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FD PARTNERSHIP NEWSLETTERS

October 2009

Welcome to the 8th edition of FD Partnership, our newsletter for accounting and finance professionals.

Our prediction in the 5th edition, a year ago, that we were soon entering the bottom phase of the recession has so far proven correct, certainly according to our sales in recent months and in line with anecdotal evidence from customers.

Growth will stay flat for some time to come especially as there is economic data that you don’t read much about that is yet to hit us in full and may even push things back on the consumer front.

As a volunteer debt counsellor I negotiate with banks concerning people’s mortgages and credit card debts. Now before the haggling starts some of them are making opening offers to write off 66% on credit cards and many punters can’t even afford that. As the special offer periods on mortgages end over coming months people’s interest payments are trebling or quadrupling – mine included! The difference is that I have been paying down capital for a few years and most of the country hasn’t.

Companies Act 2006...Important changes to company formation

The Model Articles as per CA 2006 are considerably shorter than the previous Table A 1985, reducing from 118 regulations to a mere 53. This is the result of a number of areas, which were previously set out in Table A, being covered in the Companies Act 2006 itself (see below) and therefore not being repeated in the Model Articles.

However, there are also a number of areas which were previously covered in Table A which are now not dealt with in the Model Articles, as Parliament considered that they were unlikely to apply to small owner-managed private companies, but it is not necessarily the case in practice.

Group 1 - Areas for which express provision must be made

These include provisions to deal with the following areas:

1. partly-paid shares (and therefore a company's lien/ right to make calls on and forfeit such shares);

2. multiple classes of shares (including the necessary authorisation for directors to allot shares where there is more than one class and the variation of class rights);

3. pre-emption rights on allotment or transfer of shares;

4. the appointment of alternate directors; or

5. directors' situational and transactional conflicts of interest (the Model Articles do not deal with the former and, in relation to transactional conflicts, they go further than the Companies Act 2006 itself in restricting the ability for directors to participate in the voting process in relation to contracts/arrangements with the company, even where they have declared their interest).

As there is no default position in the Companies Act 2006 to cover these areas, a company must make express provision in its articles if it wishes to deal with them.

Group 2 - Articles which are included to facilitate use

As the Companies Act 2006 covers a number of procedural areas which were either not dealt with or are dealt with in less detail in the Companies Act 1985, Parliament felt that these areas should not be duplicated in the Model Articles (which to some extent was the case with Table A and the Companies Act 1985). Such areas include the procedure for calling general meetings, the length of notice to be given for general meetings, the manner and timing of delivery of proxy notices, the quorum for general meetings, entitlement to vote on a show of hands, voting on a poll, timing for taking polls and the ability for members to pass written resolutions.

The problem with this approach is that whilst it simplifies (and shortens) the articles, it becomes difficult for a chairman, director or other user of the articles to easily see how general meetings should be run without repeatedly referring back to the Companies Act 2006, which will arguably prove onerous and impractical in the context of a meeting.

Following extensive legal research and advice from The Association of Company Registration Agents we strongly recommend that for a company with only person involved who is both sole director and sole shareholder you use the Special Articles that Formations Direct is introducing.

However, for any situation where there is either more than one director or more than one shareholder you should the Advanced Articles that Formations Direct is introducing covering a variety of eventualities and complications including compulsory share transfers and good leaver/bad leaver options that cater for a dispute between shareholders.


Companies Act 2006 Changes from 1st October 2009

Some of the final implementations will affect small businesses quite profoundly. Fundamental changes cover Registrar’s powers, company formation and restoration. Below is a snapshot of the changes, which is based on information from Companies House.

Registrars Powers

Companies Act 2006 gives the registrar of companies a range of powers with effect from 1st October 2009. These include powers to decide on the form and manner in which companies must deliver documents, what is needed for a document to be properly delivered, provision of electronic delivery for certain documents, and amendments to the register.

Instead of rejecting an incomplete or incorrect document automatically in some circumstances the registrar may decide to accept it even if it has not been properly delivered.

Such acceptance does not necessarily absolve the company from submitting the document in its correct format. The registrar would send letters to the company asking them to file a document that complies with the proper delivery requirements.

Companies sometimes by mistake submit more information than they need that does not form part of the statutory accounts. If it cannot be readily separated from the original document the registrar will normally reject the document but if it is obvious and easy to separate, e.g. an extra page, the registrar will normally remove the unnecessary material and accept the document.

The registrar may accept a document to replace one previously delivered only if it;

• did not meet the requirements of proper delivery or,

• contained unnecessary material

Only the person or the company that delivered the original document can deliver the replacement document, which must be accompanied by a replacement document form required to link the replacement document with the original.

