E-Corporate Communications

The Electronic Communications Act 2000, which received royal assent on 25th May 2000, contains a general power to make orders to amend existing legislation to authorise or facilitate electronic means of communication. Probably the first order to be made under the Act will be the proposed Companies Act 1985 (Electronic Communications) Order 2000 (the "Order"). A draft of this Order was issued by the DTI in February as part of a consultation process in which we partook. Recent conversations with the DTI indicate that, although certain amendments have been made as a result of comments submitted, the Order will be laid before Parliament this session in substantially the same form as the issued draft.

The Order allows certain communications between a company and its shareholders to take electronic form. It also enables companies to be incorporated at Companies House and deliver other significant documents to Companies House by electronic means.

The Order has a permissive rather than a compulsive approach. In no way will companies, shareholders or Companies House be requiredto use electronic communication: the Order will simply enable them to do so (in circumstances where both sender and recipient agree).

The Order amends Table A to ensure that, for companies that adopt Table A in the future, full account is taken of the amendments concerning electronic communications. The Order goes further than this in relation to existing articles of association: it has the effect that any provisions that would prevent a company from taking advantage of the amendments in the Order are overridden.

The Order is sparse on prescriptive detail, presumably in the interest of providing companies with the flexibility to organise their own approach to electronic communication. The Institute of Chartered Secretaries and Administrators is in the process of drawing up a Best Practice Guide on Electronic Communications which companies will most likely wish to follow.

The main implications of the Order (as per the draft) are as follows:

Companies will be able to send their annual reports and accounts electronically, either directly (by email or on CD-Rom) or by notifying the shareholders concerned that the documents have been published on a web site.

Companies will be able to send their summary financial statements to shareholders electronically.

Companies will be able to serve notice of general meetings electronically, either directly (by email or otherwise) or by notifying the shareholders concerned that the notice has been published on a web site.

Shareholders will be able to lodge appointments of proxies electronically.

Where a private company has elected to dispense with the laying of the annual reports and accounts before a general meeting, a shareholder is nevertheless permitted to require that such a meeting is held by giving due notice. Under the Order it will be possible for the shareholder to give this notice electronically.

The statutory obstacles to the electronic incorporation of companies will be removed. Electronic signatures and statements will be accepted in place of witnessed signatures and statutory declarations.

A company will be able to re-register as a different type of company electronically.

The Registrar will be able to accept electronic statements in place of statutory declarations in certain circumstances (such as compliance with the share capital requirements of a public company, the establishment of a place of business in Great Britain and the submission of a memorandum of satisfaction of a charge).