Company Law Reform

This will result in a number of changes for the voluntary and community sector including:

Update: 27 May 2009 - Changes for companies in voluntary and community sector

The Companies Act 2006 is UK wide legislation which received Royal Assent on 8 November 2006. The Department of Enterprise, Trade and Investment (DETI) expects that all parts of the Act will become fully operational by October 2009 at which time the Companies (Northern Ireland) Order 1986 and most of its associated rules and regulations will no longer apply.

The main changes for companies in the voluntary and community sector include:

1. Audit requirements

The Companies Act does not make any provisions for the audit of small companies that are charities but rather expects charity legislation in the different jurisdictions to provide for this. As there are no provisions, as yet, in Northern Ireland charity legislation for the audit requirements of charitable companies the old rules in the Companies (Northern Ireland) Order 1986 as amended still apply:

- Very small charitable companies (with less than £90k gross income) are exempt from any audit requirement

- Slightly larger ones (with gross income between £90k and £250k) can choose to have a report by a reporting accountant rather than an auditor.

- Charitable companies (with gross income of over £250k) will need to have an audit under part 16 of the Companies Act 2006.

For more information see NICVA Advice Note 8: Accounting for Northern Ireland Charities

2. Accounting arrangements

Since April 2008, the deadline for filing annual accounts and reports with Companies Registry has been reduced from 10 months to 9 months. In addition companies are no longer required to send out the annual accounts to their members prior to the AGM however they must be sent to the members by the time they are due to be filed with Companies Registry.

3. Proxy voting

On 1 October 2007 new rules for voting by proxy will come into effect. All company members now have a statutory right to appoint a proxy to attend, speak and vote (either on a show of hands or on a poll) on their behalf at general meetings of the company - even if the Articles say otherwise. The Company is also required to communicate this information to its members on the notice of the meeting from the 1 October - Directors risk being fined if they fail to comply.

All companies need to make the following administrative arrangements:

• Update, or create, proxy forms to include the right of the proxy to speak as well as to attend and vote or create a proxy
• Update, or create, the notice of the general meeting to tell members of their statutory right to appoint a proxy
• State on the proxy form that it must not have to be returned more than 48 hours before the general

• Consider updating the Articles of Association if proxies haven't been permitted in the past

4. Written Resolutions

On 1 October 2007 it will no longer be necessary for companies to have unanimous approval when using written resolutions from members to make a decision - even if the Articles say otherwise.

Companies will now be required to have:

• the written approval of 50% of its members to pass an ordinary resolution and
• 75% written approval of its members to pass a special resolution.

This should make it easier for companies to pass written resolutions without the need to hold a general meeting however written resolutions cannot be used to remove directors or auditors. If a Company wants to allow longer than the 28 days stated in the Companies Act to receive a response to a written resolution, then it should consider altering the Articles of Association. Companies can also use electronic communications (in accordance with the provisions for the use of electronic communications) to seek and receive agreement for a written resolution.

5. Directors Duties

On 1 October 2007, the first of the Directors statutory duties (which have been written in statute for the first time) will come into effect:

• To act within the company's powers
• To promote the success of the company (for the benefit of its purposes as a whole for non-profit taking companies) and in doing so a Director must have regard for:

(i) The likely consequences of any decision in the long term

(ii) The interests of the company's employees

(iii) The need to foster the company's business relationships with suppliers, customers and others

(iv) The impact of the company's operations on the community and the environment

(iv) The desirability of the company maintaining a reputation for high standards of business conduct

(v) The need to act fairly as between members of the company

• To exercise independent judgment
• To exercise reasonable care, skill and diligence

Further duties will come into force in October 2008 including the duty to avoid conflicts of interest.

6. Electronic communications

New provisions of the Companies Act also came into force on 20 January which should allow for the wider use of e-communications. This now means that any information or documents (it was previously limited to certain specified documents) can be communicated by email or any other electronic form including websites. The company must acquire the consent of the intended recipient to receive the information in this way and fulfil the requirements of the Act.

The consent can relate to all general information or in specific circumstances and it can be withdrawn at any time. This could potentially result in savings for those companies which have large numbers of members.

For more detailed information see this very useful briefing from Oswalds Solicitors.
The Institute of Chartered Secretaries and Administrators has issued a new guidance note on the use of e-communications.

7. Disclosure of Company Details

Since January 2007, companies are now required to show the following company details on all business letters, order forms, emails, faxes and websites in a legible form:

• Its full registered name
• A statement that it is a limited company if it is exempt from using limited in its name
• The country of registration
• The company's registration number
• The address of its registered office

A company is now also required to write its full registered name (but not the other details as listed above) on all notices (of meetings, etc), official publications, cheques, endorsements, invoices, receipts, promissory notes, bills of exchange, letters of credit and conveyance whether in hard copy, electronic or other form.

8. Community Interest Company (CIC)

On 6 April 2007 a new type of company was introduced in Northern Ireland, the Community Interest Company (CIC). This is a new corporate structure for non-charitable social economy enterprises that want to use their profits and assets for the public good. The CIC may be a public limited company limited by shares, a private company limited by shares or a company limited by guarantee and will have to register with Companies Registry with memorandum and articles of association and a community interest statement to confirm that the company will provide benefit to the community. It does this by describing its proposed activities, who the company will help and how. CICs will be regulated by the UK wide CIC Regulator who can provide information and advice on setting up and running a CIC.