In line with the Governmental philosophy underpinning the new company Law Reform Bill to "think small first", there are significant amendments introduced via the new Bill which seek to streamline and simplify the decision making process for private companies.
Firstly, private companies will not be required to hold AGMs or to table their annual accounts and reports, or to appoint auditors at a general meeting. It will also cease to be a formal requirement that a company secretary is appointed although in practice this role will no doubt continue for many companies. Sole member companies will be permitted for all types of company not just private limited companies. In addition written resolutions will no longer need to be signed by all the shareholders, instead they will only require to be signed by the majority that would have been required to pass the resolution at general meeting i.e. over 50% of the voting rights for ordinary resolutions and 75% of voting rights for special resolutions. Similarly the percentage required for consent to holding a meeting at short notice reduces to 90% from 95%. This is in line with the drive towards reducing regulation and formality for private companies and improving company efficiency.
In addition, the notice period for general meetings (for both private and public companies) is reduced to 14 days (although it remains 21 days for a public company AGM). There will no longer be a 21-day mandatory notice period for any special resolutions to be voted on at a general meeting.
As regards the constitution of the company (i.e. the memorandum and articles) there will also be slight amendments. The memorandum under the new regime will simply set out that the subscribers wish to form a company – it will no longer set out the objects of the company. In addition, unless the articles state otherwise, the objects of the company shall be deemed to be unrestricted. For existing companies, provisions in the memorandum setting out the objects of the company will be deemed to be included within the articles thus facilitating members to alter or remove them. There will also be new standard articles that will replace the 1985 Act Table A which will be very brief, although these have not yet been published.
Finally the requirement to have an authorised share capital will be removed. A company will be able to reduce its share capital in any way it wishes by a special resolution of the members, supported by a solvency statement from the directors regarding the following 12 months. Companies will also be able to convert their share capital from one currency to another and round up the amounts to the nearest unit. Provided also that the company has distributable profits, it can make a distribution of a non-cash asset at book value.
Next issue we shall consider the changes introduced with regard to the rights of shareholders to bring actions against the company.