At Work: Law and Governance - Keep it legal - New company law

Anne-Marie Piper, a partner in the charity and community team at solicitors Farrer & Co

The Companies Bill is expected to become law by the end of the year.

It is anticipated that most of the Bill will come into force in October 2007.

All of the charities established in England and Wales under the old Companies Act as private limited companies (generally, limited by guarantee) will need to become familiar with the new Act in due course, not least because all the forms and filings with Companies House will have new names. There are also many more charities that have subsidiary trading companies to which these changes will apply.

The Bill is intended to overhaul all aspects of company law. Its purpose is to simplify it, make it easier to understand and comply with, enhance members' involvement, promote business and stimulate investment. Once enacted, it will become the principal statute regulating companies in the UK and will for the most part replace the 1985 Act. It will make changes to existing law and, for charitable companies limited by guarantee, will affect areas such as the memorandum and articles of association, reports and accounts, board and shareholder meetings, the passing of resolutions and the composition of the board.

For the most part the Act will provide greater flexibility to existing charitable companies, but will not require them to take immediate action.

However, there are a number of new statutory provisions with which charities must comply.

For example, time limits for filing accounts have been reduced and there will be a statutory right for members of a company limited by guarantee to appoint a proxy to attend general meetings.

Charities might also want to take advantage of certain relaxations introduced by the Bill. For example, the requirement to hold an AGM every year has been dispensed with. If charities are to be able to take advantage of these reforms, they will need to review their constitutional documents.

All charities should be aware that the articles of association are to replace the memorandum and articles of association as a company's governing document, and the memorandum of association will be reduced to a simple form containing the list of subscribers. All other provisions previously set out in the memorandum will be treated as if they are set out in the articles of association.

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