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The Companies Act 2006 (c 46) is an Act of the
Parliament of the United Kingdom The Parliament of the United Kingdom is the supreme legislative body A legislature is an assembly Assembly may refer to: Organisations and meetings * Deliberative assembly A deliberative assembly is a gathering of members (of any kin ...
which forms the primary source of
UK company law The United Kingdom company law regulates corporations A corporation is an organization—usually a group of people or a company A company, abbreviated as co., is a legal entity In law, a legal person is any person A person (p ...
. The Act was brought into force in stages, with the final provision being commenced on 1 October 2009. It largely superseded the
Companies Act 1985 The Companies Act 1985 (c.6) is an Act of the Parliament of the United Kingdom of Great Britain and Northern Ireland, enacted in 1985, which enabled companies to be formed by registration, and set out the responsibilities of companies, their di ...
. The Act provides a comprehensive code of company law for the United Kingdom, and made changes to almost every facet of the law in relation to companies. The key provisions are: * the Act codifies certain existing
common law In law, common law (also known as judicial precedent or judge-made law, or case law Case law is the collection of past legal decisions written by courts and similar tribunal A tribunal, generally, is any person or institution with authority ...
principles, such as those relating to
directors' duties Directors' duties are a series of statutory, common law and equitable obligations owed primarily by members of the board of directors to the corporation that employs them. It is a central part of corporate law and corporate governance. Directors' ...
. * it transposes into UK law the
Takeover DirectiveThe Takeover Directive''2004/25/ECis an EU Directive dealing with European company law's treatment of mergers and acquisitions. It concerns the standards takeover bidders must comply with in how long a bid stays open to, who they offer to, and the in ...
and the
Transparency Directive The Transparency Directive, Transparency Obligations Directive or Directive 2004/109/EC is an European Union, EU Directive (European Union), Directive issued in 2004, revising an earlier Directive 2001/34/EC. The Transparency Directive was amended i ...
of the
European Union The European Union (EU) is a political and economic union of member states that are located primarily in Europe Europe is a which is also recognised as part of , located entirely in the and mostly in the . It comprises the wester ...

European Union
* it introduces various new provisions for
private Private or privates may refer to: Music * "In Private "In Private" was the third single in a row to be a charting success for United Kingdom, British singer Dusty Springfield, after an absence of nearly two decades from the charts. Both "In Pri ...
and
public companies A public company, publicly traded company, publicly held company, publicly listed company, or public limited company is a company A company, abbreviated as co., is a legal entity In law, a legal person is any person A person (plura ...
. * it applies a single company law regime across the United Kingdom, replacing the two separate (if identical) systems for Great Britain and Northern Ireland. * it otherwise amends or restates almost all of the Companies Act 1985 to varying degrees. The Bill for the Act was first introduced to Parliament as "the Company Law Reform Bill" and was intended to make wide-ranging amendments to existing statutes. Lobbying from directors and the legal profession ensured that the Bill was changed into a
consolidating Act A consolidation bill is a Bill (proposed law), bill introduced into the Parliament of the United Kingdom with the intention of consolidating several Act of Parliament (UK), Acts of Parliament or Statutory Instruments into a single Act. Such bills si ...
, avoiding the need for cross-referencing between numerous statutes. The reception of the Act by the legal professions in the United Kingdom has been lukewarm. Concerns have been expressed that too much detail has been inserted to seek to cover every eventuality. Whereas a complete overhaul of company law was promised, the Act seems to leave much of the existing structure in place, and to simplify certain aspects only at the margins. In other areas, it is said to have complicated and obfuscated previously settled law and may make doing business more difficult for those operating small companies. It is the single, longest piece of legislation passed by Parliament, totalling 1,300 sections and 16 schedules.


Implementation

A small portion of the Act, including s.43 which transposed the EU Transparenct Directive into UK law, came into effect on Royal Assent in November 2006. The first and second Commencement Orders then brought further provisions into force in January 2007 and April 2007. The implementation timetable for the remainder of the Act was announced in February 2007, by Margaret Hodge, Minister for Industry and the Regions. The third and fourth Commencement Orders brought a further tranche of provisions into force in October 2007, and the fifth, sixth and seventh in April and October 2008. The eighth commencement order, made in November 2008, brought the remainder of the Act into force with effect from October 2009. The staggered timetable was intended to give companies sufficient time to prepare for the new regime under the Act, rather than implementing all 1,300 sections of the Act on one day. Another reason for the staggered implementation is that, despite the Act's size, a great many sections provide for
subsidiary legislation In parliamentary systems and presidential systems of government, primary legislation and secondary legislation, the latter also called delegated legislation or subordinate legislation, are two forms of law, created respectively by the legislature ...
to be brought in by Secretary of State, which required time to draft. Implementation of the Act is the responsibility of the
Department for Business, Innovation and Skills , type = Department , logo = Department for Business, Innovation and Skills logo.svg , logo_width = 200px , logo_caption = , picture = File:Лондан. 2014. Жнівень 26.JPG , seal = , se ...
.


