The Companies Act 2006 which received Royal Assent in November 2006 consists of 1300 sections and is the thought to be the single largest piece of legislation ever made. This Act restates and replaces most of the company law provisions brought in by the previous Acts. The 2006 Act introduces an extensive range of changes to areas of company law such as the formation of a company, directors’ duties and liabilities, members/shareholders rights and share capital maintenance.
Although the majority of the provisions contained in the Act were not due to come into force until 1st October 2008, which has subsequently been postponed to 1st October 2009, a number of provisions such as the codification of directors duties, transactions with directors, written resolutions and changes to the law on meetings, electronic communications with members and increased rights for proxies came into force in 2007.
The 2006 Act now enables companies to correspond with their members by electronic communication.
Under the Companies Act 19851, companies were permitted to send notices of meetings and copies of their annual accounts and directors reports by means of electronic communication, provided that the company and the recipient agreed. The 2006 Act allows for members and companies to communicate via electronic means and the scope of the term has been widened. The company communications provisions of the Companies Act 2006 are to be found under sections 1143 to 1148 in Part 37 and the accompanying Schedules 4 and 5.
These provisions came into force in January 2007. The reasons for this part of the Act coming into force at this early stage was to insure the EU Transparency Obligations Directives were complied with and to allow early delivery of the benefits of e-communications. These benefits include significant monetary savings to business, improved accessibility to information for all parties involved in the company, and provides a way for a direct dialogue between companies and shareholders.
Members of a public company who hold at least 5% of the voting rights, or at least 100 members of a public company holding on average £100 of paid-up capital, can propose resolutions for an AGM agenda and to require the company to circulate details of the resolutions, which can be done in electronic form, to all members. Further, the members can require the company to circulate a statement up to 1000 words relating to a resolution or other matter which would be dealt with at an AGM.
The 2006 Act also now enables indirect investors who are individuals who invest in units in a unit trust that invest in shares in the company to be more involved in, have a more direct relationship with their intermediary and be kept more informed of company decisions.
Part 9, Section 145 of the 2006 Act, which came into force on 1st October 2007, gives rights to companies to allow them to empower a member to nominate other persons to enjoy his rights. In order to empower their members with these rights, this provision will require to be detailed in the companies Articles of Association. If this is the case, the member may nominate several persons to apply his rights, so as to accommodate the splitting up of the exercise of the rights among numerous investors with beneficial interests in them.
The Act recognises that in the a large number of cases the shares owned by beneficial owners in a companies are not the legal owners. The legal owners are usually institutional investors who the beneficial owners have channelled their investment. The Act requires that companies allow the institutional investor to nominate the beneficial owner to have a right to all communications that would have been sent by the company to the legal owner.
This applies in particular to the rights conferred by sections 291 and 293 (right to be sent proposed written resolution); (b) section 292 (right to require circulation of written resolution); (c) section 303 (right to...
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