Articles
Think Small First
A major revision of British company law is now under way following an independent three-year review. The Government published its response to the Review’s key recommendations in a White Paper “Modernising Company Law” on 16 July 2002. The Government hope that the implementation of the Review will deliver many changes and improvements particularly for small or medium sized enterprises, or “SMEs”, and it hopes that such changes will help to maintain the UK’s position as the best place to set up and run a business.
To date much work has been carried out on the detail of the reforms and the Government intends to legislate as soon as Parliamentary time allows. In early 2003 the Government announced its intention to introduce early legislation to implement changes to company accountancy and auditing procedures following the Enron and WorldCom corporate scandals. The Companies Audit Investigations & Community Enterprise Bill (“CAICE”) was published in December 2003 and it is hoped that the bill will restore investor confidence in companies and financial markets.
Of particular interest to the reader will be the suggested reforms for SMEs. The Government’s new attitude is that the starting point for company law should be small companies – to “think small first” – with additional provisions for larger companies where necessary. In line with this the Government intends to remove the requirements for private companies to hold AGMs unless members want them; simplify the rules on written resolutions; merge a company’s constitution into one document; codify directors duties and provide clear guidance on what is expected of them; replace the director’s financial report with a short supplementary statement; simplify accounts; and perhaps surprisingly abolish the requirements for private companies to have an authorised share capital and appoint a company secretary.
At this early stage it is impossible to say whether all the proposals will be legislated, whether they will achieve the Government’s goal of simplifying and clarifying UK company law, and how much it will cost UK businesses to implement. Some analysts have commented that the cost to companies of implementing the CAICE could run into millions.