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The Companies Bill received Royal Assent yesterday, introducing sweeping changes
to simplify and improve company law.
Company law has been substantially rewritten to make it easier to understand and
more flexible, especially for SMEs.
In bringing forward the Companies Act 2006, the government has listened
carefully to concerns expressed by a wide range of business groups, shareholders
and other interested parties.
Secretary of State Alistair Darling explained: "This Act will help ensure
Britain remains one of the best places in the world to set up and run a
business.
"It makes sure the regulatory burden on business is 'light-touch', promotes
shareholder engagement and will help encourage a long-term investment culture in
the UK.
"We will continue to work closely with interested parties in implementing the
Act.
"In particular, we will work with the business community to ensure widespread
and effective communication of the Act's provisions so that all parties fully
understand the measures and are in a position to take advantage of the
benefits."
The Act aims to help businesses save £250 million a year, including up to £100
million for small businesses.
The first measures to be introduced will include provisions on company
communications to shareholders.
These will be introduced in January 2007, saving businesses over £50 million by
using electronic communications rather than paper.
The clauses on takeovers which give the Takeover Panel power to make rules
within a statutory framework will also be one of the first areas introduced.
Measures relating to disclosure to the market and clarification of the liability
attaching to such disclosures will also come in at an early stage.
All parts of the Act will be in force by October 2008.
The Companies Act includes measures that:
► Give greater clarity on directors' duties, including making clear that they have
to act in the interests of shareholders, but in doing so have to pay regard to
the longer term, the interests of employees, suppliers, consumers and the
environment.
► Encourage narrative reporting by companies to be forward-looking, covering risks
as well as opportunities, with explicit requirements for quoted companies; and
gives
► An option for all directors and shareholders to file a service address on the
public record 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 comprehensive package also includes allowing shareholders to agree to limit
the auditors' liability to the company to what is fair and reasonable.
The Act also includes a new offence for recklessly or knowingly including
misleading, false or deceptive matters in an audit report.
A power is provided in the Act to require institutional investors to disclose
how they use their votes.
The Government has made clear that they hope that the
market will provide such disclosure without the need to exercise the power and
that regulations would not be put in place without prior consultation and a
detailed cost analysis.
The Act also paves the way for the Financial Reporting Council to undertake
regulation of the actuarial profession, following the Penrose report into
Equitable Life.
The Act includes measures to benefit private companies including:
► New model articles.
► No need to have a company secretary unless the company wants one.
► MNo need to have an AGM unless the company wants one.
The Act extends to the whole of the UK, so that there will no longer be a
separate regime for Northern Ireland.
Source:
Credit
Control Journal
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