July 2009
1. BACKGROUND
1.1 The changes happening on 1st October 2009 are a combination of changes in the law and practical changes to how Companies House will operate. At the time of writing, we only have draft guidance and forms issued by Companies House and therefore, please note some of the content may be subject to change. We will prepare an updated version of this note when the Companies House guidance and forms are finalised.
1.2 This note divides the changes into the following categories:
1.2.1 Changes affecting existing companies which are not optional
1.2.2 Optional changes affecting existing companies
1.2.3 Changes to formation of new companies
1.2.4 Timetable for company registrations
1.2.5 Other changes
1.2.6 Sources of more information
2. CHANGES AFFECTING EXISTING COMPANIES – NOT OPTIONAL
Changes to an existing company’s constitution
2.1 There are two key changes which taken together lead to some practical issues all companies should be aware of:
2.1.1 From 1st October, all the provisions of the memorandum (except for the details of the subscribers) are treated as forming part of the articles.
2.1.2 From 1st October, a company’s constitution will consist of its articles plus any resolutions or agreements affecting the company’s constitution (unless the resolution has been incorporated into the articles by amendments).
2.2 From discussions with BIS and Companies House, it appears what this means in practice is:
2.2.1 If a company is providing a copy of its constitution to anyone post 1st October, it must provide its articles, its memorandum (because the provisions of the memorandum are treated as forming part of the articles) and any resolutions making further changes to the articles.
2.2.2 Existing companies do not have to prepare a revised version of their articles incorporating the provisions from the memorandum until any amendment is made to the articles after 1st October. At that point, the company must file both a copy of the amending resolution and either:
(a) an amended version of the articles incorporating the provisions of the memorandum; or
(b) the updated version of the articles with the memorandum annexed at the back.
We have been told that a change of name will not be treated as an amendment to the articles triggering the requirement to do one of the above.
2.3 BIS is due to issue some guidance for existing companies which may shed further light on this.
Changes to objects
2.4 Section 31(2) of the Act states:
"Where a company amends it articles so as to add, remove or alter a statement of the company's objects -
(a) it must give notice to the registrar
(b) on receipt of the notice, the registrar shall register it, and
(c) the amendment is not effective until entry of that notice on the register"
2.5 This is a change from the current position where a change takes effect on the date of the resolution. From 1st October, the change will only take effect when notice of the change is entered on the Register.
2.6 There are some important practical implications:
2.6.1 There is a new Form CC04 which must be filed with the copy of the special resolution. So far as we are aware, there is no fee payable.
2.6.2 If a company does not file notice of change of objects, the change is not effective - potentially critical in say a merger situation where one charity is changing its objects.
2.6.3 A week or so after filing, companies would be wise to double-check that the notice has been entered on the Register. We have been told that a same day filing service for change of objects will not initially be available but may be introduced if there is demand for it.
Variation of class rights
2.7 Any company with more than one class of members may be affected by Section 631 of the Act which introduces a minimum default procedure for any change to the rights of a class of members. Under Section 631, in the absence of anything in the articles, in addition to a special resolution of all the members agreeing the variation, the members of that class must separately consent to the variation either by:
2.7.1 consent in writing from at least three quarters of the members of the class; or
2.7.2 a special resolution passed at a separate general meeting of the members of that class sanctioning the variation
2.8 Insertion of any provision for class rights into the articles is treated as a variation of class rights.
New Companies House forms
2.9 There will be significant changes to Companies House forms with over 250 new forms:
2.9.1 All existing forms will have a new name and look different.
2.9.2 Many additional forms are being introduced – imposing requirements for companies to file accompanying forms with certain documents where previously it was sufficient just to file the documents on their own. Examples include changes to a company’s objects and changes to a company’s name.
For a list of the new forms and draft versions, go to http://www.companieshouse.gov.uk/forms/formsAvailable.shtml. These drafts should not be used – final versions for use will be published on 1st October 2009.
2.10 Up to 30th September the existing forms should be used.
2.11 From 1st October:
2.11.1 For forms recording a particular event (e.g. appointment of a director), you should use the form current at the time of the event e.g. if a director was appointed on 28th Sept, you should notify this on a Form 288a even if the form is sent in after 1st October.
2.11.2 For forms not linked to a particular event (e.g. change of registered office, change of accounting reference date) you should use the form current at the date of submission.
