Will this piece of new legislation provide any benefits to those for whom it concerns? In a word, ‘YES’. Like all legislation, it is not easy to read and for most people more difficult to understand than it should be, but then it is legal language. I attended a lecture on this topic recently, presented by Mr Mahmud Samad BL.
There are 1,449 sections to the Companies Act 2014, don’t be put off by this number, most of the amendments focus on forms and procedures. Mr Samad advised practitioners to take the time to pair each provision contained in the 2014 Act with its former counterpart. For example, a private company limited by shares will be required to have a ‘constitution’. The Companies Act 1963 required such companies to have ‘Articles and Memorandum of Association’. Model documents are provided to assists companies and create uniformity of structure.
For me, changes related to the “Types” of companies are of particular interest. One of the most significant amendments contained in the Act, is the adoption of two types of company.
A “DAC” is a private limited company registered under part 16 of the Act. A DAC will have both “Articles of Association” and “Memorandum of Association”. Like an LTD, a DAC will be required to have a maximum of 149 members, but must have 2 directors. The essential difference is that DAC’s will be more tightly regulated.
An “LTD” is registered under part 2. There are a number of differences between a new “LTD” and an old private limited company:
- The number of members which in now capped at 149 members.
- The new “LTD” is required to have a ‘Constitution’. The sample ‘constitution’ is available in section 1 of the 2014 Act.
- The new “LTD” must have a minimum of one director, and one independent secretary. Under previous legislation, many small limited companies were created by “sole traders” and for convenience, wives or other family members were brought in as Directors, not having a clue what was gong on, but they served a purpose of compliance with the legislation at the time. This has now changed.
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