Companies to review articles

Companies and advisers need to urgently review their Articles of Association
to ensure that they are compliant with the new version of The Companies (Tables
A to F) Regulations 2007, which came into effect on 1 October 2007, says Janis
Law, chief group solicitor at business information and services group, Jordans.

Table A sets out the articles which apply to companies limited by shares by
default if they fail to file articles on incorporation. It is incorporated into
most companies’ articles.

The approach taken by the government in updating Table A is to omit any
provision which may be inconsistent with the provisions of the Companies Act
2006.

According to Law, the key changes are that there will be two versions of
Table A ­ one for private and one for public companies and there will be a new
definition of “the Acts” to include both the 1985 and 2006 Companies Acts.

Up for review
Some of the areas in relation to which private companies should be reviewing
their articles at this stage are obvious, according to law firm Lovells, but
others are less so.The main areas for review include:
• References to annual general meetings – The Act abolishes the
requirement for private companies to hold an AGM, unless 10% of shareholders
demand one. The abolition is subject to any express provision in a company’s
articles specifying that it must hold an AGM.

Companies will need to check for any indirect references to an AGM, because,
although such references will not oblige the company to hold an AGM, they may
create practical difficulties in relation to the running of the company. For
example, current company law provisions 73 to 75 requiring directors to retire
by rotation at AGMs will cease to have effect, and companies will need to
consider what to replace it with. A particular point to note is that even
companies which have passed an elective resolution to dispense with AGMs will
need to check that their articles do not contain any express requirement to hold
one. This is because the elective resolution fell away on 1 October 2007, with
the result that any express requirement which, until now, has been overridden by
the resolution, will once more have effect.
• Notice period for general meetings – The Act abolishes the 21
days’ notice period for a meeting at which a special resolution is to be
considered. However, the standard 14-day notice period which the Act imposes for
all meetings other than a public company’s AGM is stated to be subject to the
company’s articles. Companies may, therefore, want to delete any provision in
their articles requiring a meeting to consider a special resolution to be called
on more than 14 days’ notice.
• Proxy rights – The Act introduces enhanced rights for proxies
allowing them to attend and speak at meetings, and to vote both on a poll and on
a show of hands. In some respects, the rules on proxies are stated to be subject
to the articles, and so companies may want to ensure that their articles
establish a regime which meets their needs.
• Written resolutions – Under the Companies Act 1985 private
companies could provide in their articles for a non-statutory alternative to the
statutory procedure. The Companies Act 2006 does not allow a non-statutory
alternative, and companies may want to delete any relevant wording from their
articles for two reasons: purely as a tidying-up exercise; and because there is
some doubt as to the effect of leaving such wording in place. It may be that a
non-statutory alternative which requires unanimity prevents companies from
taking advantage of the new statutory regime, under which unanimity is no longer
required.

Other issues that take effect that companies should consider include:
• The introduction of the new electronic communications regime in January 2007.

• The removal of any provisions requiring directors to retire at a certain age ­
age discrimination regulations came into force last year and the upper age limit
in section 293 of the Companies Act 1985 was repealed in April.
• There is no need to appoint a company secretary unless the company wants to.
If one is appointed, they will have the same rights and responsibilities as
previously was the case.
• Until now, the general duties of directors have been developed in case law. To
make the rules more accessible, the Act confirms the existing case law by
stating that the duty of directors is to act in a way which they consider most
likely to promote the success of the company for the benefit of its shareholders
as a whole and that, in doing so, they will need to have regard, where
appropriate, to long-term factors, the interests of other stakeholders and the
community, and the company’s reputation.

Future Amendments
Other issues that will come into effect on 6 April 2008 and 1 October 2008
include:
• New accounting arrangements From April 2008, the deadline for private
companies to file annual accounts and reports will reduce from ten months to
nine, and the exemption from preparing consolidated accounts by medium-sized
groups has been changed so as to apply now to only small groups.
• At least one person to serve as director From October 2008 all companies will
need to have at least one actual person as a director and cannot just have
companies acting as directors.
• From October, a new minimum age of 16 is set for directors. Those who are
under age will cease to be directors.

Useful links
www.berr.gov.uk
www.jordans.co.uk
www.lovells.com