The Government believes that the starting point for company law should be small companies.


For further information or assistance please contact:

 

Jonathan T R Silverman
jtrs@silvermansherliker.co.uk


or

John C Abbott
jca@silvermansherliker.co.uk


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MODERNISING COMPANY LAW

It has for some time been recognised that British company law can be a cumbersome and unhelpful instrument for many businesses, but in particular small and medium sized enterprises who may have neither the time nor the resources to devote to compliance with the current legal framework.

British company law is largely a creation of the 19th century. It acknowledged that the right to limited liability carried with it certain responsibilities, and that the advantages should be matched by a degree of openness and accountability.

Whilst these basic principles are as necessary today as they were 150 years ago, the details and implementation of company law are in need of significant modernisation and reform. Businesses, and in particular smaller companies need to be able to work within a clearer and more accessible legal framework in order to thrive free from unnecessary red tape and bureaucracy.

A number of years ago the DTI launched a long-term fundamental review of core

company law with the aim of developing a simple, modern, efficient and cost effective framework for carrying out business activity in the UK for the twenty- first century. As a result of this review the Government published at the end of July 2002 a White Paper ‘Modernising Company Law’ setting out its proposals for review.

The Government stated that it believes that the starting point for company law should be small companies – to ‘think small first’. There will of course be additional or different provisions for larger companies where these are deemed necessary.

The following modifications are proposed:

Removing the requirement for companies to hold AGMs, lay accounts in general meetings or appoint auditors annually unless they positively want to do so.

No requirement for a company secretary unless the company wants one.

Duties of directors to be more clearly defined by statute with more detailed disclosure relating to directors training, qualifications and other relevant information.

Simplifying the rules on written resolutions to make it easier for private companies to take decisions.

Company constitutions as a single clearer document.


With regard to reporting and auditing:

Replacement of the directors’ report for small companies with a short simple supplementary statement.

Extending the ‘small company’ accounting regime to the EU maximum of £4.8million turnover, £2.4 million balance sheet total, 50 employees.

Simplifying the format and contents requirements for small company accounts while removing the ability for small companies to file uninformative abbreviated accounts at Companies House in order that all company accounts are generally available.

The threshold below which companies are required to have their accounts audited to be raised to £1million.

The time limit for private companies to file accounts to be reduced from 10 months to 7 months after the financial year-end.

Simplifications of the capital maintenance regime for all private companies with, in particular, repeal of the present costly and complex rules on financial assistance in connection with share acquisitions.

Companies and the law must adapt to cope with the complex arena of the 21st century. We will be happy to take your call or email, on a no-obligation basis to discuss how Silverman Sherliker LLP can assist you in ensuring that your company keeps abreast of new developments as they are implemented.

 

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