The registrar can decide whether or not to remove the original document, and will judge each case on its individual merits.

The registrar has new powers to put notes on the register to inform searchers of changes.

The registrar can write to a company inviting them to file a replacement or additional documents to correct an inconsistency.

The registrar can administratively remove from the register:

• unnecessary material; or

• a document that has been replaced.

Before removing any material, the registrar must give notice to the person who delivered the material or the company that it relates to. The notice must be dated and state what material is to be, or has been, removed.

Rectification is a new process to remove material from the register in certain circumstances, i.e.

• material that’s invalid or ineffective or that was produced

without the authority of the company, or

• arose from something that was factually inaccurate or forged.

Rectification allows the registrar to deal with company hijacks and other false filings without having to obtain a court order as previously.

Application can be made by an individual, a company or a person registering a charge to have information made unavailable.

A director or secretary may apply to the registrar to make their usual residential address unavailable for public inspection if the address was placed on the public record on or after 1 January 2003.

A company may apply to the registrar to make the usual residential address of all its members, former members and subscribers to the memorandum, unavailable for public inspection if their address was placed on the public record on or after 1 January 2003.A person who registered a charge on or after 1 January 2003 may make an application to make the address he used when delivering the charge to the registrar unavailable for public inspection.

Applications must be on certain grounds as defined in the Registrars Powers guidance, available on Companies House website.

Form Changes

There are in the region of 200 forms required by the Act, some are revised versions of existing forms and some are completely new. From 1st October 2009 there will be changes to all Companies House forms if only to remove the number, which at present refers to the relevant section on the 1985 Companies Act. It is likely that the new forms will have a descriptor relating to their functionality; however they will still contain a reference to the section of the 2006 Act.

The section number will appear on the form but not in the heading as currently.

Incorporation

The new incorporation process will require an application to register a company (Form IN01) accompanied by a memorandum of association, the articles of association and the correct fee.

The memorandum of association is a much shorter document which will serve the limited purpose of providing evidence of the intention of each subscriber to form a company and become a member of that company. In the case of a company that is to have a share capital on formation, each member agrees to take at least one share.

There will be several types of articles; from default Model Articles to bespoke articles.

Amendments to a company’s articles of association must be notified to Companies House within 15 days, and failure to comply will be a criminal offence. The Companies Act 2006 introduces a new civil penalty of £200 for failure to comply in response to a notice from the registrar.

Authorised / nominal share capital will be discontinued on incorporation, which means that there will also no longer be a limit set out in the Memorandum on the number of shares that directors can issue. Currently a special resolution is required to increase the authorised capital if directors wish to issue shares above the limit in the memorandum. However shareholders can seek controls on the issue of shares by Directors in the Articles.

Finally, the need for a solicitor to make a statutory declaration of compliance will be replaced with a statutory statement of compliance from the company - also designed to make the company incorporation process simpler. The statement maybe made in paper or electronic form and need not be witnessed. It will be an offence to make a false statement of compliance.

Change of Constitution

Articles of association may contain provisions for entrenchment establishing restrictions on the conditions to amend certain provisions of the articles. These can be introduced on and after formation by the company or by order of a court or other authority.

Companies will also be required to file a notice to notify the Register of:

• the presence and removal of such provisions of entrenchment,

• when the company amends its articles and these contain

provisions for entrenchment, and

• when the company’s constitution is amended by court order

or by enactment.

Change of Company Names

Companies can change its name by 4 methods by:

• resolution,

• conditional resolution,

• resolution from directors,

• means provided in the company’s articles.

Companies must notify the Registrar by completing a notice available for each method. This notice must be accompanied by the fee.

Change of name is a part file process. The change of name is only effective when the Registrar has processed all the documentation required. Names cannot be reserved so we strongly recommend you send the documents together.

Since October 2008 a name can also be changed by the Company Names Tribunal (part of the Patent Office) as a result of a successful complaint for opportunistic registration.

Treatment of Company Name

The rules on ‘same as’ will be stricter. For example, Companies House will disregard a number of matters if they appear at the end of the name and they are preceded by a full stop including “GB”, “services”, and “com”.

You may register a name that is the same as another in the registrar’s index if the company belongs or is to belong to the same group as the company already on the register and a written consent from the latter is sent to us.

