Monday, March 5, 2007

Registration of Companies

If you have not already re-registered your "1955 Companies Act" company, then it is too late to do so now. Under the Companies Act 1993 your company will be deemed to be re-registered. The practical implications are that the Memorandum and Articles of Association no longer have effect. All shares lose special or privileged qualities and will now be ordinary and ranking equally in all respects with each other.
For those directors who have not complied with the re-registration requirements and as a result have allowed shareholders' special rights to fail, there may be personal liability.

The Company, even now, may adopt a Constitution to set out the rules of the company. That Constitution needs to be passed by a Special Resolution of the Company which under the 1993 Act (unless changed by an existing Constitution) means a majority of the votes of those Shareholders entitled to vote and voting on the question.

One of the most important aspects of a company is the Constitution, which now replaces the Memorandum and Articles of Association. Not every company will need a Constitution and this is particularly true for one-person companies. However, whenever two or more shareholders are involved, it is strongly suggested that that a Constitution would be entered into. The Constitution is the "Rules" of a Company. Constitutions should generally be "tailor-made'. My advice to clients in relation to "standard" constitution s is that unless they are special to the clients then the clients are probably better off without one.