While many of us were overdosing on mandarin oranges and pineapple tarts last week, the Companies Act 2016 (“the new Act”) came quietly into force. Although its debut may have been overshadowed by the CNY celebrations, its far-reaching effects will no doubt become apparent, moving up your priority list long after the mah-jong table has been stored away, and the last yee sang for the year tossed.
To assist you in getting a quick handle on the new Act, here are 5 things to immediately take note of:
1. No par value for shares: As of 31st January 2017 (date the new Act came into force), the concept of nominal/ par value of shares is abolished. Hence, so will the share premium account, capital redemption reserve and authorised capital concept be abolished.
There is no need to change references to par value in existing agreements or documents however, as the Act provides transitional/ deeming provisions for the interpretation of such references (section 618(7)).
2. No need for AGM for private companies: Private companies need not hold an annual general meeting. Instead, financial statements and reports are to be circulated to members within a set time frame.
3. Shareholders’ approval can be obtained through written resolutions (no need unanimity): The new Act does away with the requirement for circular resolution to be passed unanimously. Shareholders’ written resolutions can now be passed with the requisite percentage of assent.
The new Act sets out the procedure for written resolutions, and this should be adhered to.
4. Change in date for filing of annual returns: Annual returns are now to be filed within thirty (30) days from the anniversary of a company’s incorporation date. Hence, companies should take note of any upcoming incorporation dates anniversary after 31st January 2017, and ensure that the annual returns are filed within the timeline.
5. Memorandum and Articles of Association now deemed to be your Constitution: The new Act abolishes MAAs, and replaces it with a Constitution. A company can choose whether or not to have a Constitution. Provisions in the new Act deems MAAs as at the time the Act comes into force to be the Constitution. Hence, if a company does not want a Constitution, it will need to resolve to withdraw its MAA/ Constitution. If a company chooses to have a Constitution, it would be prudent to review the existing MAA/ Constitution carefully.
Further information on the new Act is set out in our series, A New Corporate Landscape: Key Changes under the Companies Bill 2015 that our clients should know about.
CCLC Corporate and Commercial advises and supports clients on an extensive range of matters including in mergers and acquisitions, takeovers, security dealings, capital and fund raising, restructuring, joint ventures, financial instruments, and general regulatory and compliance issues.