Companies Act 2006 – The Final Push

The remaining sections of the Companies Act 2006 are due to come into effect on 1 October 2009. It is, therefore, important to be ready for the changes and the impact they could have on your company.

The principal changes, among others, that will come on stream on 1 October will affect the role played by a company’s memorandum and articles of association, the way that share capital is managed and details about directors and secretaries that must be made public.

Free Guideline Document for you to Download

We outline some of the major new rules and their significance for your company in a free PDF for you to download, CA2006 The Final Push. Make sure you are well prepared for the last implementation date of the Companies Act 2006.

Director’s Legal Duties

The Companies Act 2006 codified directors’ duties for the first time. After a phased implementation timetable, all seven new statutory duties are now in force. We take a look at each of the duties in turn and provide some practical examples.

The following is an extract from ‘The Dutiful Director’, an article by Nigel Miller http://www.freshbusinessthinking.com/articles.php?CID=8&AID=3390:

1. To act within the company’s constitution and to only exercise powers for a proper purpose
   Constitutional documents include the company’s articles of association as well as any instructions given to the board by shareholders say in a shareholders’ agreement.
   An example of when this duty may come into play is a requirement that two directors are present at a board meeting in order for the decisions of the meeting to be valid and the meeting to be “quorate”. This prevents one director making unilateral decisions that could be detrimental to the company and its shareholders.
2. To exercise independent judgment
   You must exercise your own judgement for the benefit of the company as a whole. A director must not use his or her position to further the interests of a single shareholder or a particular group of shareholders. The duty to exercise independent judgment does not prevent a director from taking professional advice or from using others as a “soundboard”. The director must consider the advice he is given and reach an independent conclusion himself, having regard to the Interests of the company as a whole.
   As an example, often, a significant shareholder will have a right to appoint a director to the board of a company. The director will usually report to his appointer and inform the other directors of his appointer’s wishes. It is however important that this nominee director! also acts in the interests of the company as a whole and not just in his appointer’s interests.
3. To exercise reasonable care, skill and diligence
   There are two tests for establishing whether a director has exercised reasonable care, skill and diligence. Firstly, a director must satisfy the “objective test”, that he has the knowledge, skill and experience that would reasonably be expected of a director. Secondly, a director must show he has used the knowledge, skill and experience that he actually possesses. Where a director possesses a special skill or discipline, the standard expected of that director in relation to his special skill or discipline will be higher.
   For example, a director with accounting experience and accounting qualifications, would be expected to exercise his duties with a higher level of skill when considering the finances of the company than other directors with no such experience or qualifications.
4. Not to accept benefits from third parties
   It is normally considered acceptable for a director to accept an invitation to lunch, paid for by a third party, On the other hand, if the lunch is part of an all expenses paid week in Paris (paid for by a supplier chasing a new contract), that would create a conflict of interest. If you are unsure whether to accept a benefit, discuss it with the other members of the board.
5. To declare interests in proposed transactions or arrangements with the company
   Usually, this involves a director making a declaration at the board meeting where the proposed transaction or arrangement is to be discussed.
   As an example, directors are interested in their own service contract and remuneration arrangements. Most directors would be well advised not to vote in meetings to discuss their own remuneration (even where they may be able to do so under the terms of the company’s constitution).
6. To act in good faith to promote the success of the company
   Directors must act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to a range of factors such as the interests of the company’s employees and the impact of the company’s operations on the community and the environment.
   An example may be when a company’s board has to decide whether to outsource the production process to an overseas factory. On the plus side it could improve the long term sustainability of the business and reduce damage to the local environment. On the minus side, it could reduce employment opportunities and have a negative impact on the local community.
7. To avoid conflicts of interest
   The 2006 Act creates a new, positive duty to avoid conflicts of interest unless authorised by the directors. For example, you are a director of Company A which has a supply contract With Company B. Every year there is a negotiation between companies A and B on the terms of the supply. Before the new duty, you could be a director of both Company A and Company B (albeit after disclosing their interest and “sitting out” on all deliberations).
   Under the new duty, “sitting out” is not sufficient. It will not be possible to remain as a director of both companies without obtaining proper authorisation from the boards of both companies.

If you would like any help or advice on the new rules, please don’t hesitate to contact us.

