COMPANY LAW REVIEW ANNOUNCES THIRD AND FINAL CONSULTATION

30 Nov 2000 12:00 AM

Further proposals for a modern and effective framework of company law were published today by the independent Steering Group responsible for the Company Law Review.

The consultation document ''Modern Company Law for a Competitive Economy: Completing the Structure'' invites views on a number of important new proposals for reform as well as reporting the outcome of earlier consultations.

The main new proposals are:

* new arrangements for making detailed company law and accounting rules and for keeping company law under review through a new Companies Commission building on the current Financial Reporting Council (FRC);

* further simplification of the law, for example by reducing the burdens on companies which operate within a group structure and making it easier for companies to restructure;

* for a coherent framework of criminal and civil sanctions to underpin the law, supported by other action to encourage compliance.

The document confirms the Steering Group''s proposals for a major simplification of the law for private companies and for a statutory statement of directors'' duties. It develops further its proposals for improved company reporting.

Speaking on behalf of the Steering Group, John Parkinson (Professor of Law, Bristol University) said:

''We believe that the Company Law Review is on course to recommend a radically updated framework of company law in our final report due next May.

''Most of the proposals we made in March have received wide support and we have therefore taken them forward; but the responses have also helped us to make a number of improvements.

''Our proposed statement of directors'' duties was widely welcomed. This would require directors to act in the best interests of shareholders, while recognising the importance of wider interests. This inclusive approach would be underpinned by improved disclosure, principally through the new operating and financial review (OFR).

''We have now strengthened the OFR with a proposal that the process by which it is prepared should be audited. We believe that our proposals will encourage companies to be responsive to wider interests in a way which will support business success and competitiveness.

''A streamlined timetable for publication of accounts and reports will make best use of new technology and give shareholders better, more timely access to information.''

Colin Perry (Chairman, LTE Scientific Ltd, former Chairman, CBI SME Council) added:

''This consultation document reinforces our commitment to ''think small first''. We were pleased at the high level of support received for our proposals in Developing the Framework. Our proposals will greatly simplify the way in which private companies operate and offer a regime suited to the needs of small companies.

''The proposal we make for a Companies Commission builds on the present FRC and Accounting Standards Board (ASB). However, it would have a substantially wider remit to keep company law under review and have responsibility for detailed rules and regulations.

''This would ensure that our law is able to respond quickly and effectively to changing needs and circumstances.

''A Private Companies Committee would have a specific brief to ensure that the law fully reflects the interests of small companies.''

Notes for Editors

1. The Company Law Review was announced by the then Secretary of State, Margaret Beckett, on 4 March 1998 (DTI Press Notice P/98/167) in the document ''Modern Company Law for a Competitive Economy''. The Review is directed by a Steering Group of independent experts. The previous consultation documents published by the Steering Group are: ''Modern Company Law for a Competitive Economy: The Strategic Framework'', published February 1999 (DTI Press Notice PN/99/166); ''Company General Meetings and Shareholder Communication'', ''Company Formation and Capital Maintenance'', and ''Reforming the Law Concerning Oversea Companies'' all published in October 1999 (see DTI Press Notices P/99/874 and P/99/875); ''Modern Company Law: Developing the Framework'' published March 2000 (see Press Notices P/2000/180 and P/2000/181); ''Capital Maintenance'' published June 2000 and ''Registration of Company Charges'' published October 2000. All these documents can be found on the Review pages of the DTI website (http:/www.dti.gov.uk/cld/review.htm).

2. The present consultation document ''Modern Company Law for a Competitive Economy: Completing the Structure'' is also available on the website. Alternatively, copies can be obtained by telephoning 0870 1502 500.

3. Press copies are available from the DTI press office on 0207 215 5961.

4. A summary of the document''s main proposals is attached.

5. Comments are invited on the proposals by 28 February 2001.

6. The members of the Company Law Review Steering Group are:

Richard Rogers: Director, Company Law and Investigations, Department of Trade and Industry (Chairman)

The Right Hon Lady Justice Mary Arden DBE: Court of Appeal; former Chairman of the Law Commission

Robert Bertram: former partner, Shepherd and Wedderburn WS

Sir Bryan Carsberg: Secretary-General, International Accounting Standards Committee

Paul Davies: Cassel Professor of Commercial Law, London School of Economics and Political Science

Sir Stuart Hampson: Chairman, John Lewis Partnership plc

John Parkinson: Professor of Law, University of Bristol

Colin Perry: Chairman, LTE Scientific Ltd; former Chairman, CBI SME Council

John Plender: Broadcaster and journalist

Rosemary Radcliffe CBE: Chief Economist, PricewaterhouseCoopers

Jonathan Rickford: Company Law Review Project Director

Bryan Sanderson CBE: Chairman, Learning and Skills Council, former Group Managing Director, BP Amoco plc

Martin Scicluna: Chairman, Deloitte & Touche

Richard Sykes QC: Chairman, Financial Reporting Review Panel

Completing the Structure

Summary of Main Proposals

This consultation document develops the Steering Group''s ''think small first'' approach, confirming the simplifications already proposed for private companies.

It also:

* proposes a Companies Commission to ensure that British company law keeps up to date. Subsidiary bodies would issue detailed rules and guidance, enforce reporting requirements and promote the needs of private companies

* confirms the proposals set out in Developing the Framework for an inclusive statement of directors'' duties and for an OFR (Operating and Financial Review) to be prepared by public companies and large private companies

* puts forward significantly revised proposals in relation to financial reporting documents and the timetable for their publication with respect to public companies

* recommends that, in the light of responses received, no par value shares should not be introduced for private companies until they can also be introduced for public companies

* proposes that DTI and Companies House should explore ways to enable directors to put a ''service address'' on the public record rather than their residential address. Access to the latter would be available only to certain regulatory and enforcement bodies or by order of the court

* proposes restrictions on the use of information in companies'' registers of members

* invites views on an optional regime for groups of companies permitting less onerous reporting and auditing requirements for subsidiary companies where the parent guarantees their liabilities

* sets out proposals to make it simpler for companies to restructure, including a simpler statutory merger procedure within wholly-owned groups of companies

* puts forward proposals for ''jurisdictional migration'' ie allowing a company to move its place of incorporation into or out of Britain or between England and Wales and Scotland without having to wind up and re-incorporate

* sets out criteria for a coherent framework of criminal and civil sanctions and looks at other means of encouraging compliance

* considers ways of strengthening protection against ''phoenix'' companies