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Companies Act 2006 Explained

When acting as a company director, you understand the ground rules of how you operate a limited company.

Companies Act 2006 remains the origin of UK law. As a result, it is the main source of corporate law for private companies. The law is still the longest in Parliament’s history. Built about 1,300 sections. But now amended by the Corporation Tax Act 2009.

Corporate governance requires a company’s articles of association, which are a document along with the memorandum of association from the company’s constitution, and also determines the duty of directors,

Why then was the Companies Act 2006 introduced?

Therefore, the primary objective was

  • Simplify along with,
  • Modernise corporate law


  • Codify common law. 

Revisions to the 2006 act then took effect in stages. Finalising in October 2009.

The fundamental changes, companies act 2006 explanation; therefore, being:

  • Extra stipulations for private and public registered companies in England and Wales, Scotland, plus Northern Ireland;
  • executed The European Union’s Transparency Obligation and Takeover Directives;
  • arranged (laws or rules) into a systematic code relating to various common law principles;
  • revised or reinstated most features of the 1985 Companies Act;
  • implemented a single United Kingdom company law regime. However, Northern Ireland is treated separately to the UK.

How Does The Companies Act 2006 Then Affect Business?

Before the act, directors duty and responsibilities  in the main were led by case law. The 2006 Act then codified the duties of company directors into a statutory statement.

The main duties:

At all times;
  • Ensure you therefore act within your powers, utilising skill and experience;
  • always promote the success of the company, therefore, ensuring a benefit for shareholders;
  • ensure independent judgement at all times;
  • exercise reasonable care skill and diligence at all times;
  • avoid conflicts of interest at all times;
  • third-party benefits, must not be accepted at any time;
  • make known interest transactions or arrangements with the company. Duties ensure minimum standards directors adhere to;
  • trade within the company’s capacity;
  • company has adequate business funding;
  • file accounts and report at companies house in electronic;
  • ensure the company has adequate business insurance;
  • as appropriate Government Licence approved to trade;
  • avoid fraudulently trading;
  • stay clear of wrongful trading of a limited company;
  • if turnover requires, then appoint a statutory auditor;
  • maintain a registered office;
  • ensure confirmation statement (Annual return) filed;
  • ensure if a public company, all political donations declared;
  • communicate with shareholders, give notice of meetings, record resolutions and meetings, written resolutions.

Who does the Companies Act 2006 then apply?

Introduces provisions for private and public companies. Therefore, it applies a single company legal administration then across the United Kingdom. It therefore replaces the two separate systems for Great Britain and Northern Ireland.

What is Section 1000 of the Companies Act 2006?

Section 1000 – Authority to then strike off a company not taking on business or running. If the companies house registrar, then has plausible reason to understand that a company is not carrying on business or in operation. The registrar may inquire whether the company is carrying on business or in operation.

Changes to section 172 of the Act 2006

A small alteration to section 172 of the UK’s Companies Act 2006 could have a impact on company law, company directors’ duties, corporate governance, businesses, and the UK economy.

Presented by the BBA coalition changes. This change affects director’s duty set out in s172. It changes a directors duty from being a duty “to promote the success of the company” to being a duty “.

Does the Companies Act 2006 apply to Scotland?

Companies in Scotland remain governed by the Companies Act 2006, as Scotland has no independent Scottish company law regime.

Note though, Scotland has separate registrars in Scotland, as do England and Wales, as does Northern Ireland.

Corporation Tax Act of 2009

The requirements of the act were performed progressively in stages. The final provision, commencing October 2009. Revisions to nearly all aspects of UK company law were made.

The following are the essential elements of the 2009 act:

  • Added additional requirements for the UK registered private and public quoted companies;
  • Changed most features of the Companies Act 1985;
  • Commenced through performance, the European Union’s Transparency Obligations and Takeover Directives;
  • Codified many enduring common UK law principles, including directors’ duties;
  • Applied a single unified company law regime for the entire UK, replacing the previously used;
  • Different rules exist for Great Britain and Northern Ireland.

Why was the Companies Act 2013 added?

The new law aimed to help ease the process of effecting business overseas in India, along with developing corporate governance through accountability. It further introduces a:

  • Single person company;
  • Small company;
  • dormant company and
  • corporate social responsibility.

For further help on aspects of the Companies Act 2006 and subsequent amendments. Please contact HBG Advisory on and read Structural Changes to UK Corporate Law in 2020.

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