For fresh ideas, new possibilities and a value driven service go to www.garside.co.uk.

CA 2006 – Preparing for Final Implementation

1 October 2009 sees the final and largest implementation of the Companies Act. This will change the way most advisors and directors administer companies. Some of the more important changes are:

• Directors’ services addresses – all company registers need updating
• Directors’ residential addresses to become ‘protected information’
• New procedures for the administrative restoration of companies
• All new Companies House forms, all the 1985 Act forms rescinded
• Voluntary strike off extension
• All companies’ constitutions will be Articles only
• Companies formed after 1 October 09 will be based on the new model articles
• All 1985 Act companies may need to review their Articles, Memorandum of Association will become part of the Articles, may need to adopt new model Articles
• Abolition of Authorised share capital
• A ‘Statement of capital’ is required every time there is a change and with the annual return

In addition to the Companies Act changes there is also the ‘Shareholders Rights Directive’ coming into force on the 3 August 2009 with new rules for all companies when calling and holding general meetings.

Companies House are currently writing to all company directors informing them that changes will happen, but not what the changes are.

At Garside & Co, we are ready to help and advise you. Our systems are being updated and we can help you through this transitional stage. We have produced a series of guides and help sheets to aid you in your planning. You can download them by following the links below:

CA2006 Guide – Filing AR01 Annual Return
CA2006 Guide – Service Addresses and Company Registers
CA2006 Guide – Company Names
CA2006 Guide – Written Resolutions
CA2006 Guide – Eighth Commencement Order

For fresh ideas, new possibilities and a value driven service go to www.garside.co.uk.

We have produced a series of guides and help sheets to aid you in your planning. You can download them by following the links below

Surviving the Recession

Here are ten top tips for surviving the recession:

1. Manage your cash flow
   There are many ways you can manage your cash flow from negotiating longer credit terms with your suppliers to chasing up debtors. Other techniques you can use include keeping in touch with your bank and trying not to buy more stock than you need, no matter how cheap it is!
2. Look at other ways to sell
   Using additional channels to sell your products and services can expose your business to a larger market at minimal cost. Selling online is a huge channel with massive potential, so make sure you encourage customers to purchases from your site by providing a secure payment process with added security.
3. Cut costs
   Look for savings in every part of your business. Do you really need a big office? Consider moving to smaller premises or even subletting some of your existing space. The same applies for excess equipment – sell what you don’t need and consider hiring expensive equipment rather than purchasing it. Try negotiating new terms and conditions with your suppliers.
4. Being green can help your business
   Becoming a responsible business is not just about helping to protect the environment; it can also save you money. Turn off your electrical equipment when it is not in use to save money on utility bills.
5. Increase your marketing
   As many companies cut back on their marketing to save costs, this gives you the perfect opportunity to tell people why they should buy your products and services over your competitors.

   Marketing is an investment in future sales and could help position you for the upturn. Review your marketing plan and revise your goals and budget – effective marketing doesn’t have to be expensive.

6. Concentrate on product and services that sell
   It may not be the right time to begin developing new products, so if you have profitable favourites then stick with them.

   However, for some businesses identifying new products and services to sell to an existing customer base may be worth considering. Product/service development can be risky at anytime though so beware.

7. Focus on retaining your customers
   In uncertain times, consumers cut their spending. You need to do everything you can to retain your customers by offering loyalty schemes and keeping in regular contact to let them know how much you value them.

   Don’t be tempted to slash your prices, this can send out the wrong impression. Instead offer your customers added value short term deals.

8. Avoid borrowing
   In the current slump loans are harder to obtain and more expensive so do try to avoid borrowing at all costs. Instead, look at ways to save money by cutting costs.
9. First class customer service
   Customers welcome good customer service so make sure your business stands out by offering an efficient service with fast delivery. This will ensure your customers spend with you and not your competitors.
10. See everything as an opportunity
    Be optimistic, plan ahead and use every opportunity to your advantage.

    If you need more advice on any business issues, our Business Advisory is waiting to take your call now on 020 7439 1050.

For fresh ideas, new possibilities and a value driven service go to www.garside.co.uk.

Tax Credit Insurance Top-Up Scheme

Eligible businesses will be able to purchase ‘top-up’ credit insurance cover, under a new scheme launched by the Government.

