Introduction

The government has now published its detailed implementation timetable for the Companies Act 2006 (the ‘Act’), and the key dates set out are October 2007, April 2008 and October 2008. A larger than expected portion of the Act will be coming into force in October of this year, including the codification of directors’ duties.

However, it is important not to forget amongst all the publicity surrounding these dates that 6 April 2007 is also a key date. Some of the Act will be coming into force on this date, and certain repeals of the Companies Act 1985 will take effect. This article looks at the most significant changes in brief.

The Main Changes

Takeovers

The main area that will come into force on 6 April relates to takeovers. Part 28 of the Act, implementing as required the Takeovers Directive, is being brought into force by way of the Second Commencement Order. The temporary regime governing takeovers introduced by interim regulations in May last year to implement the Takeovers Directive will be replaced under the Act by equivalent provisions. The dual system will fall away, and the Takeover Panel will be placed on a statutory footing across the board. The Panel will be able to make rules on takeover regulation, require disclosure of information and impose sanctions on those who breach its rules.

In terms of specifics, the main effect of the takeover provisions in the new Act will be as follows:

• For all companies, there will now be a single squeeze-out and sell-out procedure, allowing the mandatory buy out of minority shareholders (and the right of minority shareholders to be bought out) if 90% acceptances under a takeover bid are achieved and the procedure is implemented within 3 months of the end of the time allowed for acceptance of the bid. NB: the new test, a dual test, differs slightly from the old regime under the 1985 Companies Act, and the basic effect of the new provisions is to remove the traps that were in the 1985 Act. However, in practical terms, the dual test to reach the 90% threshold should not make a real difference as the percentage of total capital carrying voting rights in a company (or class of shares) and the percentage of voting rights will normally be the same.
  
• For financial years beginning on or after 20 May 2006, where a UK company has securities carrying voting rights admitted to trading on an EU regulated market at the end of that year, its directors’ report will have to include certain information about its share structure, the rights attaching to its shares, and any rules or arrangements which could affect the success of a takeover bid. For example, details will need to be given of the rights and obligations attaching to each class of shares, including any restrictions on voting rights, and any ‘concert party’ arrangements between shareholders that are known to the company.

Miscellaneous repeals of the Companies Act 1985

Various repeals of the Companies Act 1985 are coming into effect on 6 April, including:

• Sections 293 and 294 (which set the age limit on directors at 70) NB: many companies, however, mirror the old statutory requirement in their articles of association and such a provision could now fall foul of the new age discrimination regulations. If this is the case for your company, you should consider amending the articles;
  
• Section 311 (the prohibition on a company paying a director remuneration free of income tax);
  
• provisions in Part X relating to the disclosure of share dealings by directors and their families and the need to maintain a register of directors’ share interests (NB: directors of companies who are listed on PLUS, AIM or the main list will need to comply with DTR5 (set out in the FSA’s new Disclosure and Transparency Rules) as a result of implementation of the Transparency Directive); and
  
• the Sections 323 and 327 prohibitions on directors dealing in options over shares in a company admitted to the Official List, AIM or PLUS markets.
  

This staggered implementation of the Act is certainly keeping all of us on our toes, and we will be issuing further briefing notes as and when relevant.

© Davenport Lyons 2007 All rights reserved
This document reflects the law and practice as at March 2007. It is general in nature, and does not purport in any way to be comprehensive or a substitute for specialist legal advice in individual circumstances.