Company Law Update - In Business Spring 2003

01 April 2003

The government has published a White Paper called “Modernising Company Law”. The White Paper lays down the basic principles upon which legislation will be drafted. More detailed information will be available later on in the year but the following is a brief resume of the Government's intentions:

• Simplification of the way in which companies take decisions. For example, removing the requirement for private companies to hold AGMs unless they want to and simplifying the rules on written resolutions, so that companies can pass resolutions without the need for calling a meeting. At present, written resolutions may be passed if they are signed by all of the shareholders entitled to attend and vote at company meetings. This rule will be relaxed so that written resolutions can be passed on a simple majority (for ordinary resolutions) and by shareholders holding 75% of the votes for special resolutions.
• Revision of the way in which companies are incorporated. A single company constitution will replace the existing Memorandum and Articles of Association.
• The role and duties of Directors is to be enshrined in legislation making it simpler and clearer to understand.
• The definition of “small companies” for accounting purposes will be increased to the EU maximum. A company is “small” if it meets any two of the following criteria:

1. If it has a turnover of less than £4.8 million
2. A balance sheet total of no more than £2.4 million
3. Less than 50 employees

• The Government proposes to abolish the requirement for private companies to appoint a secretary although they may do so if they wish. It is not clear at the moment what the secretary will be replaced with to ensure that the compliance rules are met.
• It is proposed that over time, corporate directors will be prohibited.

We will keep you advised of further developments once the detailed provisions are available.
 

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