Corporate Act Aware 2 - The Companies Act
ACT AWARE 2
Welcome to the second Act Aware from FSI. In the first edition we promised to update you as soon as the Government had settled on a implementation timetable for the Companies Act 2006 (the Act). The Department of Trade and Industry (DTI) has now published that timetable and so this Act Aware provides you with a summary in the accompanying schedule.
The DTI have also recently issued a new consultation document on the Act. We explain below what that document means and how it relates to the Act.
THE IMPLEMENTATION TIMETABLE
As you will see in the Table overleaf, the key date for your diary in the next 6 months is the 1 October 2007 when a broad range of provisions become operational. We shall update you in full as this date approaches. However, it is important not to ignore those provisions that shall be implemented much sooner, in particular, the new takeovers regime.
Why does the Government not implement all of the Act at the same time?
Put simply there are a range of commercial and administrative factors that affect how quickly the Act be implemented the pace of implementation of the Act’s provisions. The Government must balance the conflicting needs of trying to introduce the benefits of the new Act for businesses as quickly as possible whilst still giving companies and their advisors time to adjust to the new law. In addition, the Registrar of Companies will require sufficient time to adapt to the new regime by updating Companies House’ systems and processes.
Where substantive secondary legislation is required it must be in place well in advance of commencement of the relevant provisions. The Government is also conscious of synchronising the timing of EU Company Law requirements with the introduction of the Act’s provisions to avoid adding further complexity to the implementation process.
The staggered start certainly provides us and you with sufficient time to ensure that your company is prepared for any changes under the Act, so as to minimise the impact on your business.
THE DTI CONSULTATION DOCUMENT
In February 2007, the DTI issued its latest Consultation Document on the Act in respect of secondary legislation, copies of which you can download from the DTI’s website www.dti.gov.uk. Its contents are broadly divided into three areas: new secondary legislation, new model articles of association and transitional and savings provisions.
Secondary legislation is usually required to flesh out the bones of primary legislation and, whilst many of the key provisions in the Act are comprehensively drafted, it was always intended that a number would require more detail added at a later stage. Accordingly, the Consultation Document proposes new secondary legislation on areas including company formation and re-registration, company and business names, accounting and reporting regulations, audit and statutory auditors, share capital, overseas companies and company records.
The DTI has already undertaken this process in respect of the proposed New Model Articles of Association for both private and public companies and this process continues, with the latest drafts being re-issued in the Consultation Document for further comment.
The final chapter of the Consultation Document considers the extent to which further provisions may be required to maintain the status quo for businesses operating under the old regime that will have to adapt to the new one. These Transitional and Savings Provisions are required to ensure that there is minimal upheaval for companies.
ACTION
Notification of significant shareholdings in companies whose shares are traded on a regulated market as from 20 March 2007.
Diarise 6 April 2007 and 1 October 2007 for the implementation of the next tranches of the Act
REACT - YOUR COMPLIANCE TIMETABLE
IMPLEMENTATION OF DISCLOSURE AND TRANSPARENCY RULE 5
20 March 2007
The main purpose of DTR 5 is to ensure that both the company and the market can see who has voting control over the shares in a publicly traded company, whether that company is incorporated in the UK or not.
A person with a notifiable percentage of the voting rights of an issuer, under DTR 5 should have notified the issuer by the 20th Marchthe percentage of voting rights they hold unless such a notification has already been made (if for example their holding has gone through a DTR 5 threshold after 20 January 2007).
AIM companies should take note of Rule 17 and Schedule 5 of the AIM Rules for Companies which complements the DTR 5 provisions.
6 APRIL 2007 IMPLEMENTATION
Interim regulations implementing the EU Takeover Bids Directive have been in place since 20 May 2006. These regulations will be repealed and replaced by the Takeover provisions in Part 28 of the Act. The new regime will not be substantially different from the old. However, you should note the simultaneous introduction of secondary legislation that extends the Act’s provisions to apply to unregistered companies that have voting shares admitted to trading on a regulated market.
Public authorities shall be enabled in certain circumstances, to disclose information where the information is to be used in civil proceedings or otherwise for the purpose of establishing, enforcing or defending legal rights (implemented by s.1281 of the Act, which amends Part 9 of the Enterprise Act 2002).
The first commencement order inadvertently removed protection for members of LLPs who have been granted confidentiality orders from having their details open to inspection on the public register. This protection will be restored.
MISCELLANEOUS ROUND-UP
1 October 2007
The Act is divided up into subject areas known as Parts. All or some of the Parts listed below will come into force on this date and we will provide you with more detailed commentary on each nearer the time:
The exercise of members’ rights (Part 9); Company Directors (Part 10); Derivative claims and proceedings by members (Part 11); Resolutions and meetings (Part 13); Control of political donations and expenditure (Part 14); Content of directors’ report - business review (s.417); Fraudulent trading (Part 29); Protection of members against unfair prejudice (Part 30); Company investigations - amendments (Part 32).
31 December 2007
Indirect investors shall become entitled to enjoy certain information rights via the registered member (e.g. to receive company documents and information).
The Government’s objective is to either have made all secondary legislation or have laid them in draft where Parliamentary approval is required.
1 October 2008
All parts of the Act should be implemented.