Mallin: Corporate Governance 2e 
Updates
PowerPoint presentationsMallin: Corporate Governance 2e
Chapter 8
Role, duties, and responsibilties
Page 125 of book
In November 2006, the Companies Act (2006) finally received Royal Assent after a prolonged period in the making. The Act updates previous Companies' Acts legislation, but does not completely replace them, and it contains some significant new provisions which will impact on various constituents including directors, shareholders, auditors and company secretaries. The Act draws on the findings of the Company Law Review proposals.
The main features are as follows:
- directors' duties are codified
- companies can make greater use of electronic communications for communicating with shareholders
- directors can file service addresses on public record rather than their private home addresses
- shareholders will be able to agree limitations on directors' liability
- there will be simpler model Articles of Association for private companies, to reflect the way in which small companies operate
- private companies will not be required to have a company secretary
- private companies will not need to hold an annual general meeting unless they agree to do so
- the requirement for an Operating and Financial Review (OFR) has not been reinstated, rather companies are encouraged to produce a high quality Business Review
- nominee shareholders can elect to receive information in hard copy form or electronically if they wish to do so
- shareholders will receive more timely information
- enhanced proxy rights will make it easier for shareholders to appoint others to attend and vote at general meetings
- shareholders of quoted companies may have a shareholder proposal (resolution) circulated at the company's expense if received by the financial year end
- whilst there has been significant encouragement over a number of years to encourage institutional investors to disclose how they use their votes, the Act provides a power which could be used to require institutional investors to disclose how they have voted
All parts of the Act should be in force by October 2008 with certain provisions taking effect much earlier, for example, company communications to shareholders, including electronic communications, took effect from January 2007.
Overall there seems to be an increasing burden for quoted companies whilst on the other hand the burden seems to have been reduced for private companies. In terms of the rights of shareholders these are enhanced in a number of ways including greater use of electronic communications, more information, enhanced proxy rights, and provision regarding the circulation of shareholder proposals at the company's expense. Equally there is a corresponding emphasis on shareholders' responsibilities with encouragement for institutional shareholders to be more active and to disclose how they have voted.
Companies Act (2006) Her Majesty's Government, Available for download from www.opsi.gov.uk/
Other useful websites in relation to the Companies Sct 2006
www.icaew.com/library/index.cfm?AUB=TB2I_44492
ICAEW website: useful exposition of directors' duties under the Companies Act 2006.
www.legislation.gov.uk/acts/acts2006/pdf/ukpga_20060046_en.pdf
The Companies Act 2006 (all 760 pages!).
www.dti.gov.uk/bbf/co-act-2006/index.html
The DTI website provides details of the key changes and links to more detailed aspects of different areas.
www.companiesact.org.uk/
The ICSA website details various aspects of the Companies Act 2006
www.companieshouse.gov.uk/companiesAct/implementations.shtml
Companies House has a useful summary of the timetable for implementation of different sections of the Companies Act 2006.
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