The scheme is a short-term measure to provide real help to businesses, in the current economic climate, whose credit insurance cover has been reduced by their provider.

Trade credit insurance covers businesses against the risk of bad debt due to insolvency or protracted default of their buyers. It can provide a replacement of working capital when bad debts and late payments impact on cash flow.

What changes were announced on 9 June 2009?

The scheme has backdated eligibility for those companies who have had their credit limits reduced since 1 October 2008. These companies are now eligible for six month’s prospective cover, providing they meet the other eligibility criteria set out below. Up to 28 days’ retrospective cover can be purchased in circumstances where a business requires continuity of cover from a partial reduction made by insurers in the previous 28 days.

How does the scheme work?

The trade credit insurance (TCI) top-up scheme is open to eligible businesses trading in the UK, with a trade credit insurance whole-turnover policy. If your credit limit is reduced you can purchase top-up cover via your existing credit insurance provider, who will administer the scheme on the Government’s behalf.

For queries, complaints, or to apply for help under the scheme, you can contact your current credit insurance provider.

Key features of the TCI top-up scheme:

• It is open to new applicants until 31 December 2009
• It can be purchased in respect to reductions in cover that have occurred since 1 October 2008, with cover under the scheme backdated to start from when the reduction took place
• The duration of each policy, written under the scheme, is a maximum of six months
• The value of the cover you receive is determined by the level of cover provided by your underlying policy. If the level of your underlying policy changes during the six month period then the level of top-up cover will also change accordingly
• You can buy more than one policy. Each policy bought under the Government scheme covers your relationship with one buyer

Eligibility for the scheme:

• Top-up cover is available if you hold a whole-turnover trade credit insurance policy
• You trade within the UK with payment terms of no more than 120 days
• The level of cover being compared was in place for at least 30 days
• Your cover was reduced on, or after, 1 October 2008
• The reduction in cover was triggered by the credit insurance provider
• NB. This scheme does not cover exports

Level of cover provided by the scheme

You can buy insurance to the value of the lower of the following amounts:

• The amount equal to the level of cover, now offered under your credit insurance policy
• The amount which restores the level of cover to the amount you had previously
• Up to £1 million

For example, if cover provided by your underlying policy is reduced from £100,000 to £80,000 then you can buy top-up cover of £20,000 to restore cover to the original level of £100,000. If cover is reduced from £100,000 to £30,000 then you can buy top-up cover of £30,000, matching that of your underlying policy, giving you total cover of £60,000.

Top-up insurance is purchased as a six month policy at a price of 2% of the value of the cover.

Note: The trade credit insurance top-up scheme does not cover businesses where cover has been completely withdrawn by the credit insurance provider, unless it is partially reinstated and the other eligibility criteria apply.

Providers

Trade credit insurance providers who are currently operating the Government top-up scheme are:

• Atradius Credit Insurance N.V
• HCC International Insurance Company PLC
• It’s likely that other credit insurance providers will join the Government top-up scheme in due course

For fresh ideas, new possibilities and a value driven service go to www.garside.co.uk.

HMRC Changes Bank Account Details for VAT Payments

HMRC has changed its bank account details for the payment of VAT, with effect from 8 July 2009.

• For payments by BACS Direct Credit, CHAPS transfer, standing order and internet and telephone banking, the new details are as follows:
  Sort code: 08 32 00
  Account number: 11963155
  Account name: HMRC VAT
• For payments from an overseas bank account, the new details are as follows:
  Euro BACS payment
  Sort code: 08 32 00
  Account number: 12000849
  IBAN number: GB06CITI18500812000849
  Account name: HMRC VAT BACS EUROEuro CHAPS payment
  Account number: 12000717
  IBAN number: GB78CITI18500812000717
  Account name: HMRC VAT CHAPS EURO
  SWIFT BIC code: GB78CITI18500812000717

  Payment in all other currencies
  IBAN number: GB25CITI08320011963155
  Account name: HMRC VAT
  SWIFT BIC code: CITIGB2L

• For payments made by Bank Giro, HMRC will be using NatWest to process payments from 8 July 2009. Businesses can continue to use the slips in their current Bank Giro booklet. In due course HMRC will send a booklet containing the new bank account details. Once these are received they should be used instead of the old booklet.