2.12 Fee bearing documents will be rejected if the fee has not been paid.
Late filing penalties
2.13 There will continue to be automatic late filing penalties for failure to file accounts on time. In addition, the Registrar has been given power to fine companies which fail to file a resolution relating to a change to the articles. The time limit for filing remains 15 days. Before imposing a fine, the Registrar must send a notice to a company it thinks is in default, requiring it to meet its filing obligations. (For example, if a company filed a special resolution of changes to the articles but failed to file a copy of the amended articles, this would alert the Registrar to the fact the company was in default.) There will then be a 28 day period to comply and if the company still fails to file there is a new automatic civil penalty of £200.
3. OPTIONAL CHANGES AFFECTING EXISTING COMPANIES
Change of name
3.1 There will be a wider range of ways for a company to change its name (Sections 77 to 81 of the Act). In addition to the current procedure of members’ special resolution, the articles can provide for alternative methods e.g. by directors’ resolution. Existing companies may want to amend their articles to take advantage of this.
3.2 It will also be possible to pass a resolution to change the company’s name conditional on the occurrence of an event, in which case the notice given to the Registrar must specify that the change is conditional and either state if the event has occurred or give separate notification when the event has occurred.
Share companies
3.3 There are new rules applying to share companies registered after 1st October – see 4.3.2 below. Existing share companies can take advantage of some of these relaxations – there are specific transitional provisions setting out how in each case this can be done.
Directors’ service addresses
3.4 Both directors of existing companies and directors of new companies can designate a “service address”.
3.4.1 For directors of existing companies, the Register will show this as their current address, but all home addresses recorded on forms already filed will continue to appear on the Register. There will be a procedure whereby “at risk” directors can apply for their residential address to be expunged from documents already on the Register. This is limited to documents filed since January 2003 and there will be a fee per document, likely to be £45.
3.4.2 For directors of new companies, the Register will show this as their current address. Directors will have to provide their home address to Companies House but this will not be disclosed to the public, although may be disclosed to credit reference agencies and other Government agencies.
3.5 Companies will still need to record residential addresses in the company records – in practice, this will mean having two registers or a split register.
Single Alternative Inspection Location (“SAIL”)
3.6 The Companies Act imposes requirements to keep a number of different sets of company records available for inspection at the registered office. As an alternative, a company can designate a Single Alternative Inspection Location, known as “SAIL” http://www.statutelaw.gov.uk/content.aspx?LegType=All+Legislation&PageNumber=1&NavFrom=3&parentActiveTextDocId=3533319&activetextdocid=3533329 . Two forms must be filed: Form AD02 to notify a SAIL and Form AD03 to notify that company records will be now be kept at the SAIL.
Electronic filing
3.7 There will be no immediate changes to what can be filed electronically. So for example, changes to articles will still have to be filed in hard copy (although ultimately Companies House plans over time to allow for everything to be filed electronically).
3.8 Companies House is however strongly encouraging all companies to use electronic filing as much as possible. Advantages include:
3.8.1 documents filed electronically get on the Register quicker and in some cases, the fee is reduced;
3.8.2 online filing avoids the need to get signatures for forms; and
3.8.3 filing online avoids the risk of using an outdated version of a form.
You can register your company for WebFiling by entering details online at https://ewf.companieshouse.gov.uk. You will be sent a security code by email immediately and an authentication code will be sent by post to the registered office address.
3.9 Companies using electronic filing can sign up to a new Companies House Protected Online Filing Service (“PROOF”) which acts as protection against rogue paper filing. (For example, a football fan filing a Form 288a to say he/she has been appointed a director of Chelsea Football Club). Once a company has subscribed to PROOF, Companies House will only accept certain information electronically. For more details see http://www.companieshouse.gov.uk/infoAndGuide/proof.shtml
Incorrectly filed documents
3.10 The Registrar will now also have the power to remove wrongly filed documents such as confidential board minutes filed along with a certificate of passing a resolution. It is not clear yet whether there will be a fee for this.
4. CHANGES TO FORMATION OF NEW COMPANIES
Memorandum post 1st October 2009
4.1 The memorandum of a company will look very different. Essentially it simply states the details of the subscribers and their desire to form a company. The memorandum must be in the prescribed form for that type of company i.e. company limited by shares, company limited by guarantee or public limited company. Below is the prescribed form for a company limited by guarantee.
4.2 Form of Memorandum for company limited by guarantee
“COMPANY NOT HAVING A SHARE CAPITAL
Memorandum of association of [insert name of company]
Each subscriber to this memorandum of association wishes to form a company under the Companies Act 2006 and agrees to become a member of the company.
