New Company Law - Company administration

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30 January 2009

The objective of the Companies Act 2006 here is intended to be deregulation, mainly intended for small to medium-sized owner/manager company businesses – but some of the provisions may be of interest to charitable companies.

From October 2007 Annual General Meetings (AGM) are no longer obligatory – but a company's Articles can still require an AGM. If the Articles already require one then it is compulsory unless the Articles are amended. Many charities, especially those with a wide membership body, will opt to retain AGMs.

The Act removes the right of a chairman of a general meeting of company members to have a casting vote – but the chairman of meetings of the directors/trustees may still exercise a casting vote.

The Act introduces enhanced proxy rights, with a statutory right for members to appoint a proxy who can attend, speak and vote at general meetings (even on show of  hands) – these proxy rights can no longer be excluded.

A company secretary is no longer compulsory for private companies – but the company may still choose to retain the role. Charities with volunteer, non-executive trustees will usually need to appoint one of their number, or a non-trustee, to fulfil the role of a company secretary.

The notice period for general meetings will be 14 days regardless of the type of resolution to be passed (unless otherwise specified in the company's current Articles) – but we have found that many charities still opt to give their members 21 days' notice of general meetings.

Extraordinary resolutions are abolished, and the term "extraordinary general meeting" is removed from the legislation – the Act refers only to a "general meeting", if it is not an AGM.

A written resolution will no longer need the unanimous approval of all the company members. Ordinary written resolutions may now be passed with a simple majority of over 50% and special resolutions with a 75% majority (they formerly required unanimous approval). This provision may be useful for many charities  - but a written resolution cannot be used to remove a trustee/director or an auditor.

Members holding between them 5% of voting rights can propose a written resolution and require its circulation by the company, plus an accompanying statement, at the members' own expense unless the company agrees to pay the costs. Small activist groups of members who wish to challenge the decisions of the board of trustees - quite common in the charity sector - may be able to use this provision to further their agenda.

All companies should now have at least one 'natural' director i.e. a human being. This will affect companies in the charity sector which have a parent charitable company as the sole 'corporate' director, and which will need to appoint an individual to the board as well.

From October 2009 it should be possible for all directors to use a service address rather than a residential address for publication on the Companies House register, which may be preferred by many charity trustees.

Also, from October 2009, a new company's constitution will comprise only of the Articles of Association, which will include the company's objects. The Memorandum of Association will become simply a company formation document. For existing companies, the provisions in their Memorandum will be deemed to form part of their Articles.

As regards the public right to inspect a company's Register of members, there are new conditions for access. A person wishing to inspect the Register now has to provide his or her name and address, the purpose of the inspection and details of  to whom the information will be disclosed. The Court may relieve a company of the obligation to allow access to the Register of Members.

Finally, all companies may now use electronic means and websites to communicate with their members, with their consent – although this may be deemed if a member does not object after 28 days’ notice of the intent to use such facilities, provided the company's request makes such proposed use clear. A charity may be able to use electronic communications to circulate annual report and accounts, financial statements, AGM notices and proxy appointments, thus considerably reducing printing and postage costs. Individuals members will retain the right to receive information in paper form if they wish.

Many of these changes in the legal regulations for company administration may enable charitable companies to simplify their procedures and to reduce costs in the long term, provided any necessary amendments to their Memorandum and Articles are adopted by the members in general meeting or by written resolution. Our Charities Unit will be able to assist your charity with this process and will provide a costs estimate on request.

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