The Companies Act 2006 is being implemented in stages and on 1st
October this year companies will face a change in the law relating
to directors' conflicts of interest. But company law specialist
Claudia Gizejewski has said that companies can save time and money
by making the changes now.
Many companies have their annual general meetings (AGMs) in
April to approve accounts for the previous year because it takes
some weeks for the accounts to be prepared. Gizejewski said that
companies should take the opportunity to amend their articles to
include October's changes at AGMs now to avoid extra costs
later.
"For a large company, certainly for a listed company, it's a
major exercise to call a shareholder meeting, which involves
printing notices of meeting and sending them to shareholders," said
Gizejewski. "So what we're recommending is that if companies are
holding AGMs now or any time up to October 2008, they adopt new
articles with effect from 1st October 2008 that contain these new
conflict of interest provisions."
The part of the Companies Act which will come into force in
October says that a company director must not have a direct or
indirect interest which conflicts or may conflict with the
interests of the company, but that other directors can authorise
specific conflicts in individual cases.
"For a public company the directors can only authorise the
conflict if they're permitted to do so by their articles of
association," said Gizejewski. Articles of association are like a
company's constitution, governing what it can and cannot do.
"So public companies will have to amend their articles before 1
October 2008 to include a provision to enable directors to
authorise conflicts," said Gizejewski.
There are other changes in the Companies Act which have already
come into effect including provisions relating to general meetings
and proxies, said Gizejewski, and, in relation to private
companies, the removal of the need for company secretaries or
AGMs.
"If companies are going to amend their articles now for all the
smaller matters that have already been brought into effect they
could amend them at the same time to include the new conflict of
interest provisions," said Gizejewski.
