Company law reforms revealed

In a nod to the ethical and environmental lobbyists, who have long drawn attention to the moral ambivalence perceived in corporate culture – the Government’s draft Company Law Reform Bill urges directors to adopt a longer-term view of their business’ activites.


In a nod to the ethical and environmental lobbyists, who have long drawn attention to the moral ambivalence perceived in corporate culture – the Government’s draft Company Law Reform Bill urges directors to adopt a longer-term view of their business’ activites.

In a nod to the ethical and environmental lobbyists, who have long drawn attention to the moral ambivalence perceived in corporate culture – the Government’s draft Company Law Reform Bill urges directors to adopt a longer-term view of their business’ activites.

Unveiled by Trade & Industry Secretary Patricia Hewitt, the draft bill seeks to provide ‘greater clarity on directors’ duties’ and obligations. So while company executives will still ‘have to act in the interests of shareholders’ first and foremost they will also be granted licence to ‘pay regard to the long as well as the short term, taking due account of the interests of employees, suppliers, consumers and the environment’.

Additional proposals seek to save small businesses up to £100 million a year, with the focus heavily on ‘reducing the regulatory burden, promoting shareholder engagement and [stimulating] a long-term investment culture’.

Individual proposals include the abolition of the requirement on firms to appoint a company secretary, the promotion of greater use of e-communication with shareholders and a simplification of the rules relating to company formation.

The audit process will also be overhauled, with auditors facing ‘tougher penalties’ – including potential custodial sentences – for making ‘reckless statements’ and with shareholders also being granted the option of ‘limiting the auditor’s liability’ if they see fit. This latter measure has been conceived to help stimulate greater competition amongst accountancy firms.

The draft bill now enters a consultation period, which will be open until 10 June, with Parliamentary approval to then follow.

(18/3/05)

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