Keep it legal: The Companies Act

New provisions of the Companies Act 2006 come into force on 1 October.

With 1,300 sections and 16 schedules, the act can seem daunting, particularly for charities that are also grappling with the Charities Act 2006. However, the basic message is "don't panic". There is little in the act that charities or their trading subsidiaries will have to act upon, but there are things they might wish to do.

One aim of the act is to simplify administration, so the new rules assume that more will be done by written resolution and less by meeting. Passing written resolutions is made easier so that, in most cases, unanimity will no longer be required, although there are detailed provisions for circulating resolutions to members.

Unless their articles provide otherwise, private companies will no longer have to hold annual general meetings and the notice period will be reduced to 14 days. Many charitable companies do not currently allow proxy appointments, but all members will now have that right, overriding the company's articles. Some statutory directors' duties are brought in, such as exercising reasonable care, skill and diligence, acting within their powers and promoting the success of the company. These should not cause concern for directors who are also charity trustees, but they should ensure they are aware of the statutory duties and keep them under review in their regular trustee training.

A helpful addition for charity trustees provides that an order obtained from the Charity Commission under section 26 of the Charities Act 1993 can authorise an act, notwithstanding that it involves a breach of these statutory duties.

Directors may want to check their insurance if they are concerned about derivative claims, where a member seeks relief on behalf of the company, generally against a director for breach of duty or negligence, including breaches before the claimant became a member of the company. The act widens the scope for such claims, albeit with some safeguards.

To be ready for and make best use of the latest provisions, charitable firms or trading subsidiaries should review their constitutions for any changes they wish to make to enhance administration of their companies.

- Nicola Evans is a solicitor for Bircham Dyson Bell 

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