For fresh ideas, new possibilities and a value driven service go to www.garside.co.uk.

Euro BACS payment
Sort code: 08 32 00
Account number: 12000849
IBAN number: GB06CITI18500812000849
Account name: HMRC VAT BACS EUROEuro CHAPS payment
Account number: 12000717
IBAN number: GB78CITI18500812000717
Account name: HMRC VAT CHAPS EURO
SWIFT BIC code: GB78CITI18500812000717

New EU VAT Number Verification

If you are VAT registered and trading with companies based in the EU, the EUROPA website enables you to verify the validity of a company’s VAT number.

Simply select the Member State from the drop-down menu and enter the number to be validated.

For fresh ideas, new possibilities and a value driven service go to www.garside.co.uk.

Green Shoots or Weeds?

Whatever your view of the UK economy, none can deny the nation’s finances are in a mess.

Yet, in spite of the financial fall out following the credit crunch and the devastating impact on investments across the board, some are starting to be a little more optimistic about a recovery.

There are some perennial optimists who see considerable opportunities in the current markets.

However, with unemployment soaring by almost a quarter of a million in the first quarter of 2009 and set to reach 3 million probably by the end of the year, some would argue that the optimists are delusional at best.

Is the UK economy sprouting green shoots or weeds? Where are we now and what can we expect by the end of 2010?

To find out, download your free report, Green Shoots or Weeds? World and UK Economic Outlook, presented by Stephen Garside, Senior Partner of Garside & Co LLP.

The report is an easy-to-follow, “PowerPoint” styled presentation which looks at the following key areas:

• The UK economy in a global context
• Lessons from history
• Budget and borrowing forecasts
• What kind of growth to expect by 2010

Here’s a scenario for you.  Gordon and his gofers get kicked out next year.  Cameron keeps his resolve, and subjects the UK to cuts (long over due) to its bloated public sector.  After several years on starvation rations, UK plc is out of intensive care.

Pessimism or cautious optimism?

Download the report here.

For fresh ideas, new possibilities and a value driven service go to www.garside.co.uk.

Revenue to Spend £1billion on Tax Avoidance

As ever, HM Revenue and Customs are under serious pressure to raise additional tax revenue. It is no secret that HMRC are investing huge resources into tax avoidance this year… a staggering £1billion.

HMRC’s new chief executive, Lesley Strathie, said that the organisation would “relentlessly pursue those who bent or broke the rules”.

In the Revenue’s annual litigation and settlement review, it resolved to take more people to court to recover tax instead of negotiating out-of-court settlements.

Toby Ryland, partner of Blick Rothenberg firm of accountants, warned: “Taxpayers can expect far more frequent enforcement actions, inquiries and challenges to their tax affairs and far greater scrutiny of their affairs, even where they have structured their finances within the letter of the law”.

Given the scale of this crack down it is more pertinent than ever for individuals and businesses to have tax investigation insurance in place. Bear in mind that you do not need to have done anything wrong to be targeted for an investigation, and in terms of professional fees, it can be expensive  to defend yourself.

If you’re considering professional fee protection or would like help with handling the tax authorities, contact Garside & Co.

For fresh ideas, new possibilities and a value driven service go to www.garside.co.uk.

EU to Streamline VAT Refund Process

Effective 1 January 2010, the EU will streamline the process for reclaiming VAT incurred in Member States.

Claims are to be processed electronically with the home tax authority (i.e. HMRC for UK businesses).

Other changes include:

• Time limit extended to submit claims

  Businesses now have nine months rather than six to submit their claims (from the end of the calendar year in which VAT was incurred).

• Applicant to receive interest for late refunds

  If the refund does not take place within four months, the tax authority in the refund Member State will be required to pay interest. This deadline can be extended to a limit of eight months in the event that further information is requested.

• Applicant entitled to appeal process

  Applicants will have the right of appeal in the Member State of Refund.

For more information see Budget Note 77:
http://www.hmrc.gov.uk/budget2009/bn77.pdf

For fresh ideas, new possibilities and a value driven service go to www.garside.co.uk.

