Companies Act 2006 (c. 46)

(The document as of February, 2008)

-- Back --

Page 4

Pages: P.1 | P.2 | P.3 | P.4 | P.5 | P.6 | P.7 | P.8 | P.9 | P.10 | P.11 | P.12 | P.13 | P.14 | P.15 | P.16 | P.17 | P.18 | P.19 | P.20 | P.21 | P.22 | P.23 | P.24 | P.25 | P.26 | P.27 | P.28 | P.29 | P.30 | P.31 | P.32 | P.33 | P.34 | P.35 | P.36 | P.37 | P.38 | P.39 | P.40 | P.41 | P.42 | P.43 | P.44 | P.45 | P.46 | P.47 | P.48 | P.49 | P.50 | P.51 | P.52 | P.53 | P.54 | P.55 | P.56 | P.57 | P.58 | P.59 | P.60 | P.61 | P.62 | P.63 | P.64 | P.65 | P.66

Part 4 A company's capacity and related matters

Capacity of company and power of directors to bind it

39 A company's capacity

(1) The validity of an act done by a company shall not be called into question on the ground of lack of capacity by reason of anything in the company's constitution.

(2) This section has effect subject to section 42 (companies that are charities).

40 Power of directors to bind the company

(1) In favour of a person dealing with a company in good faith, the power of the directors to bind the company, or authorise others to do so, is deemed to be free of any limitation under the company's constitution.

(2) For this purpose--

(a) a person "deals with" a company if he is a party to any transaction or other act to which the company is a party,

(b) a person dealing with a company--

(i) is not bound to enquire as to any limitation on the powers of the directors to bind the company or authorise others to do so,

(ii) is presumed to have acted in good faith unless the contrary is proved, and

(iii) is not to be regarded as acting in bad faith by reason only of his knowing that an act is beyond the powers of the directors under the company's constitution.

(3) The references above to limitations on the directors' powers under the company's constitution include limitations deriving--

(a) from a resolution of the company or of any class of shareholders, or

(b) from any agreement between the members of the company or of any class of shareholders.

(4) This section does not affect any right of a member of the company to bring proceedings to restrain the doing of an action that is beyond the powers of the directors.

But no such proceedings lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the company.

(5) This section does not affect any liability incurred by the directors, or any other person, by reason of the directors' exceeding their powers.

(6) This section has effect subject to--

section 41 (transactions with directors or their associates), and
section 42 (companies that are charities).

41 Constitutional limitations: transactions involving directors or their associates

(1) This section applies to a transaction if or to the extent that its validity depends on section 40 (power of directors deemed to be free of limitations under company's constitution in favour of person dealing with company in good faith).

Nothing in this section shall be read as excluding the operation of any other enactment or rule of law by virtue of which the transaction may be called in question or any liability to the company may arise.

(2) Where--

(a) a company enters into such a transaction, and

(b) the parties to the transaction include--

(i) a director of the company or of its holding company, or

(ii) a person connected with any such director,

the transaction is voidable at the instance of the company.

(3) Whether or not it is avoided, any such party to the transaction as is mentioned in subsection (2)(b)(i) or (ii), and any director of the company who authorised the transaction, is liable--

(a) to account to the company for any gain he has made directly or indirectly by the transaction, and

(b) to indemnify the company for any loss or damage resulting from the transaction.

(4) The transaction ceases to be voidable if--

(a) restitution of any money or other asset which was the subject matter of the transaction is no longer possible, or

(b) the company is indemnified for any loss or damage resulting from the transaction, or

(c) rights acquired bona fide for value and without actual notice of the directors' exceeding their powers by a person who is not party to the transaction would be affected by the avoidance, or

(d) the transaction is affirmed by the company.

(5) A person other than a director of the company is not liable under subsection (3) if he shows that at the time the transaction was entered into he did not know that the directors were exceeding their powers.

(6) Nothing in the preceding provisions of this section affects the rights of any party to the transaction not within subsection (2)(b)(i) or (ii).

But the court may, on the application of the company or any such party, make an order affirming, severing or setting aside the transaction on such terms as appear to the court to be just.

(7) In this section--

(a) "transaction" includes any act; and

(b) the reference to a person connected with a director has the same meaning as in Part 10 (company directors).

42 Constitutional limitations: companies that are charities

(1) Sections 39 and 40 (company's capacity and power of directors to bind company) do not apply to the acts of a company that is a charity except in favour of a person who--

(a) does not know at the time the act is done that the company is a charity, or

(b) gives full consideration in money or money's worth in relation to the act in question and does not know (as the case may be)--

(i) that the act is not permitted by the company's constitution, or

(ii) that the act is beyond the powers of the directors.

