Companies Act 2006

The Companies Act comprises approximately 1,300 sections and introduces new legislation which reflects the changing business environment. The Act contains new and updated legislation.

The Act provides for a single company law regime applying to the whole of the UK, so that companies will be UK companies rather than GB companies or Northern Ireland companies as at present. In Scotland, there are several areas where the Act deals with matters that are devolved.

Summary of the Act

PART	SUMMARY
1 to 7	The fundamentals of what a company is, how it can be formed and what it can be called.
8 to 12	The members (shareholders) and officers (management) of a company
13 and 14	How companies may take decisions
15 and 16	The safeguards for ensuring that the officers of a company are accountable to its members
17 to 25	Raising share capital, capital maintenance, annual returns, and company charges
26 to 28	Company reconstructions, mergers and takeovers
29 to 39	The regulatory framework, application to companies not formed under the Companies Acts and other company law provisions
40 to 42	Overseas disqualification of directors, business names and statutory auditors
43	Transparency obligations
44 to 47	Miscellaneous and general

A three step approach

Start small
The Companies Act starts by approaching the legislative needs and obligations of private companies while there are additional requirements for public, quoted and traded companies. Previously legislation applied to all companies while providing for exemptions in certain circumstances for smaller companies or if shareholders agreed. It is important to note that private companies remain subject to much of the detail contained in this Act.
Simplifying legislative arrangements
In order to make the UK a country where it is easier to do business the Act seeks to simplify procedures and requirements for starting and running a company.

Notwithstanding that objective, there is still a weighty tome of legislation to be complied with.
Shareholder accountability
These provisions mainly apply to listed companies. The Act seeks to make directors more accountable to shareholders.

Summary of sections of the act

Please click on the links to expand and collapse the following navigation bars for more information and links to additional parts of the Act.

A more in depth look at the act

A more in depth look at the Act

Forming a company

The provisions relating to company formation are contained in Parts 1 to 7.

Choosing a name for your company

A company name must not be offensive or suggest any connection with government or public authority, unless permission is granted by the Secretary of State.

Changing the company name

The Act permits a company to change its name. The provisions governing name change are found in sections 78 and 79. This may be achieved either by special resolution of the members or by other means provided by the company's articles. There are also p...

Registered office

The registered office is the official address to which all communications and notices may be addressed. The company must at all times have a registered office and this must be a physical location and not a PO Box address. The country of the location o...

A company's members

All companies must keep a register of members

Shares and share capital

Shares in a limited company having share capital must each have a fixed nominal value and a share must be distinguished by its appropriate number, unless if at any time all the issued shares in a company are fully paid up and rank pari passu for all p...

Appointment of directors

The legislation governing the appointment and removal of directors is contained in the Act in Part 10 and comprises nine chapters and over 100 sections. Inevitably this section of our website cannot cover all the aspects of the Act, but endeavours to ...

General duties of directors

The general duties required of a director are set out in seven sections.

Directors transactions requiring members approval

Where a service contract is, or maybe, longer than two years.

This is a complicated area of the Act and we recommend that advice be sought with regard to long term service contracts.

Loans to directors

The Act introduces a major change in that it permits a company to make a loan to a director. A loan or guarantee must be approved by a resolution of the members of the company. A resolution giving the necessary approval can only be passed when a memor...

Related agreements

A company may not take part in an arrangement under which another person enters into a transaction that, if it had been entered into by the company, would have required approval under sections 197, 198, 200 or 201, and that person, in pursuance of the...

Directors' service contracts

The company is required to keep directors' service contracts or any memorandum of terms at the company's registered office, or at any place specified under section 1136, as section 229 confers rights on members to inspect a request copies.

Directors' liabilities

Provisions protecting directors from liability

Filing of accounts and late filing penalties

Companies are automatically fined if accounts are not submitted on time. Accounts should be normally be filed for a private company ten months after the company's accounting reference date (reduced to nine months for accounting periods starting on or after 6 April 2008).

Records of directors meetings

The company's Board of Directors has responsibility for the affairs of the company.

The Act requires every company to keep minutes of all proceedings at directors meetings for at least ten years from the date of the meeting.

Company secretary

A private company is not required to have a secretary, while a public company must have a secretary.

Accounting records

Every company must keep adequate accounting records

Financial year

A company's financial year is determined by its accounting reference date in each calendar year.

Group accounts

Small companies: If at the end of a financial year a company subject to the small companies regime is a parent company the directors, as well as preparing individual accounts for the year, may prepare group accounts for the year.

An overview of key changes

The Companies Act 2006 received Royal Assent on 8 November 2006 and is the longest Act ever passed by Parliament. The vast majority of the Act comes into force by 1 October 2008 with some of the law effective January and April 2007. Other key dates fo...

Directors' report

The approved accounts must include a directors' report

Signing of accounts: directors and auditors

Subject to certain exemptions, a company that meets the small company criteria in respect of a financial year is exempt from the requirement to have an audit of accounts for that year.

Appointment of auditors

An auditor of a private company must be appointed for each financial year of the company, unless the directors resolve otherwise on the grounds that audited accounts are unlikely to be required.

Auditor's rights to information

A person commits an offence who knowingly or recklessly makes to an auditor of a company a statement (oral or written) that conveys or purports to convey any information or explanations which the auditor requires, or is entitled to require and is misl...