Changes in UK Company Legislation

Changes in UK Company Legislation – Constitutional Documents

Companies incorporated in the UK Company Legislation under the 2006 Act, on or after 1 October 2009, are required to have the following constitutional documents: Memorandum of Association, Articles of Association and, if a company with limited liability, a Statement of capital and shareholdings or a Statement of guarantee.

Memorandum of Association

There is a new style memorandum – which must be in the prescribed form – which is a much-reduced document and essentially contains simply the names of the subscribers to the company and authentication that they have agreed to become members of that company. The company’s objects, liabilities and assets – all of which were previously in the memorandum – are now contained in the articles.
Any new companies formed on or after 1 October 2009 are not required to list objects for the company as these will be unrestricted from that point forward, unless the company chooses specifically to restrict them. For any company incorporated before 1 October 2009, its objects are deemed to be contained in the articles.

Articles of Association

Table A model articles are superseded by the Companies Act 2006 model articles from 1 October 2009 as model articles for companies incorporated on or after that date. Table A will, however, remain in force for companies incorporated under the Companies Act 1985, and companies can continue to incorporate provisions of Table A by reference (or provisions of the Companies Act 2006 model articles).
The new model articles:

  • reflect updated provisions of company law;
  • avoid archaic and legalistic language wherever possible; and
  • do not duplicate provisions of the Companies Act 2006 governing procedural matters

Statement of capital and shareholdings or Statement of guarantee

Information on capital and shareholdings is no longer part of the memorandum after 1 October 2009. This information is now contained in either a ‘statement of capital and shareholdings’ or, for those companies limited by guarantee, a ‘statement of guarantee’.

New companies incorporated on or after 1 October 2009, under the 2006 Act, will be required to file the appropriate statement with the Registrar on registration –  contained in Form IN01 (which replaces the old forms 10 and 12).

If a company registered under the 1985 Act (or previous Companies Acts) changes its share capital after 1 October 2009, a new ‘statement of capital’ should be sent to Companies House. The statement of capital sets out the total number and aggregate nominal value of each class of share in issue, whether any amount is unpaid and details of the rights attached to the shares.

Existing companies should be alert to the fact that, unless already changed by special resolution, their articles will contain their authorised capital as set out in the company’s memorandum (now deemed to be part of the articles). The provision as to the amount of authorised capital will be treated on and after 1 October 2009 as setting the maximum amount of shares that may be allotted by the company, although this can be amended or revoked by ordinary or special resolution.
Although companies will no longer be required to have an authorised share capital, any new share issued must still have a fixed nominal value.

Companies Act 2006 – What do existing companies have to do?

Directors and members of existing companies are not required to make any changes to their constitutional documents as a result of the Companies Act 2006 coming into force on 1 October 2009, but there are a number of advantages in doing so:

  • A simpler, clearer constitution
  • Less risk of breaching the Act where inconsistent provisions are no longer valid
  • If appropriate, reduced formalities in relation, for example, to meetings and the issue of new shares.

There are also points to note in terms of provisions that become effective at the point at which existing companies make changes to their constitutional documents on or after 1 October 2009, which are set out below.

Memorandum of association

As previously stated, there is a new style memorandum of association that simply contains the names of the subscribers to the company and authentication that they have agreed to become members of that company. For limited liability companies, the limited liability status will be covered in the articles of association.
From 1 October 2009 as part of the new UK Company Legislation, the parts of the memorandum of an existing company that is additional to that of the new-style memorandum of association will be automatically deemed to be part of the company’s articles of association. These parts typically include the company’s objects and limited liability status but may include anything specific to the company that is not the names of the subscribers and their authentication of its formation.
In itself, the automatic deeming of these parts moving to the company’s articles requires no action from existing companies. However, existing companies may choose, for example, to pass a special resolution removing the objects from the articles.
Where members of an existing company (or anyone else entitled to a copy of the articles) request a copy of the articles on or after 1 October 2009, the company can either:

  • append a copy of the old-style memorandum to the articles, or
  • send a copy of the old-style memorandum with the articles indicating the provisions that are deemed to be provisions of the articles.

When existing companies amend their current articles on or after 1 October 2009, or where pre-1 October 2009 amendments take effect on or after that date, the company can, when filing the articles of association with the registrar:

  • append a copy of the old-style memorandum to the articles, or
  • send a copy of the old-style memorandum with the articles indicating the provisions that are deemed to be provisions of the articles.

Existing limited companies, if making a further amendment to those parts of their articles that contain the original memorandum, should either

  • not remove or alter an article that limits their liability (unless they intend to re-register to change the limited liability status of the company), or
  • put an express statement into their amended articles along the lines of article 2 of the model articles for private companies limited by shares.

Articles of association

The articles of association registered by a company when it was incorporated always remain its articles of association, according to the Companies Act applicable when the company was formed, unless the company registers a change to those articles. Table A will continue to provide the default articles for companies formed before 1 October 2009.

Members of existing companies are able to amend their articles at any point in time by passing a special resolution. From 1 October 2009, when any company makes amendments to its articles of association it must file an up to date copy of the entire set of articles not later than 15 days after the amendment takes effect. Failure to do this is an offence by the company and its officers, which carries a civil penalty.

However, where an existing company changes its name on or after 1 October 2009 it is not required to amend its articles to effect the change.
Companies wishing to take advantage of new provisions in the Companies Act 2006 should check that their own articles do not specifically prohibit them from doing so. For example, from 1 April 2008, there is no longer a requirement for a private company to have a company secretary. A company wanting to remove its company secretary should ensure that its own articles are not written in such a way that requires a secretary. If they are so written, such a company might consider, with legal advice as necessary, whether to amend their articles by special resolution. Table A and the new 2006 Act model articles are written permissively to allow a secretary to be employed if a company so wishes.

Forms

All Companies House forms changed on 1 October 2009 to reflect the new UK Company Legislation and must be used for all company events that take place on or after 1 October 2009. If you use an old form it will be rejected.

If you would like more information on UK company legislation, or to set up a company in the UK, please do not hesitate to contact us.

 

Disclaimer This article is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Company Bureau for any action taken or not taken in reliance on the information set out in this article. Professional or legal advice should be obtained before taking or refraining from any action as a result of this article. Any and all information is subject to change.