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A package of measures to support the Government's overhaul of company law has
been announced by the government.
The new clauses for the Company Law Reform Bill were laid before Parliament last
week, including changes to directors' duties, narrative reporting and derivative
claims.
As part of the package, the Government will also clarify the position on
liability for disclosures under the Companies Act and for implementation of the
EU Transparency Obligations Directive.
Alun Michael, Minister for Industry and the Regions explained: "The Company Law
Reform Bill is the result of extensive collaboration between all those with an
interest in company law.
"I believe that our proposals on narrative reporting represent consistent and
balanced policy in light of our recent consultations and our discussions with
interested parties.
"Our aim has always been to encourage meaningful strategic, forward-looking
information to assist shareholder engagement while avoiding disproportionate
burdens on business, in line with our better regulation agenda.
"The Government has decided that the additional burden imposed by the statutory
OFR requirement is not justified in light of the competitiveness of UK
businesses. The changes to narrative reporting requirements announced today will
add value to the quality of reporting without imposing unnecessary costs.
"In order to encourage open reporting the Government believes it needs to
provide certainty on the issue of liability. We expect shareholders to make full
use of this further information.
"We want to achieve a proper balance between the ability of directors to take
business decisions in good faith and shareholder rights. I believe that in this
package we have met those aims."
On directors' duties, the Government amendments seek to put beyond doubt that
the need to have regard to certain factors such as the interest of the employees
and impact on the environment is subject to the overriding duty to act in the
way the director considers, in good faith, would be most likely to promote the
success of the company for the benefit of its members as a whole.
The requirements for narrative reporting have been streamlined so that the
requirements for quoted companies are now more closely aligned to those for
unquoted companies.
The proposed new narrative reporting arrangements include
the requirement that all companies, other than small companies, will need to
produce a Business Review, as required by the EU Accounts Modernisation
Directive.
The purpose of the Review is to inform shareholders of the company and help them
assess how the directors have performed their duty under section 156.
Source:
Credit
Control Journal
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