07 December, 2005
The Government is in the process of modernising the legislation governing the operation of companies and has recently issued the Company Law Reform Bill. This focuses on small private companies as the current legislation was written with large companies in mind. In summary, the main proposals affecting small companies are:
(a) Company formation documentation is to be simplified.
(b) There will be model articles of association for different descriptions of new companies.
(c) The requirement to appoint a company secretary is to be abolished.
(d) The Bill contains a statutory statement of directors' general duties in particular in relation to their primary role of promoting the success of a company for the benefit of its shareholders. The Government intends to provide clear guidance to directors on the implications of these duties.
(e) Directors will be able to file a service address on the public register instead of their residential address as currently required.
(f) Written resolutions will be passed by a 50% or 75% majority of votes instead of the existing statutory procedure of unanimity making it easier for companies to take decisions.
(g) A private company will no longer be required to hold an AGM.
(h) The prohibition on the giving of financial assistance by a company for the purchase of shares in itself is being abolished.
(i) It will be easier for companies to make capital reductions.
(j) The time limit for filing accounts will be reduced from 10 months to 9 months.
These changes are intended to make the legislation easier for small companies to understand and less expensive to comply with whilst keeping the regulatory burden to a minimum. It is envisaged that the legislation will come into force in 2007.
Business Law Department