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Proposals Published for the Company Reform Law Bill |
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Proposals to save businesses £250million a year - including £100million
to small business - and update company law were published today by
Trade and Industry Secretary Patricia Hewitt.
Company
law will be substantially changed to make it easier to understand and
more flexible - especially for small businesses. The plans would help
keep the regulatory burden to a minimum, and promote shareholder
engagement and a long-term investment culture.
The proposals for the Company Law Reform Bill, published today, are
designed to help ensure that Britain remains one of the best places in
the world to set up and run a business.
Patricia Hewitt said:
"An
effective framework of company law and corporate governance will
promote enterprise and helps stimulate investment in the UK.
"We
needed a thorough overhaul of the law to make it more suited to the
needs of our companies and the measures set out in the White Paper will
help us achieve that.
"The proposals are part of a wide
programme of action to boost enterprise, encourage investment and
promote long-term company performance. These measures represent a
significant step forward in ensuring that our company law remains up to
date, flexible, and accessible for everyone who uses it."
It is estimated that business benefits from these proposals would total around £250m a year.
This includes an annual £100m benefits for small companies from:
*
restructuring those parts of company law most relevant to small
businesses making it easier for them to understand what they need to do;
* simpler rules for forming a company;
* abolition of the need for a company secretary;
* making AGM opt in rather than opt out; and
* new model articles;
For all businesses there will be benefits from a range of measures including:
*
greater clarity on directors' duties, including making clear that they
have to act in the interests of shareholders, but can pay regard to the
long as well as the short term, taking due account of the interests of
employees, suppliers, consumers and the environment;
* greater use of e-communications and removing the need for hard copy share certificates; and
* an option for all directors to file a service address on the public record rather than a private address.
Shareholder
engagement will also be promoted through enhancing the powers of
proxies and making it easier for indirect investors to be informed and
exercise governance rights in the company.
The draft package also includes proposals on auditor liability and audit quality including:
*
allowing shareholders to agree to limit the auditors' liability to the
company, so the financial liability of the auditor relates to the
auditors' responsibility for the loss;
* greater rights for shareholders to question auditors and named partners for audit reports;
* audit reports to give the name of the individual lead auditor, as well as the audit firm; and
* tougher penalties for reckless statements by auditors including custodial sentences
The Bill would also be used to implement the Takeover Directive, placing the work of the Takeover Panel on a statutory footing.
The consultation is open until 10 June and the aim is to introduce a Bill as soon as Parliamentary time allows.
A
separate consultation document, also issued today, covers a further
recommendation of the Company Law Review - the extension of the option
to prepare and distribute summary financial statements to all
companies. This consultation also includes proposals for allowing
companies that prepare their accounts using international accounting
standards to continue to take advantage of the summary financial
arrangements.
A full copy of the Company Law Reform White Paper Cm 6456 is available from The Stationery Office or the DTI website
www.dti.gov.uk/cld/review.htm.
A
short summary of the main changes for small businesses is also
available on the website www.dti.gov.uk/cld/review.htm or by calling
the DTI publications orderline on 0845 0150010
All of the
material about the consultation document on accounting changes
including summary Financial statements is on the DTI website at
www.dti.gov.uk/cld/condocs.htm.
{mos_sb_discuss:2}
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