Articles Of Association: Time For Change?

We review the situation in light of the deferred implementation of the Companies Act 2006

Introduction

A number of provisions of the Companies Act 2006 (the Act) are now in force and, under the original time-table, the Act would have been fully operational by 1 October this year. However, in a surprise move, the Government announced last November that it had decided to delay final implementation of the Act until October 2009.The reason for the delay is to ensure that Companies House will have enough time to prepare the necessary changes to its systems.

The remainder of the Act will now be implemented in several further stages during the course of this year(principally in April and October) with the last remaining provisions being brought into force on 1 October 2009.News of postponement of the final implementation of the Act has caused a dilemma for those companies that had planned to up-date their articles at this year's annual general meeting (AGM) to include all changes necessary to reflect the new law. Many companies now query whether the changes already in force are significant enough to justify making any amendments to their articles at this stage.

For reasons we discuss below, we recommend that companies should, in fact, go ahead and up-date their articles at the next AGM in order to take account of provisions of the Act already in force as well as those due to be implemented later this year (even though further changes to the articles may still be needed at a later date).

We suggest that companies with an AGM in the early part of the year adopt revised articles with effect from1 October 2008 so that all these changes can be dealt with at the one general meeting.

Which changes already introduced by the Act substantially affect a company's articles?

The new regime introduced on 1 October 2007 by Part 13 of the Act, governing shareholder resolutions, company meetings and voting rights, significantly changes the law in this area, with a considerable impact on company articles. For example, the Act:

removes the statutory requirement for private companies to hold an AGM although they may still choose to do so

reduces the statutory notice period for shareholder meetings to 14 days, except in the case of AGMs of public companies where the notice period required by the Act is 21 days

greatly enhances the rights of proxies

provides a new statutory procedure for written shareholder resolutions for private companies. The Act abolishes the...