Electronic communication provisions of the Companies Act 2006

Introduction

The Government has indicated that the e-communication provisions in the Companies Act 2006 will be implemented by January 2007, as it is felt that these provisions will bring substantial cost saving benefits to many companies.

This article summarises the key provisions which were included in the version of the Companies Bill which was published in July 2006, but only insofar as they relate to private companies whose shares are not admitted on any regulated market. It will be updated when a copy of the Companies Act 2006 becomes available.

Current law

Under the current law, companies can send certain documents – notices and copies of their annual accounts, directors' report, auditors' report or summary financial statements – by means of electronic communication if the company and the recipient has agreed to this and the recipient is notified of the publication on the website if this is the means of e-communication chosen.

Members can send requests to hold general meetings and appointment of proxies by means of e-communication.

The provisions in the Act are designed to allow any information or documents to be communicated in electronic form, provided that the requirements of the Act are fulfilled.

Definitions in the Act

Before looking at what the rules are, we need first to understand some of the terminology used in the Act.

"Electronic form" means that the document or information is sent or supplied by electronic means (eg email or fax) or by any other means whilst in electronic form (for example by sending a disk by post).

A document or information is sent by "electronic means" if it is sent and received by means of electronic equipment for the processing or storage of data and transmitted, conveyed and received by wire, radio, optical means or other electromagnetic means.

A document or information sent by "electronic means" must also be sent in such a form that the sender reasonably considers will enable the recipient to read it and retain a copy of it. Here "read" means that the document or information can be read with the naked eye, or, if it consists of images, pictures, plans etc, it can be seen with the naked eye.

Different rules for different companies

The Act distinguishes between communications BY a company and communications TO a company. Where two companies are communicating, only the rules relating to communications BY a company apply.

Communications TO a company

If the company agrees, documents can be sent to or served on a company by electronic means. The address is that specified by the company and so, for example, it could be an email address or fax number.

The Act says that in some situations the company is deemed to have consented to receiving documents electronically. For example if it publishes an electronic address in a notice convening a general meeting, the Act provides that the company is deemed to have consented to receiving documents relating to that meeting, such as proxies, at the electronic address.

If a document is sent in electronic form by hand or by post (for example on a CD or floppy disk) then it must be sent to the company's registered office or to the address provided by the company for hard copy correspondence.

The company may also agree to receive documents in a form other than hard copy or electronic, subject to any requirements or contrary provision in the Companies Acts.

Communication BY a company which is not a traded company

Electronic communications

If the recipient agrees, the company may supply information and documents in electronic form, to the address provided for that purpose by the recipient.

Again, if the document or information is sent in electronic form by post or delivered by hand (eg on a disk), it must be handed to the intended recipient or sent or supplied to an address to which it could be validly sent if it were in hard copy form.

Publication on website

A company may communicate via its website with its members. To do this:

• The members must resolve that the company may communicate with members through a website or the company’s articles must contain a provision to this effect. The resolution must be filed at Companies House.
• Each member must be individually asked by the company to consent to communication by means of a website (either generally or in relation to specific documents).
• The company’s request must clearly state the effect of a failure to respond by the member (eg that he would be deemed to have consented if he does not reply within 28 days starting with the date on which the request is sent).
• The company's request must not be sent less than 12 months after a previous request made to that member in respect of a similar class of documents.

• A document or information on a website must be made available in a form, and by a means, that the company reasonably considers will enable the recipient to read it and retain a copy of it. So, the company must use an electronic form that is in common usage; an electronic form at the cutting edge of technology may not enable most recipients to read and retain a copy.
• The company must notify the intended recipient of the presence of a document or information on a website, the address of the website, the place on the website where it may be accessed and how to access the document or information. Unless the member has also consented to being contacted by electronic means, this means that this information must be provided in hard copy form (eg by letter).
• The company must make the document or information available on the website throughout the period specified by any applicable provision of the Companies Acts or, if no such period is specified, the period of 28 days beginning with the date on which the notification that the document is available on the website is sent to the person in question.