(2) Where a company that is a charity purports to transfer or grant an interest in property, the fact that (as the case may be)--

(a) the act was not permitted by the company's constitution, or

(b) the directors in connection with the act exceeded any limitation on their powers under the company's constitution,

does not affect the title of a person who subsequently acquires the property or any interest in it for full consideration without actual notice of any such circumstances affecting the validity of the company's act.

(3) In any proceedings arising out of subsection (1) or (2) the burden of proving--

(a) that a person knew that the company was a charity, or

(b) that a person knew that an act was not permitted by the company's constitution or was beyond the powers of the directors,

lies on the person asserting that fact.

(4) In the case of a company that is a charity the affirmation of a transaction to which section 41 applies (transactions with directors or their associates) is ineffective without the prior written consent of--

(a) in England and Wales, the Charity Commission;

(b) in Northern Ireland, the Department for Social Development.

(5) This section does not extend to Scotland (but see section 112 of the Companies Act 1989 (c. 40)).

Formalities of doing business under the law of England and Wales or Northern Ireland

43 Company contracts

(1) Under the law of England and Wales or Northern Ireland a contract may be made--

(a) by a company, by writing under its common seal, or

(b) on behalf of a company, by a person acting under its authority, express or implied.

(2) Any formalities required by law in the case of a contract made by an individual also apply, unless a contrary intention appears, to a contract made by or on behalf of a company.

44 Execution of documents

(1) Under the law of England and Wales or Northern Ireland a document is executed by a company--

(a) by the affixing of its common seal, or

(b) by signature in accordance with the following provisions.

(2) A document is validly executed by a company if it is signed on behalf of the company--

(a) by two authorised signatories, or

(b) by a director of the company in the presence of a witness who attests the signature.

(3) The following are "authorised signatories" for the purposes of subsection (2)--

(a) every director of the company, and

(b) in the case of a private company with a secretary or a public company, the secretary (or any joint secretary) of the company.

(4) A document signed in accordance with subsection (2) and expressed, in whatever words, to be executed by the company has the same effect as if executed under the common seal of the company.

(5) In favour of a purchaser a document is deemed to have been duly executed by a company if it purports to be signed in accordance with subsection (2).

A "purchaser" means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property.

(6) Where a document is to be signed by a person on behalf of more than one company, it is not duly signed by that person for the purposes of this section unless he signs it separately in each capacity.

(7) References in this section to a document being (or purporting to be) signed by a director or secretary are to be read, in a case where that office is held by a firm, as references to its being (or purporting to be) signed by an individual authorised by the firm to sign on its behalf.

(8) This section applies to a document that is (or purports to be) executed by a company in the name of or on behalf of another person whether or not that person is also a company.

45 Common seal

(1) A company may have a common seal, but need not have one.

(2) A company which has a common seal shall have its name engraved in legible characters on the seal.

(3) If a company fails to comply with subsection (2) an offence is committed by--

(a) the company, and

(b) every officer of the company who is in default.

(4) An officer of a company, or a person acting on behalf of a company, commits an offence if he uses, or authorises the use of, a seal purporting to be a seal of the company on which its name is not engraved as required by subsection (2).

(5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

(6) This section does not form part of the law of Scotland.

46 Execution of deeds

(1) A document is validly executed by a company as a deed for the purposes of section 1(2)(b) of the Law of Property (Miscellaneous Provisions) Act 1989 (c. 34) and for the purposes of the law of Northern Ireland if, and only if--

(a) it is duly executed by the company, and

(b) it is delivered as a deed.

(2) For the purposes of subsection (1)(b) a document is presumed to be delivered upon its being executed, unless a contrary intention is proved.

47 Execution of deeds or other documents by attorney

(1) Under the law of England and Wales or Northern Ireland a company may, by instrument executed as a deed, empower a person, either generally or in respect of specified matters, as its attorney to execute deeds or other documents on its behalf.

(2) A deed or other document so executed, whether in the United Kingdom or elsewhere, has effect as if executed by the company.

Formalities of doing business under the law of Scotland

48 Execution of documents by companies

(1) The following provisions form part of the law of Scotland only.

(2) Notwithstanding the provisions of any enactment, a company need not have a company seal.

(3) For the purposes of any enactment--

(a) providing for a document to be executed by a company by affixing its common seal, or

(b) referring (in whatever terms) to a document so executed,

a document signed or subscribed by or on behalf of the company in accordance with the provisions of the Requirements of Writing (Scotland) Act 1995 (c. 7) has effect as if so executed.

Other matters

49 Official seal for use abroad

(1) A company that has a common seal may have an official seal for use outside the United Kingdom.

