A radical overhaul in company law was unveiled yesterday in the Company Law Reform Bill.
The Bill aims to simplify and improve company law. The changes are spearheaded by deregulation with proposals to save businesses up to £250m a year, including £100m for small businesses.
The plans are also designed to help keep the regulatory burden on business to a minimum, promote shareholder engagement and encourage a long-term investment culture.
Trade and Industry Secretary Alan Johnson said: "An effective framework of company law and corporate governance will promote enterprise and help stimulate investment in the UK. We have focused throughout on making the law more accessible and 'thinking small first".
Benefits for small businesses include abolition of the need for a company secretary and making the AGM opt in rather than opt out.
Other benefits for all businesses include greater clarity on directors' duties and and removal of the need for hard copy share certificates.
The Bill also includes proposals to introduce auditor liability and boost audit quality including allowing shareholders to agree to limit the auditors' liability to the company and greater rights for shareholders to question auditors and named partners for audit reports.
It also includes a new offence for recklessly or knowingly including misleading, false or deceptive matters in an audit report.
The Bill is also used to implement the EU Takeover Directive. It will implement the company law aspects of the European Transparency Directive and aspects of the EU Audit Directive.
The Bill includes a company law reform power to allow faster updating and amendment of company law in future, subject to rigorous consultation and Parliamentary scrutiny requirements.
Johnson added: "Our company law is central to corporate activity and this important updating will provide a tremendous boost for British businesses, large and small.
"We are determined to make sure that our law keeps step with economic needs. This Bill will help ensure that Britain remains a prime place for incorporation."
