In an unexpected move towards the end of last year, the government announced that the final commencement date for the Companies Act 2006 (the ‘2006 Act’) would be put back from 1 October 2008 to 1 October 2009.  Whilst many felt relief at the extension of this grace period (particularly those at Companies House who had, according to the government, instigated this delay) there was also a certain amount of concern and frustration amongst stakeholders that some of the flexibilities under the 2006 Act that were to come into force would not be available for a further year.  There was even a question mark over whether any changes would be coming into force in October 2008, or whether all would be put back until October 2009.

The situation has now been clarified, and the government has confirmed that some provisions of the 2006 Act will be coming into force this October. Some of these are particularly welcome for private companies in particular, others for companies across the board.

The key areas

The following areas of note will be coming into force this October:

• the repeal of the prohibition on financial assistance by private companies;
• directors' conflicts of interest and declarations of interest (the remaining codified duties);
• corporate directors and under-age directors; and
• reductions of capital by using the new solvency statement procedure (only available to private companies.

Obviously the first and last points are key for private companies, and in particular there is considerable relief about the confirmed repeal of the financial assistance prohibition for private companies, as there had been some doubt as to whether this would actually take place at all. 

The introduction of the remaining codified duties relating to directors’ conflicts of interest and declarations of interest is also significant.  The rules on conflict are changing somewhat, with one of the most significant changes relating to the ability of independent directors to authorise directors’ conflicts of interest. For many companies amendments to their Articles of Association will be necessary in order to take advantage of the new rules, and the best timing for this is one of the issues currently being debated upon by many clients.  The requirement to have at least one director who is ‘natural’ person could also be significant, although a two-year grace period has been built in.

What happens now?

There is of course an implementation date before this – 6 April 2007.   Details of the changes coming into force on this date can be found here.

© Davenport Lyons 2008. All rights reserved.
This document reflects the law and practice as at January 2008. 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.