Corporate Legal Alert

Transcription

1 Corporate Legal Alert Trading disclosures for companies: more new rules On 1 October 2008, UK companies will be subject to revised trading disclosure requirements under the Companies Act 2006 and the Companies (Trading Disclosures) Regulations 2008 (the Regulations ). This alert summarises the requirements that will apply from that date. Background Companies must currently comply with the disclosure requirements that are set out in the Companies Act 1985 (the CA85 ) and a company trading under a business name must also comply with overlapping, but not identical, disclosure requirements set out in the Business Names Act 1985 (the BNA ). The CA85 requirements were amended in January 2007 to comply with EU law. They are about to be amended again, by the Regulations which will replace both the CA85 provisions and the BNA requirements to provide a single set of obligations which fulfils the policy aim of ensuring that anyone dealing with a company is able easily to identify the entity he is dealing with so that he can get further details about it from Companies House and, in particular, that its limited liability is evident to him. September 2008

2 The new requirements are sometimes different from the current ones. Consequently, it is important that all companies and others assess what action is required to comply with the new obligations and implement any changes by 1 October Display of name As from 1 October 2008, a company must display its registered name at: its registered office and any inspection place. A new exception provides that this is not required if the company has always been dormant since its incorporation; and any other location at which it carries on business. A new exception provides that this is not required if the location is primarily used for living accommodation. An inspection place is a location (but not a company s registered office) at which a company keeps available for inspection any company record which it is required under the Companies Acts to keep available for inspection. A company record is widely defined as: any register, index, accounting records, agreement, memorandum, minutes or other document required by the Companies Acts to be kept by a company; and any register kept by a company of its debenture holders. This display requirement replaces the current CA85 requirement for a company s name to be displayed outside every office or place in which its business is carried on. It also replaces the BNA requirement that a company trading under a business name must display, in all premises where the business is carried on and to which customers and suppliers have access, its corporate name and an address in Great Britain at which documents can be served. As from 1 October 2008, such a company will not need to display a service address for documents. The registered name must be: displayed in characters that can be read with the naked eye; positioned so that it may be easily seen by a visitor to the office, place or location; and displayed continuously. A new exception to this obligation applies if an office, place or location is shared by six or more companies. In that situation, each company is only required to display its registered name for at least 15 continuous seconds at least once in every three minutes. Two further exceptions have been proposed, to have effect from October 2009, one relating to companies whose registered office or inspection place moves to that of a liquidator, administrator or receiver and the other relating to locations at which a business is carried on by a company all of whose directors have residential addresses which are protected from disclosure by the Registrar of Companies. 2 Corporate Legal Alert

3 Requirements for business letters, orders forms and websites The details which a company must disclose on its business letters, order forms and websites remain for the most part unchanged. Those details (which must be disclosed in characters that can be read by the naked eye) are: its registered name; the part of the United Kingdom in which it is registered; its registered number; the address of its registered office; in the case of a limited company exempt from using the word limited in its name or a community interest company which is not a public company, the fact that it is a limited company; and in the case of an investment company, the fact that it is an investment company. These disclosure requirements continue to apply to business letters and order forms in hard copy form or electronic form. The single change in this area is that a company trading under a business name will no longer be required to comply with the similar requirement prescribed by the BNA to include its name and a service address for documents on business letters and order forms. Websites Websites were first covered by the disclosure requirements in January 2007, but until now there has been no definition of what is meant by a company s websites. The Regulations state that a company s websites include any part of a website relating to that company which that company has caused or authorised to appear. This does not greatly expand our current understanding of what is covered. In particular, the Regulations continue just to refer to a company s websites and do not explicitly deal with a group that operates a global website with information about some or all of the companies within the group. The safest approach remains, therefore, for a global website to include the required information about each UK company if the website (or part of it) relates to that company or a business operated by it. The required information does not have to be disclosed on every page of a website but can just be included on, for example, an about us or a legal information page. Requirements for other forms of communications In addition to the requirements that apply to business letters, order forms and websites, a company is currently also required to disclose its registered name on various other types of communications. The Regulations have expanded this list of communications to cover: mayer brown 3

