UK's Small Firms Pleased By Company Law Reforms

by Robin Pilgrim, LawAndTax-News.com, London

15 November 2005

Organisations representing the UK's business community have welcomed the Company Law Reform Bill published by the UK government earlier this month.

Under the measures proposed in the legislation, the liability of auditors will be capped, investors will gain powers to make company directors more accountable if they knowingly provide false information to auditors, and the establisment of SMEs will become easier.

Commenting on the new legislation, the Institute of Directors suggested that small companies especially were likely to benefit from the exercise.

Miles Templeman, Director General of the IoD, observed that:

“The publication of today’s Bill has been a long time coming. We now have workable legislation in modern English that takes a bottom up approach to company law, providing as it does, separate provisions for small companies.”

With particular regard to the contentious issue of the Bill's allowing civil litigation against directors by shareholders, the IoD said it welcomed the move, arguing that shareholders who suffer from the negligent actions of executives should have the right to pursue the individual for compensation.

The IoD said it supported high standards of conduct for executives at all times. However, it went on to add that the possible introduction in the future of secondary legislation on the back of the Bill was a cause for concern.

Mr Templeman, concluded by observing that:

“We do not want to see the good work of this Bill undone at some future date by the introduction of secondary legislation. We are happy with this Bill as it stands.”

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