On 8 November 2006 the Companies Act 2006 (the "Act") received Royal Assent and became law. The Act is notable for its size and at 1,300 sections and 16 schedules it is the largest Act that has ever been passed by Parliament. The Government expects the Act to save business up to 250 million a year, by reducing the regulatory burden on companies and enhancing the flexibility of legislation so as to enable the law to change with the developing business environment.
Although the Act is on the statute books, many of the provisions in the Act require commencement by secondary legislation. The process of implementing parts of the Act has already begun with the introduction of:
the requirement for companies to state on their websites their name, registered number, place of registration and registered office address;
regulations dealing with company communications with shareholders and others, including electronic communications; and
provisions giving a public company the right to investigate who has an interest in its shares.
On 28 February 2007, Margaret Hodge MP, Minister of State for Industry and the Regions announced the dates for the implementation of the remaining parts of the Act. Of the notable issues, some of which have received a lot of press attention, the following will be implemented in:
Company's Directors (Part 10 of the Act)
The majority of the provisions dealing with directors will be introduced including the sections dealing with the codification of directors' duties. Currently directors' duties are governed by case law and market practice. The Act will codify many duties that are placed on directors including the controversial concept of 'enlightened shareholder value'. Although the duty to avoid conflicts of interest will not be implemented until October 2007.
Derivative claims and proceedings by members
Shareholders of companies will be able to bring claims on behalf of a company against directors for negligence, default or breach of duty. Although certain criteria will have to be satisfied before a shareholder can bring a claim. Uncertainty exists at the moment as to how derivative claims under the Act will work in practice and a clearer picture will not emerge until such time as the first cases are brought under the Act.
Private companies will no longer be required to have a company secretary.
The memorandum of association as we currently...