Out-Law News 1 min. read
09 Apr 2008, 5:20 pm
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.
