Katie Hughes, commercial law solicitor with AMD Solicitors considers how the recently implemented changes to the law may affect your company.
The 1st October 2009 marked the final stage of implementation of the Companies Act 2006. The remaining provisions brought into force on this date include changes to the memorandum and articles of association for all companies. The new memorandum of association will be a much shorter document serving the limited purpose of providing evidence of the subscribers intention to form a company. Three new model forms of Articles are introduced.
The provisions contained in any company’s existing memorandum of association are treated as provisions contained in their articles of association. The existing articles will continue to apply except as superseded by the Companies Act 2006.
Whilst there is no requirement for a company to amend its existing articles it will be advisable for most companies to do so. This is particularly true for those many companies which rely only on their articles for guidance on the rights and obligations of its directors and members. Updating will enable a company to take advantage of the new provisions contained in the Companies Act 2006. For example, under the new Act private limited companies are no longer required to hold annual general meetings but, notwithstanding this provision companies will still have to continue to do so if their existing articles require it. Updating will also prevent the company from inadvertently breaching the new provisions introduced by the 2006 Act. The consequences of a breach range from a substantial fine to disqualification of directors!
The most advisable course of action is for a company to update its existing articles or to adopt the relevant new model form of articles and tailor these to suit its requirements. Some companies may be tempted to adopt the new model articles without amendment as a cost cutting exercise. A level of caution however should be exercised for any companies considering doing this as the new model form of Articles may be too simplistic for many companies as it fails to provide for certain situations, such as alternative directors or company secretaries and does not for example provide for alteration to a company’s share capital. It also assumes a degree of knowledge of the Companies Act 2006, which has 1300 clauses and 16 schedules!
For a limited time AMD Solicitors are offering private limited companies a special fixed fee to review and update its articles of association. For more details on updating your Company’s articles of association, please contact Katie or her colleagues in the commercial law team at AMD Solicitors telephone 0117 962 1205 or email firstname.lastname@example.org.
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