Companies Act
A large part of the Act came into force on 1 October 2007. Among the most important changes are the following:-
1. The codification of directors’ duties for the first time in English law which will oblige directors to:-
- Act in accordance with the Company’s Memorandum and Articles of Association and to exercise their powers as directors only for the purposes for which those powers were conferred.
- Act in the way they consider, in good faith, would be most likely to promote their Company’s success for the benefit of shareholders as a whole which will involve their considering the following:-
- the likely consequences of their decision in the long term;
- the interests of their Company’s employees;
- the need to foster their Company’s business relationships with suppliers, customers and others;
- the impact of their Company’s operations on the community and the environment;
- the desirability of maintaining a corporate reputation with high standards of business conduct;
- the need to act fairly as between shareholders.
- Exercise independent judgment.
- Exercise reasonable care, skill and diligence.
The remainder of the Code will come into force on 1 October 2008 which, amongst other things, will oblige directors to avoid conflicts of interest.
2. A right for shareholders to bring an action on behalf of the Company against directors and auditors for breach of duty or negligence, although in order to bring such a claim a shareholder must get permission from the Court.
3. New rules in relation to shareholders’ meetings and resolutions, including the following:-
- Written resolutions will no longer have to be passed unanimously by shareholders, and so that written ordinary resolutions only require a simple majority whilst written special resolutions require a 75% majority of those eligible to vote.
- Notice periods for shareholders’ meetings other than for AGMs and public companies will now be 14 days irrespective of the type of resolution proposed to be passed unless the Company’s articles provide for a longer notice period.
- Private companies will no longer be obliged to hold AGMs