Name of each subscriber
Authentication by each subscriber
Dated”
Articles post 1st October 2009
4.3 The Articles will now contain a combination of the key provisions previously set out in the Memorandum and Articles. There are some changes:
4.3.1 Objects – all companies are formed with unrestricted objects unless the articles contain a restriction. Therefore most companies will not have an objects clause, although charitable companies will.
4.3.2 Change of name – the articles can now include provisions for the company to change its names in other ways, in addition to the usual special resolution. See 3.1 above
4.3.3 Share companies
(a) The articles do not need to state an amount of authorised/nominal share capital as these concepts have been abolished – see 4.7 below.
(b) For companies with only one class of shares, S550 of the Act gives the directors power, unless restricted in the articles, to allot shares or grant rights to subscribe for or convert any security into shares. For trading subsidiaries of charitable companies this is something that the articles should prohibit.
(c) For all new companies, unless the articles state otherwise, the company will have power to sub-divide or consolidate shares, issue redeemable shares, permit a repurchase of shares or redeem or purchase shares out of its capital. This is a reversal of the position under the 1985 Companies Act.
4.4 Tables A – C are being replaced with three different sets of new model articles – one for a private company limited by shares, one for a public limited company and one for a company limited by guarantee. This link takes you to the regulations setting out the three sets of model articles. http://www.opsi.gov.uk/si/si2008/uksi_20083229_en_1 The model articles will apply unless excluded. This is similar to the current position for companies limited by shares and Table A, but constitutes a change for companies limited by guarantee where currently Table C applies only if specifically adopted. This means new companies can choose one of the following three options:
4.4.1 Model articles apply – this is the case if no articles are filed.
4.4.2 Model articles with amended provisions – this is the case if a company files specially drafted articles but does not exclude the model articles
4.4.3 Bespoke articles – this is the case if a company files specially drafted articles which state the model articles are excluded.
4.5 Charitable companies will need to include in their articles: the objects, restrictions on use of assets, permitted trustee and member benefits and a dissolution clause. The Charity Commission is due to publish in July 2009 model articles for a charitable company formed after 1st October 2009.
Companies House Forms
4.6 The current Forms 10, 12 and 30(5)(a) will be replaced by new Form IN01. This contains a section for all the subscribers to sign a statement of compliance. Charitable companies will no longer have to file a separate form in order to be exempt from the requirement to use the word “limited” in their name.
4.7 For companies limited by shares, the concept of the articles stating authorised share capital is abolished and instead a separate statement of capital and initial shareholdings will be submitted to Companies House on formation
5. TIMETABLE FOR COMPANY REGISTRATIONS
This is the timetable for company registrations:
5.1 "old style" applications made and processed before 1st Oct 2009 will lead to a company formed under the 1985 Act;
5.2 "old style" applications validly made up to or on 30th Sept but not processed by 30th Sept will be processed on or after 1st Oct 2009 and will lead to a company formed under the 1985 Act;
5.3 "new style" applications made before 1st Oct 2009 will be rejected;.
5.4 "old style" applications made on or after 1st Oct 2009 will be rejected; and
5.5 "new style" applications made on or after 1st Oct 2009 will result in a company formed under the 2006 Act - BUT 1st October 2009 is a Thursday and the main changes to Companies House systems will take place over the weekend of 3/4th October - with the result that no 2006 Act companies will be registered until Monday 5th October at the earliest.
6. OTHER CHANGES
Northern Ireland
6.1 The NI Registry will integrate with Companies House to allow NI company searches on the Companies House website.
New Contact Number
6.2 0303 1234500 is the new local rate general enquiries line. The existing 0870 3333636 will still work for a transitional period.
7. SOURCES OF MORE INFORMATION
7.1 Companies House forms and guidance, model articles and Companies House FAQ http://www.companieshouse.gov.uk//companiesAct/companiesAct.shtml
7.2 FAQ and guidance on the Companies Act 2006 – http://www.berr.gov.uk/whatwedo/businesslaw/co-act-2006/index.html
7.3 Charity Commission - articles for a charitable company registered after 1st October 2009 – due to be available from July 2009 from www.charitycommission.gov.uk
Prepared by Bates Wells & Braithwaite
This note is a general summary only and not intended to constitute legal advice. Specific advice should be sought for particular situations.
© Bates Wells & Braithwaite July 2009
