Companies Act provisions put on hold

Large swathes of the Companies Act 2006, which were due to come into force next October, are to be delayed for a year, the government says.
Competitiveness minister Stephen Timms told the Confederation of British Industry conference last week that aspects of the Act had to be put on hold because Companies House is not ready.

He said: “We need to make sure the necessary changes to the Companies House systems and processes are in place before we bring the final provisions of the Act into force.”

The Department for Business, Enterprise and Regulatory Reform will now consult businesses to see whether some provisions of the Act can still come into force in October 2008.

Matthew Waters, an assistant solicitor at Bevan Brittan, says: “While the question of whether companies were ready for the changes is not clear, it is clear that Companies House is not ready.”

Delayed provisions include those relating to company formation, share capital, company and business names and directors’ names and addresses. Waters says there appears to be widespread knowledge of the Act within the business community, but adds: “No doubt many companies are not fully aware of the new opportunities that there are and also the new duties and restrictions now in force. 2008 will no doubt provide a clearer steer on how the changes have been taken up.”

Many of the reforms now scheduled for October 2009 are likely to have a significant impact, he says. “These include the new structure for memorandum and articles…along with an easier approach to formation of companies. There will also be significant changes in relation to shares with the concept of authorised share capital to be abolished and companies being permitted to give financial assistance for purchase of their shares.”
He says although the full effects of the provisions introduced on 1 October this year are yet to be felt, those relating to the codification of directors’ duties and the extended power for members to carry out derivative claims against directors are still likely to prove most controversial.

“It is thought the changes will lead to more derivative claims while claims for breach of the new directors’ duties will perhaps take a longer time to reach the courts,” he says.