OECD Issues Report to G20 on Tax Havens

Last week, the Organisation for Economic Development (OECD) issued a progress report on the status of internationally agreed tax standards¹. The report lists all tax havens and the degree to which these countries are willing to share information about savers.

The list was handed to the G20 ahead of the summit this April. Prime Minister Gordon Brown will be chairing the summit in which the tax debate will be crucial.

HMRC cited tax losses of £25bn last year because of tax avoidance. A study for Oxfam claims that developing countries miss out on tax receipts to the tune of $124 billion per year – more than their $103 billion in foreign aid.

The OECD report is as follows:

Progress made as at 2nd April 2009

Jurisdictions that have substantially implemented the internationally agreed tax standard
Argentina	Germany	Korea	Seychelles
Australia	Greece	Malta	Slovak Republic
Barbados	Guernsey	Mauritius	South Africa
Canada	Hungary	Mexico	Spain
China²	Iceland	Netherlands	Sweden
Cyprus	Ireland	New Zealand	Turkey
Czech Republic	Isle of Man	Norway	United Arab Emirates
Denmark	Italy	Poland	United Kingdom
Finland	Japan	Portugal	United States
France	Jersey	Russian Federation	US Virgin Islands

Jurisdictions that have committed to the internationally agreed tax standard, but have not yet substantially implemented
Jurisdiction	Year of Commitment	Number of Agreements	Jurisdiction	Year of Commitment	Number of Agreements
Tax Havens³
Andorra	2009	(0)	Marshall Islands	2007	(1)
Anguilla	2002	(0)	Monaco	2009	(1)
Antigua and Barbuda	2002	(7)	Montserrat	2002	(0)
Aruba	2002	(4)	Netherlands Antilles	2000	(7)
Bahrain	2001	(6)	Niue	2002	(0)
Belize	2002	(0)	Panama	2002	(0)
Bermuda	2000	(3)	St Kitts and Nevis	2002	(0)
British Virgin Islands	2002	(3)	St Lucia	2002	(0)
Cayman Islands4	2000	(8)	St Vincent & Grenadines	2002	(0)
Cook Islands	2002	(0)	Samoa	2002	(0)
Dominica	2002	(1)	San Marino	2000	(0)
Gibraltar	2002	(1)	Turks and Caicos Islands	2002	(0)
Grenada	2002	(1)	Vanuatu	2003	(0)
Liberia	2007	(0)
Liechtenstein	2009	(1)
Other Financial Centres
Austria5	2009	(0)	Guatemala	2009	(0)
Belgium5	2009	(1)	Luxembourg5	2009	(0)
Brunei	2009	(5)	Singapore	2009	(0)
Chile	2009	(0)	Switzerland5	2009	(0)

Jurisdictions that have not committed to the internationally agreed standard
Jurisdiction	Number of Agreements	Jurisdiction	Number of Agreements
Costa Rica	(0)	Philippines	(0)
Malaysia (Labuan)	(0)	Uruguay	(0)

Notes:
^1. The internationally agreed tax standard, which was developed by the OECD in co-operation with non-OECD countries and which was endorsed by G20 Finance Ministers at their Berlin Meeting in 2004 and by the UN Committee of Experts on International Cooperation in Tax Matters at its October 2008 Meeting, requires exchange of information on request in all tax matters for the administration and enforcement of domestic tax law without regard to a domestic tax interest requirement or bank secrecy for tax purposes. It also provides for extensive safeguards to protect the confidentiality of the information exchanged.

^2. Excluding the Special Administrative Regions, which have committed to implement the internationally agreed tax standard.

^3. These jurisdictions were identified in 2000 as meeting the tax haven criteria as described in the 1998 OECD report.

^4. The Cayman Islands has enacted legislation that allows it to exchange information unilaterally and has identified 11 countries with which it is prepared to do so. This legislation is being reviewed by the OECD.

^5. Austria, Belgium, Luxembourg and Switzerland withdrew their reservations to Article 26 of the OECD Model Tax Convention. Belgium has already written to 48 countries to propose the conclusion of protocols to update Article 26 of their existing treaties. Austria, Luxembourg and Switzerland announced that they have started to write to their treaty partners to indicate that they are now willing to enter into renegotiations of their treaties to include the new Article 26.

For fresh ideas, new possibilities and a value driven service go to www.garside.co.uk.