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COMPANIES ACT 2006- Electronic Communications

 

Introduction

 

To help save costs, the Companies Act 2006 encourages electronic communications between companies and their shareholders. 

 

Under the e-Communications Order 2000 companies could circulate annual reports and accounts, summary financial statements and notices of the AGM electronically (provided the company and the recipient had agreed to this), but there was debate about whether some legal requirements to communicate in writing meant that email could not be used as a means of communication.

 

As from 20 January 2007 the default position is to use e-communications, although steps must first be taken to pass a resolution or to change the company's articles.

 

Shareholders and debenture holders will still have the right to receive information in hard copy if they request it.  Companies must comply with this request within 21 days after receipt and at no charge to the shareholder.

 

Communications from Members to the Company

 

Documents may be sent to the company electronically if the company has agreed to receive them in that form. If the company has given an email address in a notice or proxy form, it is deemed to have given its consent to be contacted by email.

 

E-Mail Communications from the Company to its Members

 

The company may communicate electronically with a shareholder who has given consent and an email address. The company should therefore try to obtain agreement from every intended recipient to receive information by email.  If a shareholder does not give consent or is unwilling to supply an email address, the company must continue to provide information in hard copy. 

 

If an email bounces back with an undelivered message, the company will have to rely on provisions (if any) in its articles that do not require it to send notices of general meetings or annual reports and accounts to shareholders for whom it has no valid address.

 

Communications via the Company's Website - What you need to do

 

The company should try to obtain agreement from every intended recipient and will have to pass a resolution to allow it to communicate via a website or to change its articles to allow this. 

 

If a shareholder doesn't reply within 28 days, the company may treat the lack of response as  agreement to receive information via the company's website.  Unfortunately the Companies Act says that anyone who responds to the company's request to agree to website communication is deemed not to have agreed. That means that a positive response counts as a negative.  Therefore requests need to be worded very carefully.

 

If an individual does not agree to receive information via the website, the company may not ask for his or her agreement in the next 12 months. 

  

The company will be able to continue to circulate the annual report and accounts, summary financial statement and AGM notices via its website if it already has a shareholder's agreement do this under the old Companies Act.

 

If the company's articles already provide for information to be supplied to shareholders via a website, no resolution is required.

 

The company must notify the shareholder every time information is posted on the website.

 

Text Messages

 

Companies and individuals may communicate by other electronic means such as text messaging, but this is not advisable as it will be difficult to prove what information has been sent and received.  

 

Authentication

 

Hard copy communications must be signed by or on behalf of the sender.  The company is free to specify the means of authentication for e-communications.  If no means are specified and the company does not doubt the identity of the sender, the company may consider the communication authenticated.

 

Time of Delivery

 

A communication from the company is deemed to have been delivered 48 hours later if a hard copy has been sent by post to an address in the UK or when an email is sent.  Material on a website is deemed to have been delivered either immediately (if the recipient has been notified in advance), or when the recipient is deemed to have received notification of information being posted on the website.

 

Contact Details

 

If you would like further advice about any of the issues considered above please contact Christine Reid on 01865 864195 or email her at christine.reid@northwoodreid.com

 

Terms of Use

 

This article is not intended to be, and should not be taken as being, legal advice. The law often changes and it varies from jurisdiction to jurisdiction; the information in this article is generic in nature and specific legal advice should be taken before acting on any of it.

 

© Northwood Reid 2007. The use, copying and dissemination of this article are subject to our Terms of Use.