Directors

The Act replaced and codified the principal common law and equitable duties of directors, but it does not purport to provide an exhaustive statement of their duties, and so it is likely that the common law duties survive in a reduced form. Traditional common law notions of
corporate benefitThe interest of the company (sometimes company benefit or commercial benefit) is a concept that the board of directors A board of directors is a group of people who jointly supervise the activities of an organization An organization, or o ...
have been swept away, and the new emphasis is on
corporate social responsibility Corporate social responsibility (CSR) is a form of international private business self-regulation which aims to contribute to societal goals of a philanthropic, activist, or charitable nature by engaging in or supporting volunteering or ethically- ...
. There are seven statutory duties placed on directors which are as follows: # s.171 ''to act within powers'' - to abide by the terms of the company's memorandum and articles of association, and decisions made by the
shareholders A shareholder (in the United States often referred to as stockholder) of a corporation A corporation is an organization—usually a group of people or a company—authorized by the State (polity), state to act as a single entity (a legal ...
; # s.172 ''to promote the success of the company'' - directors must continue to act in a way that benefits the shareholders as a whole, but there is now an additional list of non-exhaustive factors to which the directors must have regard. This was one of the most controversial aspects of the new legislation at the drafting stage. These factors are: ## the likely long term consequences of decisions; ## the interests of
employees Employment is the relationship between two parties Image:'Hip, Hip, Hurrah! Artist Festival at Skagen', by Peder Severin Krøyer (1888) Demisted with DXO PhotoLab Clearview; cropped away black border edge.jpg, 300px, ''Hip, Hip, Hurrah!'' ...

employees
; ## the need to foster the company's business relationships with suppliers, customers, and others; ## the impact on the community and the
environment Environment most often refers to: __NOTOC__ * Natural environment, all living and non-living things occurring naturally * Biophysical environment, the physical and biological factors along with their chemical interactions that affect an organism or ...
; ## the desire to maintain a reputation for high standards of business conduct; and ## the need to act fairly as between members. # s.173 ''to exercise independent judgment'' - directors must not fetter their discretion to act, other than pursuant to an
agreement Agreement may refer to: Agreements between people and organizations * Gentlemen's agreement, not enforceable by law * Trade agreement, between countries * Consensus, a decision-making process * Contract, enforceable in a court of law ** Meeting of ...

agreement
entered into by the company or in a way authorised by the company's articles # s.174 ''to exercise reasonable care, skill, and diligence'' - this must be exercised to the standard expected of ## someone with the general knowledge, skill, and experience reasonably expected of a person carrying out the functions of the director (the ''objective'' test) and also ## the actual knowledge, skill, and experience of that particular director (the ''subjective'' test) # s.175 ''to avoid
conflicts of interest A conflict of interest (COI) is a situation in which a person A person (plural people or persons) is a being that has certain capacities or attributes such as reason, morality, consciousness or self-consciousness, and being a part of a cultu ...
'' - methods for authorising such conflicts by either board or shareholder approval are also to be introduced # s.176 ''not to accept benefits from third parties'' - minor gifts which cannot be reasonably regarded as giving a rise to a conflict of interest may be accepted by the director(s), but this must be looked at contextually (s.176(4)). # s.177 ''to declare an interest in a proposed transaction with the company'' - there are to be carve outs for matters that are not likely to give rise to a conflict of interest, or of which the directors are already aware. There will be an additional statutory obligations to declare interests in relation to existing transactions. Although the changes to directors' duties were the most widely publicised (and controversial) feature of the legislation, the Act also affects directors in various other ways: * s.239 The shareholders' ability to ratify any conduct of a director (including breach of duty, negligence, default or breach of trust) is regulated by the statute, although s.239(7) leaves the door open for common law principles, previously the only guide on this. Under the Act, directors who are also shareholders, or persons connected to them, are not entitled to vote in relation to any ratification resolution concerning their actions; they may, however, attend, be counted towards the quorum, and take part in the proceedings at any meeting at which the decision is considered (s.239(4)). * Existing restrictions on companies indemnifying directors against certain liabilities were relaxed to permit indemnities by group companies to directors of corporate
trustee Trustee (or the holding of a trusteeship) is a legal term {{Short pages monitor