We are now approaching the date when the rest of the fifth commencement order comes into force. This article deals briefly with the Sections which will take effect from1 October 2008.
One other thing to remember from the Fifth Commencement Order is that The CA 1985 rules concerning financial assistance for acquisition of shares are repealed for private companies from 1 October 2008.
Directors: General issues
Section 155 contains the new requirement for at least one of the directors to be a natural person. The transitional provisions of the fifth commencement order say that this requirement does not apply until 1 October 2010 if a company had no natural persons as directors on 8 November 2006.
Section 157 is also new and sets the minimum age for appointment as a director to be 16. There was no minimum age in CA 1985. The Secretary of State can make exceptions to the minimum age requirement. Existing under-age directors will cease to hold office on 1 October 2008 unless they are excepted under Section 158.
Directors’ duties
Duty to avoid conflicts of interest (Section 175)
Directors must avoid a situation in which they have or could have a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company. This applies, in particular, to the exploitation of any property, information or opportunity whether or not the company could take advantage of the property, information or opportunity.
For a private company, the board can authorise the conflict of interest as long as there is nothing in the company’s constitution invalidating the authorisation. In the case of a public company, the constitution must specifically permit authorisation.
Whenever the board authorises such a conflict, the director in question does not count in the quorum and must not vote.
Note that Subsection 2 of Section 170 says that a person who ceases to be a director will continue to be subject to the duty in section 175 (duty to avoid conflicts of interest) as regards the exploitation of any property, information or opportunity of which he became aware at a time when he was a director, and to the duty in section 176 (duty not to accept benefits from third parties) as regards things done or omitted by him before he ceased to be a director.
Duty not to accept benefits from third parties (Section 176)
A director must not accept a benefit from a third party conferred by reason of his being a director or his doing or not doing anything as a director. This duty is not infringed if the acceptance of the benefit cannot reasonably be regarded as likely to give rise to a conflict of interest.
Duty to declare interest in proposed transaction (Section 177)
If a director is in any way, whether directly or indirectly, interested in a proposed transaction or arrangement with the company, he must declare the nature and extent of that interest to the other directors. The declaration must be made before the company enters into the transaction or arrangement. The director need not declare an interest if it cannot reasonably be regarded as likely to give rise to a conflict of interest or if the other directors are already aware of it.
Objections to company’s registered names (Sections 69 to 74)
A person (the applicant) may object to a company’s registered name on the ground that it is the same as a name associated with the applicant in which he has goodwill or that it is sufficiently similar to such a name that is use in the United Kingdom would be likely to mislead by suggesting a connection between the company and the applicant.
The Secretary of State shall appoint persons to be company names adjudicators. They must have such legal or other experience as, in the Secretary of State’s opinion, makes them suitable for appointment. One of the adjudicators shall be appointed Chief Adjudicator.
The Secretary of State may make rules about proceedings before a company names adjudicator.
If an application under Section 69 is upheld, the adjudicator shall make an order requiring the respondent company to change its name to one that is not an offending name. All respondents must co-operate with the order.
Either the applicant or the respondent may appeal to the court against any decision of a company names adjudicator.
Trading disclosures (Sections 82 to 85)
Section 82 states that the Secretary of State may make regulations requiring companies to display specified information in both specified locations and specified documents and to provide specified information on to those they deal with in the course of their business.
These regulations have now been published in the form of SI 2008 No 495 The Companies (Trading Disclosures) Regulations 2008 which come into force on 1st October 2008.
In these Regulations, a reference to any type of document is a reference to a document of that type in hard copy, electronic or any other form; and
A company (other than a dormant company) shall display its registered name at:
(a) its registered office; and
(b) any other location at which it keeps records available for inspection.
A company shall also display its registered name at any location at which it carries on business other than a location which is primarily used for living accommodation.
Regulation 5 deals with the manner of display of registered name. The registered name shall be displayed continuously but where any such office, place or location is shared by six or more companies, each such company is only required to display its registered name for at least fifteen continuous seconds at least once in every three minutes.
Every company shall disclose its registered name on:
(a) its business letters, notices and other official publications; (
b) its bills of exchange, promissory notes, endorsements and order forms;
(c) cheques purporting to be signed by or on behalf of the company;
(d) orders for money, goods or services purporting to be signed by or on behalf of the company;
(e) its bills of parcels, invoices and other demands for payment, receipts and letters of credit;
(f) its applications for licences to carry on a trade or activity; and
(g) all other forms of its business correspondence and documentation.
Every company shall disclose its registered name on its websites.
Every company shall disclose the following further particulars on:
(a) its business letters;
(b) its order forms; and
(c) its websites.
The further particulars are:
(a) the part of the United Kingdom in which the company is registered;
(b) the company's registered number;
(c) the address of the company's registered office;
(d) in the case of a limited company exempt from the obligation to use the word "limited" as part of its registered name under section 30 of the Companies Act 1985 or article 40 of the Companies (Northern) Ireland Order 1986, the fact that it is a limited company;
(e) in the case of a community interest company which is not a public company, the fact that it is a limited company; and
(f) in the case of an investment company within the meaning of section 833 of the Act, the fact that it is such a company.
If, in the case of a company having a share capital, there is a disclosure as to the amount of share capital on:
(a) its business letters;
(b) its order forms; or
(c) its websites, that disclosure must be to paid up share capital.
Where a company's business letter includes the name of any director of that company, other than in the text or as a signatory, the letter must disclose the name of every director of that company.
A company shall disclose:
(a) the address of its registered office;
(b) any inspection place; and
(c) the type of company records which are kept at that office or place, to any person it deals with in the course of business who makes a written request to the company for that information.
The company shall send a written response to that person within five working days of the receipt of that request.
Comment
The above requirements concerning websites and electronic communications are not new having been introduced into CA 1985 by the First Commencement Order in January 2007.
We are still finding in practice that a lot of companies are failing to comply with these requirements.
Alan Bonham
August 2008