4 orders for services purporting to be signed by or on behalf of a company; demands for payments; applications for licences to carry on a trade or activity; and, significantly, all other forms of business correspondence and documentation. The name must be disclosed in characters that can be read with the naked eye and in hard copy and electronic forms of documents. Although the final new category above will operate as a catch-all, the Regulations still set out a list of documents on which the company s name must be displayed. As a checklist for companies wishing to check the compliance of their stationery, we reproduce this list below: A company must disclose its registered name on: its business letters, notices and other official publications; its bills of exchange, promissory notes, endorsements and order forms; cheques purporting to be signed by or on behalf of the company; orders for money, goods or services purporting to be signed by or on behalf of the company; its bills of parcels, invoices and other demands for payment, receipts and letters of credit; its applications for licences to carry on a trade or activity; all other forms of its business correspondence and documentation; and its websites. A company trading under a business name will no longer be required to comply with the similar requirement prescribed by the BNA to include its name and a service address on orders forms, invoices, receipts and written demands for payment. Application of the disclosure requirements to s An sent on behalf of a company may constitute either a business letter or business correspondence. Given that different disclosure requirements apply to business letters and business correspondence, it will be safest, and probably easiest, to assume that a business-related is a business letter rather than business correspondence, and comply with the more extensive disclosure requirements that apply for business letters when a person sends any business-related on behalf a company. The Regulations do not specify whether the disclosure requirements only apply to external letters or correspondence but logically this seems to be the case. An sent on behalf of one group company to another group company should probably be regarded as an external though. Staff that carry out duties for more than one group company should make it clear which company they are sending an on behalf of. The details of all group companies 4 Corporate Legal Alert

5 could be included as an automatic footer on the bottom of all s generated within a group of companies, but the sender of any particular should still identify the particular company on whose behalf it is sending the . The details should be included when staff reply to an received from an external source. However, if the details appear in one in a thread or conversation and are not deleted when further s are sent as part of the thread or conversation, it is probably not necessary to include them in every response. Disclosure of directors names If a company s business letter includes the name of a director of that company (other than in the text or as a signatory) the letter must disclose the names of all the company s directors. This generally replicates the current requirement but there are some differences: when complying with this requirement it will no longer be possible only to set out the initial or a recognised abbreviation of an individual director s Christian name or other forename instead of that individual s full name; the current requirement also applies to a company incorporated outside Great Britain which has an established place of business within Great Britain whereas the new requirement applies only to companies incorporated in the UK. According to draft legislation, an overseas company carrying on business in the UK will have to comply with this requirement but that legislation is not due to come into effect until 1 October 2009; and currently the names of any shadow director would have to be included in a business letter but this will no longer be required once the Regulations come into force. Disclosures relating to a company s registered office and inspection place The Regulations contain a new right enabling a person with whom a company deals in the course of business to request the company to disclose: the address of its registered office; any inspection place; and the type of company records which are kept at the registered office or inspection place. The company must respond to that person within five working days of the receipt of such a request. Both the request and response must be in writing. Currently, companies trading under a business name must immediately respond to anyone who in the course of business asks for the company s name and an address in Great Britain at which documents can be served. This is a BNA requirement that will no longer apply from 1 October mayer brown 5

6 Disclosures by insolvent companies As before, a company that is being wound up must state that fact on its order forms, websites, business letters, invoices and orders for goods. The Companies (Trading Disclosures) (Insolvency) Regulations 2008, which are also due to come into force on 1 October 2008, include orders for services in the list and make it clear that the requirement applies to all such documents, not just to those on which the company s name appears. The requirements for companies in receivership, administrative receivership, administration or in respect of which a moratorium is in force are aligned with those for companies that are being wound up. Other requirements This alert deals only with Companies Act requirements for disclosures. Certain companies will be subject to other requirements, for instance, those which are members of trade associations and those which conclude contracts electronically with consumers. Offences and liability If a company fails, without reasonable excuse, to comply with any of the requirements set out in the Regulations, it and each officer of the company (including, for this purpose, shadow directors) who is in default commit an offence. The penalty for committing an offence is a fine and, for continued contravention, a daily default fine. The addition of the concept of reasonable excuse is helpful, as the requirements in this area are both complex and subject to frequent change. A company may also be unable to enforce any contract which is made at a time when the company is in breach of the disclosure requirements described in this alert, if the other party to the contract can show that the breach has led to him being unable to pursue his rights under the contract or has caused him financial loss. Currently, an officer of the company may be personally liable for, among other things, any cheque or purchase order which he signs but which does not show the company s name. That potential personal liability will be removed from 1 October If you have any questions or require specific advice on any matter discussed in this publication, please contact Kirsty Payne (T: +44 (0) or E: kpayne@mayerbrown.com), Eric Campbell (T: +44 (0) or E: ecampbell@mayerbrown.com) or your regular contact at Mayer Brown. 6 Corporate Legal Alert

7 mayerbrown.com This Mayer Brown publication provides information and comments on legal issues and developments of interest to our clients and friends. It is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein Mayer Brown LLP, Mayer Brown International LLP, and/or JSM. All rights reserved. Mayer Brown is a global legal services organisation comprising legal practices that are separate entities ( Mayer Brown Practices ). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and JSM, a Hong Kong partnership, and its associated entities in Asia. The Mayer Brown Practices are known as Mayer Brown JSM in Asia. 0312cor September 2008