Company and Business Names (Miscellaneous Provisions) Regulations 2008 at www.berr.gov.uk

Directors Service Addresses

From 1st October 2009 every director must provide Companies House with both their usual residential address, and for each directorship they hold, a service address. The service address will be on the public record and will be public information but the residential address will be protected information. A director can choose any address as the service address including the registered office address of the company. The address must be where documents can be delivered and an acknowledgement or receipt can be provided if required, but this excludes a PO Box or a DX number. If the director chooses to use his residential address as the service address the fact that the two addresses are the same would not be apparent from the public record.

The residential address will only be available to prescribed regulatory authorities such as the police and HMRC, and it may also be made available to Credit Reference Agencies.

Credit Reference agencies will not be able to obtain the usual residential address of any director who is the beneficiary of a valid Confidentiality Order on 30 September 2009 or who has made a successful application on other specified grounds

Any Confidentiality Order application received on or before 30 September 2009 will be dealt with but any applications received after that date will be rejected for the new form.

Administrative Restoration

Administrative Restoration is a new provision under the Companies Act 2006, which will be used to supplement the existing Court power to restore companies. The Court power will still exist for those cases where the Registrar cannot act.

Administrative Restoration can only be used where:

• the company was carrying on business / or in operation

at the time of dissolution

• the company has been struck off under section 1000 or 1001

(power of registrar to strike off defunct company)

• the application is made within a period of 6 years after the

date of dissolution

• the application is made by a former director or former

secretary of the company

• the Crown has signified consent (bona vacantia issue)

• the company has delivered all the necessary documents to

bring the company up to date, i.e. all outstanding documents

at the time of dissolution and any that have fallen due during

the period of dissolution.

Statement of Capital

Companies incorporating as limited by shares (whether private or public) on or after 1st October 2009 must complete a statement of capital and initial shareholdings as part of the application to incorporate.

All companies limited by shares must complete a statement of capital as part of any annual return filing made up on or after 1st October 2009.

A statement of capital must also be completed with certain forms associated with notification of capital changes such as allotment of shares, redenomination of shares.

The statement of capital must show, amongst other things, the total number of shares of the company, the aggregate nominal value of those shares and particulars for each class of shares.


Keeping you informed!

FD remains committed to excellence in customer service and that means staying in touch. In days of yore all it entailed was a newsletter delivered by snail mail but we all know that things have moved on.

We are still sending newsletters out by good old fashioned tried and tested methods such as post since many loyal customers still want to receive them this way and the last thing we wish to do is alienate people, since not everybody embraces technology at the same pace.

Earlier in the year we introduced a director’s blog which contains the rantings and scribblings of Norman Younger. Feedback tells us that he has a habit of hitting the nail on the head on a number of economic and political issues.

The addition of an   RSS feed will make it easier to keep abreast of blog updates and other notices on the website, be they special offers or legislative changes.

We have also joined twitter (yes, you do read correctly). However, we are not interested in the minutae of life such as how many cups of tea are brewed in the office each day, but rather it is a tool for connecting with new and potential customers covering areas such as legal matters, technical questions and relevant economic views.

In short, some of us here at FD are going to very busy researching and engaging with the SME community and their professional advisers, but in the harsh new economic climate that’s the name of the game.

Formations Direct…your partner in practice


Money Laundering Regulations...How well do you know the rules?

Online CPD lectures from Clientguard

As the year draws to its close many accountants will yet to have finalise their CPD. What better way to avoid the rush than to download a lecture that can be listed to at leisure and reduce unchargeable time out of the office to attend a lecture.

FD have prepared 2 online lectures on the topic of money laundering regulations and compliance, professionally prepared and delivered, lasting 1 hour each.

In addition you can also download a concise manual that takes you through basic training and client due diligence checks based on a tick box format that is user friendly and cost effective.

To find out how you can benefit from FD’s money laundering portfolio that also includes client identification verification ring our “Clientguard” team on 0800 2800 323 or visit www.fd.ltd.uk and click on “money laundering”.

 


Practice market moves up a gear

Following a slow start to the year recent months have seen an upturn in the practice acquisition and disposal activity. Valuations are holding up and we are having to come up with a raft of innovative deal structures as buyers remain cautious and sellers want to put their retirement plans in place without actually departing when they had originally planned.

The imbalance between buyers and sellers is still there so if you are contemplating closing your ledgers for good and playing golf all day now is an ideal time to talk to us and get the ball rolling. We have buyers lined up throughout the country and work behind the scenes in advance of a meeting to ensure that you will only be introduced to suitable purchasers.

To find out how we can help you call us for a no-obligation chat on 0800 2800 321 or visit www.fd.ltd.uk/kensington

Where accountants buy from Freephone 0800 085 45 05
Landline0161 798 9999
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