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Focus Dec 09 Member Bulletin

What does the election result mean for economic outlook?

A double-dip recession is almost certain says Roger Martin-Fagg

In broad terms, the result implies greater sterling instability as the markets trade on wildly fl uctuating expectations. We can expect swings of up to 15% Sterling against the Dollar, so between 1.40 and 1.65, but between 115 and 125 against the Euro. If the news out of Europe continues to worsen then we could see 128-130.

The cyclical element of the Budget Defi cit in the UK is £100Bn; this will reduce in time, even with the expected low levels of growth. The structural defi cit is £70Bn. It is this that the Government needs to remove as soon as possible - it is like overhead in a business, which has built up but adds very little value. It should be removed by cutting spending

New Companies Act 2006. Is your Company operating with the right constitution?

The implementation of the Companies Act 2006 was fully completed on 1st October 2009. Here, Vistage Member Sam Lloyd and colleague Mary Lovell, whose company 7Side provides company information, formation and property search services, reinforce why you should update your articles of association. Changes introduced within the Companies Act 2006 were intended to streamline the internal administration of limited companies. But unless Companies operating with the 1985 Companies Act or earlier version adopt new articles under the new Companies Act 2006, they could be exposed to unnecessary risk and won’t be able to take best advantage of the greater simplifi cation and fl exibility offered by the new Act.

By updating your Articles of Association, you can protect against potential confl ict with the new provisions. Why update?

Under the 2006 Companies Act... 1. The authorised share capital of a company registered prior to 1st October 2009 will in future act as a limit on the number of shares that the Directors can issue, unless it is removed. This is in confl ict with the intention behind the Companies Act 2006 that there should be no limit on the number of shares available unless one is imposed

through the articles. This restriction can be lifted by adopting new articles

2. A company no longer needs to set out its objects in its memorandum and can have unrestricted objects

3. A private company can now issue redeemable shares, effect a reduction of capital and purchase its own shares, unless this is otherwise restricted by its articles

4. A private company no longer needs a company secretary

5. A company no longer needs an authorised share capital

6. There is no longer such thing as an extraordinary general meeting

7. Shareholders can appoint more than one proxy at a general meeting (provided that each proxy is appointed in relation to different shares or different £10, or multiples of £10, of stock)

8. Providing it’s allowed for in a company’s Articles, a board of directors can now allow a director with a potential confl ict of interest to still take part in discussions or decision-making from which he would previously have had to be excluded

Sam Lloyd and Mary Lovell, 7Side Sam is a member of V 51, South Wales

rather than raising taxes. However, VAT will go up in September to 20%. The rate of growth in the supply of money in April was 2.6%, which is insuffi cient to create growth next year (it needs to grow at least 7%). It means that infl ation will not be a problem in the next few years. It also means that the Bank of England will not be raising interest rates in the next year, although LIBOR is likely to increase given the shortage of liquidity in Euroland - probably to 1.5%. A double-dip recession is almost certain in my view. It will begin with a poor Autumn and disappointing Christmas. Destocking for the fi rst six months of next year will cause real GDP to fall around 1.5% in 2011.

Looking further ahead, we can expect big upheavals in Euroland; low, slow growth in the West (under 2% YOY); and an age of austerity. These are the right conditions for innovation and risk taking, but the product or service has to be clearly different and more valuable to the consumer than the current offers. At a time of constrained personal income growth, consumers will focus, more than ever, on value for money. But, remember, this does not mean you have to cut your prices. People will buy less but better quality.

Vistage Whitepapers

Look out for the latest Vistage whitepaper on The New Economy.

‘Sales in the New Economy’ will be available on Vistage Village Online in early July. The other New Economy papers, ‘Prospering in the New Business Landscape’

(Dec 2009) and ‘Raising Finance in the New Economy’ are available to download from Vistage Village.

6 Member Bulletin | Summer 2010

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