PRESS RELEASES
Formations Direct warns SME start-ups on Companies Act 2006
October 1st sees a fundamental change in how limited companies are formed, as part of the Companies Act 2006. Leading company formation agents, www.formationsdirect.com warn small companies and their adviser to beware of the changes and avoid going for cheap substandard operators.
The problem stems from the “think small first“ approach taken that was taken in the legislation but fails to translate into reality. Previously most companies relied on Table A of the Companies Act 1985 as a default provision for their memorandum and articles – the company’s constitution. The new act replaces this with what is known as Model Articles, which substantially truncates Table A, instead relying on firms to add in what they think they may require.
The upshot of this warns Norman Younger, founder and director of Formations Direct since 1994, is that many small firms will not understand the importance of adding in certain provisions which can be crucial for businesses with more than one director or shareholder. Many will take the budget option of default Model Articles at the outset to save a few pounds but it may not take long for them to find themselves in a pickle, in turn may creating issues for accountants and solicitors who have not got up to speed in time and will have some explaining to do to their clients.
He also notes that the forms from Companies House themselves are much longer and more complex than previously, and has already alerted them to inconsistencies on 2 new forms. “It’s going to be lively for a wee bit after 1st October and formation costs will inevitably increase to reflect the increased complexity”.