Keep it legal: Companies Act 2006

Many provisions in the Companies Act 2006 have come into force already, and the entire act is expected to be in force by 2009.

The act is relevant to all charitable companies, trading companies and charities with corporate trustees. It is supposed to make it easier for companies to carry out their business. However, to take advantage of the act, companies are likely to have to amend their memorandum and articles of association because many will contain provisions that are based on the Companies Act 1985.

Charitable companies might wish to take advantage of a number of the act's provisions. Written resolutions can now be passed by the same majority as is required for passing resolutions at meetings. The requirement to hold an annual general meeting has been removed. Companies can send notices by electronic means. The notice period for all general meetings has been reduced to 14 days. Documents can now be signed on behalf of the company by one director in the presence of a witness.

The act has also changed the accounting regime for small charitable companies to bring them into line with their unincorporated counterparts in relation to the scrutiny of their accounts. It has introduced measures to put charitable companies and unincorporated charities on a level playing field in relation to the preparation and scrutiny of group accounts. Accounts must now be submitted to Companies House within nine months of the accounting year end, rather than 10.

An unintended consequence of the act that could affect many charitable companies came to light at the end of last year. It was noted that the effect of the new statutory definition of 'ordinary resolution' meant that any provision in a company's articles giving the chair a casting vote at general meetings would be overridden. The position has been addressed in secondary legislation. It means that companies that were incorporated before 1 October 2007 and whose articles provided the chair with a casting vote can still rely on the relevant article. Those that were incorporated after 1 October 2007 cannot give the chair a casting vote in their articles at general meetings, and companies that amend their articles after 1 October 2007 can retain the article giving the chair a casting vote.

 - Ros Harwood is a partner and head of charities at Dickinson Dees

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