UK DIRECTORS BEWARE!!!
The Companies Act 2006 was finally implemented on the 1st of October 2009 and will affect virtually every aspect of how a UK company is run. One of the purposes of the Act is to lessen the burden of administration of the company - particularly important for small businesses - and adopt a "plain English" approach. In practical terms however the Act has placed greater emphasis on the duties of the directors and the way the directors run the company. For the first time, legislation codifies the duties of the directors and provides various civil and criminal remedies against directors who are not aware of those duties and perhaps unknowingly do not act in the interests of the company. To provide some protection to the directors, it will be necessary to update the company's Articles of Association.
The key areas which require immediate attention are:
Directors' Conflicts of Interest
Under the new Act the directors now have a duty in regard to transactions which give rise to a conflict of interest. To protect directors, the Articles need to be amended to provide directors with the ability to authorize these transactions which may fall into the realm of "conflict of interest". If this is not done, the shareholders must authorize these transactions which may not be practical and in danger of being overlooked, leaving the director concerned personally liable and at risk of prosecution.
Shareholder Actions Against Directors
The new Act has widened the circumstances in which shareholders can bring derivative legal actions against the directors personally. The Articles need to be updated in order to allow the company to provide updated indemnity for directors against derivative actions or actions brought by third parties and also allow the company to provide appropriate insurance cover for its officers. If the Articles are not updated any indemnity provision contained in the old Articles and governed by obsolete legislation may be rendered invalid. Note: directors cannot be indemnified against breaches of duty or negligence.
Minutes and Record Keeping
Historically, many companies have adopted a fairly lax attitude towards minute taking and record keeping and this is particularly true for small owner/managed businesses. The new Act restates the obligations of the directors to ensure that a proper record of meetings and decisions is kept, which ties in with the codification of directors' duties. It is therefore crucial that the directors ensure decisions are fully and properly recorded as required by statute. in order to provide the directors with maximum flexibility, the Articles should be updated to take advantage of relaxations in the way board and shareholder meetings are conducted. The same obligation applies to the maintenance of the statutory registers which has also been impacted by the new Act and professional assistance should be sought in this regard. Companies which continue to operate without updating their Articles of Association leave the directors at risk of operating unlawfully and open to possible prosecution. Directors must make themselves aware of their obligations and do all in their power to act in the best interests of the Company. In our view this, at the very least, includes updating the Articles of Association.
HOW CAN WE CAN HELP?
For the fee of $475.00 (plus disbursements and VAT) IBCF will update your company's Articles of Association and provide all the resolutions, board minutes and forms to adopt the new constitution.
CONTACT US NOW TO ADOPT A NEW CONSTITUTION FOR YOUR COMPANY!
information can be found by visiting
our website at www.ibcf.com,
or by emailing us at email@example.com.
issues of the IBCF Newsletter can be
found at: http://www.ibcf.com/news/newshome.php
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