Companies Act 2006 - implications for shareholders

If you are a shareholder in a private company, this page touches on some of the key areas relevant to you. It includes information for private equity and other institutional investors and joint venture partners, but it only deals with private companies.

Is it in force?

Yes, except where shown below.

Can we use a written resolution rather than call a meeting?

Yes, unless it relates to the removal of auditors or directors.

Written resolutions will no longer have to be signed by all members, but by a simple a majority if an ordinary resolution and by a 75% majority if a special resolution. This may weaken shareholder protection, especially in joint ventures and private equity investments that rely on the quorum at a meeting for minority protection.

Click here for more information about written resolutions, shareholder meetings and the abolition of the AGM.

Can a company communicate with me by email or by its website?

Yes, unless the articles say otherwise. Shareholders must be consulted but electronic communication becomes the default - shareholders have to opt out if they don't want it. Now in force - click here for more information about electronic communications.

Are there changes to directors' powers to issue shares?

Yes, they are relaxed - click here for more information. Pre-emption rights are largely unchanged. In force 1 October 2009.

Is the ban on financial assistance abolished?

Yes, for private companies with effect from 1 October 2008 - click here for more information.

Can I sue directors more easily?

Yes, perhaps. Derivative actions, in which a shareholder represents the company against directors, at the company's expense, are slightly easier and now include claims against directors for negligence - click here for more information.

Can auditors agree with the company to limit their liability for the audit?

Yes, provided that the agreement is fair and reasonable, relates to the audit of a specific financial year and has been authorised by an ordinary resolution of the shareholders.

In force 6 April 2008.

Are class rights still protected?

Yes. But there are changes to the way provisions in the articles are entrenched, which may make it hard to protect rights that are not directly associated with the shares, without the consent of all shareholders and some procedural requirements.

In force 1 October 2009.

What about corporate governance? Is it tightened?

Actually, no. Directors' duties are codified, but not greatly increased. Independent directors can authorise directors' conflicts of interest (other than benefits from third parties) that previously needed shareholder approval (in force 1 October 2008) - click here for more information on directors' duties. One director can execute a deed on behalf of the company (in force 1 April 2008). For most companies, the business and powers of the company will no longer be limited by an objects clause, so shareholder control of directors' actions is reduced. (in force 1 October 2009).

Recommended action: by October 2009, or for new investments, review articles, investment agreements, and directors' service contracts to ensure shareholder protections and controls are adequate.