CBI And ICAEW Welcome New Companies Bill

by Robin Pilgrim, LawAndTax-News.com, London

22 March 2005

Company law proposals unveiled by the UK's Department of Trade and Industry (DTI) on Friday have been welcomed by business groups and accountants.

In a statement released to accompany the proposed Company Law Reform Bill, the Department announced that:

"Company law will be substantially changed to make it easier to understand and more flexible - especially for small businesses. The plans would help keep the regulatory burden to a minimum, and promote shareholder engagement and a long-term investment culture."

Changes introduced by the legislation include the simplification of company formation rules, the abolition of the need for small businesses to have a company secretary, increased clarification of company directors' duties. and the removal of the need for hard copy share certificates.

In addition, the Reform Bill contains proposals to limit the liability of auditors, but to increase the penalties for those that "knowingly or recklessly" make incorrect statements.

The Confederation of British Industry (CBI) has welcomed the reform proposals, upon which comment is invited until June 10, observing that "they will make company law clearer and more accessible and reduce the regulatory burden, especially for smaller companies".

President of the Institute of Chartered Accountants in England and Wales, Paul Druckman praised the plan to limit auditor liability, meanwhile, explaining that:

"Allowing for proportionality by contract is not about mitigating those who are at fault from responsibility. It is about ensuring that this liability is in proportion to the level of wrongdoing."

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