(2) The official seal must be a facsimile of the company's common seal, with the addition on its face of the place or places where it is to be used.

(3) The official seal when duly affixed to a document has the same effect as the company's common seal.

This subsection does not extend to Scotland.

(4) A company having an official seal for use outside the United Kingdom may--

(a) by writing under its common seal, or

(b) as respects Scotland, by writing subscribed in accordance with the Requirements of Writing (Scotland) Act 1995,

authorise any person appointed for the purpose to affix the official seal to any deed or other document to which the company is party.

(5) As between the company and a person dealing with such an agent, the agent's authority continues--

(a) during the period mentioned in the instrument conferring the authority, or

(b) if no period is mentioned, until notice of the revocation or termination of the agent's authority has been given to the person dealing with him.

(6) The person affixing the official seal must certify in writing on the deed or other document to which the seal is affixed the date on which, and place at which, it is affixed.

50 Official seal for share certificates etc

(1) A company that has a common seal may have an official seal for use--

(a) for sealing securities issued by the company, or

(b) for sealing documents creating or evidencing securities so issued.

(2) The official seal--

(a) must be a facsimile of the company's common seal, with the addition on its face of the word "Securities", and

(b) when duly affixed to the document has the same effect as the company's common seal.

51 Pre-incorporation contracts, deeds and obligations

(1) A contract that purports to be made by or on behalf of a company at a time when the company has not been formed has effect, subject to any agreement to the contrary, as one made with the person purporting to act for the company or as agent for it, and he is personally liable on the contract accordingly.

(2) Subsection (1) applies--

(a) to the making of a deed under the law of England and Wales or Northern Ireland, and

(b) to the undertaking of an obligation under the law of Scotland,

as it applies to the making of a contract.

52 Bills of exchange and promissory notes

A bill of exchange or promissory note is deemed to have been made, accepted or endorsed on behalf of a company if made, accepted or endorsed in the name of, or by or on behalf or on account of, the company by a person acting under its authority.

Part 5 A company's name

Chapter 1 General requirements

Prohibited names

53 Prohibited names

A company must not be registered under this Act by a name if, in the opinion of the Secretary of State--

(a) its use by the company would constitute an offence, or

(b) it is offensive.

Sensitive words and expressions

54 Names suggesting connection with government or public authority

(1) The approval of the Secretary of State is required for a company to be registered under this Act by a name that would be likely to give the impression that the company is connected with--

(a) Her Majesty's Government, any part of the Scottish administration or Her Majesty's Government in Northern Ireland,

(b) a local authority, or

(2) For the purposes of this section--

"local authority" means--
(a)
a local authority within the meaning of the Local Government Act 1972 (c. 70), the Common Council of the City of London or the Council of the Isles of Scilly,
(b)
a council constituted under section 2 of the Local Government etc. (Scotland) Act 1994 (c. 39), or
(c)
a district council in Northern Ireland;
"public authority" includes any person or body having functions of a public nature.

(3) Regulations under this section are subject to affirmative resolution procedure.

55 Other sensitive words or expressions

(1) The approval of the Secretary of State is required for a company to be registered under this Act by a name that includes a word or expression for the time being specified in regulations made by the Secretary of State under this section.

(2) Regulations under this section are subject to approval after being made.

56 Duty to seek comments of government department or other specified body

(1) The Secretary of State may by regulations under--

(a) section 54 (name suggesting connection with government or public authority), or

(b) section 55 (other sensitive words or expressions),

require that, in connection with an application for the approval of the Secretary of State under that section, the applicant must seek the view of a specified Government department or other body.

(2) Where such a requirement applies, the applicant must request the specified department or other body (in writing) to indicate whether (and if so why) it has any objections to the proposed name.

(3) Where a request under this section is made in connection with an application for the registration of a company under this Act, the application must--

(a) include a statement that a request under this section has been made, and

(b) be accompanied by a copy of any response received.

(4) Where a request under this section is made in connection with a change in a company's name, the notice of the change sent to the registrar must be accompanied by--

(a) a statement by a director or secretary of the company that a request under this section has been made, and

(b) a copy of any response received.

(5) In this section "specified" means specified in the regulations.

Permitted characters etc

57 Permitted characters etc

(1) The Secretary of State may make provision by regulations--

(a) as to the letters or other characters, signs or symbols (including accents and other diacritical marks) and punctuation that may be used in the name of a company registered under this Act; and

(b) specifying a standard style or format for the name of a company for the purposes of registration.

(2) The regulations may prohibit the use of specified characters, signs or symbols when appearing in a specified position (in particular, at the beginning of a name).

(3) A company may not be registered under this Act by a name that consists of or includes anything that is not permitted in accordance with regulations under this section.

