the company business.

Written request for information
Companies are required to disclose the address of their registered office or any place of inspection and also the type of company records kept at these places to any person it deals with in the course of business who makes a written request to the company for that information.

Offences
Failure to comply with these requirements could result in a fine.

Corporate Directors
A company will be required to have at least one director who is a natural person - individual.

How will this new requirement affect corporate directors of existing companies?
From 1st October 2008 every company will have to have at least one director who is a natural person, but there will be a grace period until October 2010 for any company that only had corporate directors on the day the Companies Act received Royal Assent, i.e. 8th November 2006.

Underage Directors
The Act introduces a minimum age for a director of 16 years old, this will come into force on 1st October 2008.

What will happen to existing directors under the age of 16 on the 1st October 2008?
Existing under-age directorships will cease, with no notification to the Registrar required.

Is the company required to amend any company records?
Yes, the company will be required to amend the register of directors to reflect the fact that the appointment has ceased.

Will the under age directors’ rules apply retrospectively?
Yes. When a person appointed as a director of a company before section 157 (minimum age for appointment as director) comes into force, has not attained the age of 16 by 1st October 2008, that person ceases to be a director.

What if as a consequence of the changes, the company is left without an eligible director?
Companies without an eligible director will be in default and will need to appoint at least one director to remedy the position.

These changes cover the duty of directors to avoid conflicts of interest, not to accept benefits from third parties and duty to declare interest in proposed transactions or arrangements.
The following sections relate to directors’ conflicts of interests will be implemented in October 2008.

Section 175 – Duty to avoid conflicts of interest.
Section 176 – Duty not to accept benefits from third parties
Section 177 – Duty to declare interest in proposed transaction or arrangement
Section 180(1) to (3) and (4)(b) – Consent, approval or authorisation of members.
Section 181(2) and (3) Modification of certain provisions in relation to charitable companies.

As an alternative to passing a special resolution and obtaining court approval, private companies will have the option of reducing the amount of their share capital by special resolution supported by a solvency statement made by the directors.  The resolution and solvency statement, an additional directors’ statement and a memorandum of capital showing the alteration in the company’s share capital will have to be submitted to Companies House.

What is the purpose of introducing the solvency statement route?
The solvency statement route provides a simpler and cheaper means for a company to reduce its share capital

How is the form and content of the solvency statement to be determined?
The content is dictated by section 643 of the 2006 Act and its form by BERR Regulations.

Why is this requirement not coming into force with the rest of Part 17 of the Companies Act 2006 on 1st October 2009?
Business supports the solvency statement introduction at the earliest opportunity, as it’s a procedure that will provide benefits in terms of ease and cost. Therefore these provisions will come into force on 1 October 2008, while the bulk of Part 17 will come into force on 1 October 2009.

In the absence of the court overview what safeguards exist against abuse of the solvency statement route?
If company directors make a solvency statement without having reasonable grounds for the opinions expressed in it, and the statement is delivered to the Registrar, an offence is committed by every director who is in default. The offence is punishable by a fine or by a maximum period of imprisonment of two years or both.

Is this new process also available to public companies?
No the solvency statement is only available to private companies, both private and public companies will continue to be able to reduce their share capital by special resolution confirmed by court order.

Part 14 of the Act requires a company to be authorised by its members before it makes a political donation in excess of £5000 in one year to a political party, political organisation or an independent candidate (who is not a member of a political party but standing for election to public office).

A company must also be authorised by its members before it incurs expenditure in respect of political activities such as advertising, promotion or otherwise supporting a political party, political organisation pr an independent candidate in an election.

The implementation is as follows:
In relation to political parties and other political and other political organisations the requirement for authorisation was implemented:

• In GB from 01/10/07
• In Northern Ireland from 01/11/07

However this did not apply to donations or expenditure relating to independent candidates. For independent candidates implementation is from 01/10/08 and applies to both NI and GB.

The 1st October 2008 implementation simply extends, to independent candidates, the control of political donations and expenditure by companies that already applied to political parties and organisations from last year.

