The Companies Act 2013 is a law that was passed in Parliament of the United Kingdom Parliament on 1 October 2014. It repealed and replaced the older Companies Acts of 2006 and 1985, with some amendments.
This post will examine the changes to the company law as a result of this legislation. In particular, we will look at how it affects private company shares, shares in public companies that are listed on stock exchanges, investment funds that invest in those shares, and their management companies.
We will also look at the changes that the Companies Act has made to company law for limited liability partnerships, limited liability companies, and various other companies.
There are two elements of the Companies Act 2013. The first part of the act is known as Part 2, which consists of Articles 1 – 109, and it contains new provisions applicable to private company shares. The second part of the act is known as Part 3, which consists of Articles 110 – 175, and it contains new provisions applicable to other types of company shares. As will be seen in this post, all but one of these articles relate to private company shares. Although Part 3 is not relevant to investment funds, it is still relevant in certain respects, and we discuss this in this post.
Part 2 of the Act contains three parts. Firstly, there are Articles 1 to 109 which deal with the share capital and accounting of private companies.
Section 2 of Part 2 applies to investment funds. Secondly, there are Articles 110 – 142 which deal with the company’s shareholders. Thirdly, there are Articles 143 – 150 which deal with dealing in shares.
Part 3 of the Act contains nine parts. The first part is Articles 151 – 164 which deal with companies limited by shares, and in particular, it relates to public companies listed on stock exchanges (such as FTSE 250 Index or FTSE All-Share Index) that are regulated by the UK Listing Authority (LPA) or its Scottish equivalent (the Scottish Financial Enterprise).
Part 3 also contains new provisions applicable to companies limited by guarantee (such as charities, mutual societies, and friendly societies), and it contains provisions relating to the registration of chargeable transactions. The final three paragraphs of Article 151 contain an anti-abuse provision.
Part 2 Article 1 to Part 2 become effective 1 October 2014. These Articles deal with the share capital and accounting of private companies. To give but one example, Article 24(1) has now been replaced with the following: “A company must keep accounts in accordance with generally accepted accounting standards”.
Articles 110 – 142 of Part 2 come into force on 1 October 2015. These Articles deal with the company’s shareholders. To give but one example, Article 140 requires that a company must have its registered office in the United Kingdom or another EEA State.
Articles 143-150 of Part 2 become effective on the 1st of October, 2014. These Articles deal with dealing in shares, and particularly they relate to share dealing by corporate members of investment fund groups (or corporate members of any other group). The act has now clarified that it is not unlawful for a person who has dealings in shares to fail to disclose those dealings because of competition rules (Article 146).
The act has also made it unlawful for a person who is a director of a company to be capable of being guilty of insider dealing or market manipulation (Article 147). Someone who has been found who is guilty of insider trading or manipulation of markets is subject in the event of a summary conviction, to be sentenced to jail for a period not exceeding 12 months, or to a fine, or both, and if convicted upon indictment, to prison for not exceeding seven years, either a fine or both. The majority of Articles from Part 3 will be in effect on 1.10.2014. Articles 151 – 159 relate specifically to companies limited by shares (such as public companies listed on stock exchanges that are regulated by the UK Listing Authority (LPA) or its Scottish equivalent (the Scottish Financial Enterprise)).
For example, it makes the admission of a new shareholder under section 728 of the acts easy and removes the need to have a general meeting to authorize it.
Articles 160 – 164 come into force on 1 October 2015. Articles 160 – 164 relate specifically to companies limited by guarantee (such as charities, mutual societies, friendly societies). These provisions are not relevant to investment funds.
Article 165 is relevant. It contains an anti-abuse provision that prevents abuse by “controlling persons” of certain provisions in relation to chargeable transactions under Article 151. The anti-abuse provision prevents the controlling persons of a company or of a group from extracting any benefit or causing any detriment as a result of the control. A “controlling person” is either:
(a) a person, who alone;
(b) with one or more associate persons; or
(c) together with one or more associate persons and any other person who is their employee, is in a position to exercise control over the company by virtue of those persons’ holding qualifying shareholdings in relation to that company.
This “anti-control” provision applies to charges on land and automatically charges by way of security and rights under debentures and charges which do not relate to property. These provisions are not relevant to investment funds.
Article 165 is relevant. It contains an anti-abuse provision that prevents abuse by “controlling persons” of certain provisions in relation to paragraph 3 of Schedule 1 to the Act.
Paragraph 3 of Schedule 1 applies to companies limited by guarantee, but is not relevant to investment funds. The anti-abuse provision prevents the controlling persons of a company or of a group from extracting any benefit or causing any detriment as a result of the control.
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