(4) Regulations under this section are subject to negative resolution procedure.

(5) In this section "specified" means specified in the regulations.

Chapter 2 Indications of company type or legal form

Required indications for limited companies

58 Public limited companies

(1) The name of a limited company that is a public company must end with "public limited company" or "p.l.c.".

(2) In the case of a Welsh company, its name may instead end with "cwmni cyfyngedig cyhoeddus" or "c.c.c.".

(3) This section does not apply to community interest companies (but see section 33(3) and (4) of the Companies (Audit, Investigations and Community Enterprise) Act 2004 (c. 27)).

59 Private limited companies

(1) The name of a limited company that is a private company must end with "limited" or "ltd.".

(2) In the case of a Welsh company, its name may instead end with "cyfyngedig" or "cyf.".

(3) Certain companies are exempt from this requirement (see section 60).

(4) This section does not apply to community interest companies (but see section 33(1) and (2) of the Companies (Audit, Investigations and Community Enterprise) Act 2004).

60 Exemption from requirement as to use of "limited"

(1) A private company is exempt from section 59 (requirement to have name ending with "limited" or permitted alternative) if--

(a) it is a charity,

(b) it is exempted from the requirement of that section by regulations made by the Secretary of State, or

section 61 (continuation of existing exemption: companies limited by shares), or
section 62 (continuation of existing exemption: companies limited by guarantee).

(2) The registrar may refuse to register a private limited company by a name that does not include the word "limited" (or a permitted alternative) unless a statement has been delivered to him that the company meets the conditions for exemption.

(3) The registrar may accept the statement as sufficient evidence of the matters stated in it.

(4) Regulations under this section are subject to negative resolution procedure.

61 Continuation of existing exemption: companies limited by shares

(1) This section applies to a private company limited by shares--

(a) that on 25th February 1982--

(i) was registered in Great Britain, and

(ii) had a name that, by virtue of a licence under section 19 of the Companies Act 1948 (c. 38) (or corresponding earlier legislation), did not include the word "limited" or any of the permitted alternatives, or

(b) that on 30th June 1983--

(i) was registered in Northern Ireland, and

(ii) had a name that, by virtue of a licence under section 19 of the Companies Act (Northern Ireland) 1960 (c. 22 (N.I.)) (or corresponding earlier legislation), did not include the word "limited" or any of the permitted alternatives.

(2) A company to which this section applies is exempt from section 59 (requirement to have name ending with "limited" or permitted alternative) so long as--

(a) it continues to meet the following two conditions, and

(b) it does not change its name.

(3) The first condition is that the objects of the company are the promotion of commerce, art, science, education, religion, charity or any profession, and anything incidental or conducive to any of those objects.

(4) The second condition is that the company's articles--

(a) require its income to be applied in promoting its objects,

(b) prohibit the payment of dividends, or any return of capital, to its members, and

(c) require all the assets that would otherwise be available to its members generally to be transferred on its winding up either--

(i) to another body with objects similar to its own, or

(ii) to another body the objects of which are the promotion of charity and anything incidental or conducive thereto,

(whether or not the body is a member of the company).

62 Continuation of existing exemption: companies limited by guarantee

(1) A private company limited by guarantee that immediately before the commencement of this Part--

(a) was exempt by virtue of section 30 of the Companies Act 1985 (c. 6) or Article 40 of the Companies (Northern Ireland) Order 1986 (S.I. 1986/1032 (N.I. 6)) from the requirement to have a name including the word "limited" or a permitted alternative, and

(b) had a name that did not include the word "limited" or any of the permitted alternatives,

is exempt from section 59 (requirement to have name ending with "limited" or permitted alternative) so long as it continues to meet the following two conditions and does not change its name.

(2) The first condition is that the objects of the company are the promotion of commerce, art, science, education, religion, charity or any profession, and anything incidental or conducive to any of those objects.

(3) The second condition is that the company's articles--

(a) require its income to be applied in promoting its objects,

(b) prohibit the payment of dividends to its members, and

(c) require all the assets that would otherwise be available to its members generally to be transferred on its winding up either--

(i) to another body with objects similar to its own, or

(ii) to another body the objects of which are the promotion of charity and anything incidental or conducive thereto,

(whether or not the body is a member of the company).

63 Exempt company: restriction on amendment of articles

(1) A private company--

(a) that is exempt under section 61 or 62 from the requirement to use "limited" (or a permitted alternative) as part of its name, and

(b) whose name does not include "limited" or any of the permitted alternatives,

must not amend its articles so that it ceases to comply with the conditions for exemption under that section.

(2) If subsection (1) above is contravened an offence is committed by--

(a) the company, and

-- Back --

Stat