Legislation for companies
The Companies Act 2006
is the primary source of company law in the UK. It provides a single company law regime for the entire UK.
The Act was brought into force in stages and has been subject to additions and amendments since the first provisions were enacted in 2006.
The key provisions are as follows.
Formation of a company
- Companies may be incorporated online.
- A new format memorandum states that the subscribers declare their wish to form a company and agree to take the stated number of shares.
- The statement of proposed officers remains the same, but directors must now supply an address.
- No company secretary is required for private companies.
Members and management
- The minimum age for directorship is 16 years.
- Every company must have a director who is a natural person (i.e. a human being).
- Directors’ duties are codified in statute.
Decision making – meetings and resolutions
- AGMs are no longer required for private companies unless the companies wish to hold them or their articles require them to. Members may still require their directors to call a general meeting.
- The minimum notice of meetings is 14 days for private companies.
- Minutes of general meetings and records of written resolutions must now be kept for a minimum of ten years.
- Special resolutions require 21 days’ notice and can only be passed by a 75% majority.
Accounts and audit
- The time limit for filing accounts with Companies House is reduced to nine months for private companies.
- Directors have a duty not to approve accounts unless they give a true and fair view of the company’s financial position.
- Accounts must be signed by a director.
- The general prohibition against a company indemnifying its auditor against claims for negligence remains. However, there is a new provision enabling auditors to make a ‘liability limitation agreement’ with a client company.
This is a summary of the provisions as applied to private companies. Sports bodies should review and assure themselves that they have sufficient grasp of their legal obligations. As noted above, directors’ duties are now codified in the Act, and individuals who accept the position of director should quickly acquaint themselves with these duties before joining a board.
Duties of directors
Directors have certain legal duties; these are to the company itself, not to its shareholders, employees or any person external to the company. The duties of directors were introduced into UK statute law by CA2006 (ss. 171–77).
The duties apply to non-executive directors as well as to executive directors, and are listed below.
Duty to act within powers
A director must act within their powers in accordance with the company’s constitution; they should only exercise these