This section restates section 727 of the 1985 Act.

An officer of a company e.g. a director, or someone employed by the company such as an auditor, can apply to the court for relief from liability from negligence etc. The Court is able to grant relief in certain circumstances, if the person has acted honestly and reasonably.

Other changes coming into force on 1st October 2008

Are private companies to be prohibited from giving financial assistance for the acquisition of their own shares under the Companies Act 2006?
The Companies Act 2006 will not prohibit a private company from giving financial assistance for the acquisition of its own shares (although if it has a subsidiary which is a public company, the public company may not assist the acquisition of shares in the private holding company). The Companies Act 1985 prohibits private companies from giving financial assistance for the acquisition of their own shares unless certain conditions are satisfied. The prohibition will be repealed in October 2008: for assistance given on or after 1st October 2008, until then, the prohibition remains in place.

When will the rules change that govern the giving of financial assistance by private and public companies for acquisition of shares in themselves or their holding companies?
The rules will change for private companies on 1 October 2008. The rules will not change for public companies.

Why are the changes in the financial assistance provisions not coming into force with the rest of the share capital provisions in October 2009?
Although financial assistance is part of the share capital provisions of the Act it is a simple matter to abolish the prohibition for private companies, and ‘whitewash’, separately from those provisions, which is why that abolition is coming into force in October 08. Business welcomes the earlier commencement of these provisions.

How will the changes to the rules that govern financial assistance for acquisition of shares, brought in by Companies Act 2006, affect private and public companies?
The Companies Act 1985 prohibits a company from granting financial assistance (for example by means of a non-commercial loan) for the acquisition of shares in itself or its holding company: but one exception is that private companies may grant such assistance by going through a complex and expensive procedure, often referred to as ‘whitewash’.

Under the Companies Act 2006, the prohibition on granting financial assistance will be wholly lifted for private companies but will remain in place for public companies.

Do these implementations have any effect on Companies House forms?
These changes mean that where financial assistance is given on or after 1st October 2008, companies will no longer need to file the following forms:

• 155(6)a – Declaration in relation to assistance for the acquisition of shares
• 155(6)b –- Declaration by directors of a holding company in relation to assistance for the acquisition of shares
• 157 – Notice of application made to the court for the cancellation of a special resolution regarding financial assistance (for the acquisition of shares)

Sections 116-119 of the Companies Act 2006 were brought into force in October 2007 which allowed companies to restrict access to their register of members.  To facilitate this, annual returns made up to a date on or after 1st October 2008 will contain reduced information on the company’s shareholders.  The information provided on the annual return will depend on whether or not the company has any of its shares admitted to trading on a regulated market (traded company).  Private and non-traded public companies are only required to provide names of shareholders, not addresses. Traded public companies are required to provide names and addresses for those shareholders holding at least 5% of any share class.

Will members or shareholders’ addresses still be available from Companies House?
Where addresses have been provided to Companies House as part of the annual return of a traded public company these will still be made available to the public.  We will reject any annual returns that contain shareholders addresses if the company is not a traded company.

Will it be possible for a company to take advantage of this before their next annual return is due?
Yes, a company may simply submit an annual return made up to a date on or after 1st October 2008 in order to take advantage of the reduced disclosure requirements.  A company can make its annual return up to any date it chooses, as long as it isn’t later than the anniversary of the previous annual return (or the date of incorporation in the case of a company’s first annual return).

What if a company that submits an earlier annual return wants to restore its cycle by submitting another annual return on its original due date?
The company will be able to restore its cycle at anytime but any annual return made up to date before 1st October 2008 will be under the current requirements. This means that for a company with share capital, it will have to include the names and addresses of every member (or of all those ceasing to be or becoming members since the last return).

New Limited Liability Partnership regulations will be made applying parts 15, 16 and 42 of the Companies Act 2006.  There will also be separate regulations on the form and content of accounts, in line with the Companies Act regulations.  These will come into force for accounting periods starting on or after 1st October 2008.