The companies act 2006 - traps for the unwary
New research carried out by Jordans the UK’s largest provider of business services reveals that professional advisers think the Companies Act 2006 could expose the majority of UK companies to unnecessary risk.

At a recent round table workshop organised by Jordans the panel comprising leading accountants and solicitors generally agreed that reliance solely on the Model Articles would rarely be sufficient and that most companies would seek to tailor their articles to their own needs.

Kathleen O’Reilly Senior Legal Adviser at Jordans said: “Unfortunately the concerns that Jordans have in relation to the model articles are also borne out by professional advisers. The panel agreed that whilst the new model articles are much shorter than the previous Table A this has not necessarily meant that they make life simpler. Therefore this part of the Act is seen by the vast majority of professional advisers as a far from satisfactory piece of legislation which has certainly not lived up to its promise.”

With most companies likely to tailor their articles to their requirements it was felt that many would wish to add to the Model Articles provisions contained in the model articles for public companies. One question considered by the panel was whether it would be possible to refer to provisions of both sets of model articles in one document. Section 26 of the Act may provide some support for this position. Jordans have concluded that it would be better to refer to the provisions of the default set that is being amended and then reproduce from the public company set those additional provisions required.

The new model articles assume knowledge of many sections of the Companies Act for example there is no longer reference to the number of persons required for a quorum at members’ meetings. The panel discussed whether information on commonly used provisions should be placed in the articles to make them more useful and user-friendly.

Guidance on how the Model Articles should be referred to and what practitioners should call each individual article has not been forthcoming. Questions still exist over “Regulation” (the term used for those individual provisions of Table A) and the panel felt that this would not be a suitable term. They argued that they should be referred to as e.g. “Model Article 7” or “MA7” for ease of reference. Where creating articles for a company those provisions will be referred to as articles and those of the Model Articles as either Model Article or more simply MA.

Jordans’ anticipates that its own full set of draft memorandum and articles will be available over the next month or so fully reflecting the feedback from its research panel.
 



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