Legislation update

The end of 2006 saw the government pass two important new Acts, both of which have followed lengthy consultation processes.

The Companies Act 2006

This Act is the culmination of a company law reform process that started as far back as 1998. The aim of the Act is to simplify and modernise company law so that it better meets today’s business needs and provides flexibility for the future. While the reform process aimed to ‘think small first’, the new Act will in time have an impact on directors, auditors and shareholders of private, public and quoted companies.

The Act is the longest ever to have been passed by parliament. It repeals and restates most of the provisions in the existing Companies Acts.

At this stage many of the detailed requirements of the Act have yet to be determined and 2007 will see the government consult on these. The government has also stated that all of the Act’s provisions will be brought into force by October 2008 at the latest. Certain provisions, for example those in respect of electronic communications between shareholders and the company, have already been brought into force.

The Charities Act 2006

Five years after legislation was first proposed the Charity Commission (CC) has wholeheartedly welcomed the introduction of the Charities Act 2006.

The Act gives the CC more independence from government. Ultimately, it will help to reduce some of the existing bureaucracy that charities face.

Key areas covered by the new Act include:

• a new definition of a charity - the CC will consult on what it means to provide ‘public benefit’
• higher registration thresholds and changes to the requirements for ‘exempt’ and ‘excepted’ charities
• new thresholds for the independent examination/audit of charity accounts
• a range of methods providing opportunities to modernise and to lighten the load for trustee bodies.
  
  For example, it will be possible to pay trustees for additional services to the charity, if it is in the best interests of the charity, without prior CC authorisation.

Some of the new legislation takes effect early in 2007, although many other areas will require further consultation, secondary legislation or guidance.