Company Law Reform Bill to Make Sweeping Changes

The Company Law Reform Bill will make sweeping changes, simplifying company law and making it easier to understand. The wide-ranging changes will bring an estimated £250m of savings for business including an annual benefit of £100m benefits for small companies. The proposals are designed to make sure that Britain remains one of the best places in the world to set up and run a business.

Trade and Industry Secretary Alistair Darling said: "An effective framework of company law and corporate governance promotes enterprise and stimulates investment.

"We needed a thorough overhaul of the law to make it more suited to the needs of our companies. The measures set out in the Bill will achieve that. It will help to ensure that our company regulation and financial markets continue to be regarded as among the world's best.

"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."

The changes for small businesses include:

* 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 requirement for a company secretary;

* making AGM opt in rather than opt out; and

* new model articles for private companies.

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 have to pay regard to

* wider factors including the interests of employees, suppliers, consumers
   and the environment;

* greater use of e-communications and removing the need for hard copy
   share certificates; and

* a service address on the public record for all directors 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 Bill repeals and restates some two-thirds of the existing companies legislation and the Government intends to consolidate further provisions into the Bill during its passage through the Commons, so that it will provide a more comprehensive code of company law.

Posted 06/06/06

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