There have been some interesting developments in company law in the last month. In this article, we summarise the key points for you to note.
Draft Deregulation Bill
On 1 July 2013, the government published the draft Deregulation Bill (Bill) as part of its 'Red Tape Challenge'; an initiative to reduce unnecessary bureaucracy for businesses and individuals. The Bill proposes to amend a wide range of laws, including some provisions of the Companies Act 2006. Two areas worth highlighting relate to companies changing auditor and to the disqualification of directors.
The Bill removes the requirements for:
- an auditor of a non-listed company to lodge a statement with the company if its term of office has come to an end or if the auditor's reasons for leaving office are "exempt" and there are no circumstances which need to be brought to the attention of the company's creditors or shareholders. "Exempt" reasons include where an auditor no longer carries out statutory audit work or where a company will be audited as part of the audit of group accounts by the parent's auditor,
- a non-listed company to notify the applicable audit authority if the auditor's reason for leaving is exempt and the company considers that there is no additional information that should be brought to the attention of the audit authority, and
- a company (whether listed or non-listed) to notify Companies House if the auditor is removed from office or resigns from office.
Disqualification of directors
The Bill also makes some amendments to the Company Directors Disqualification Act 1986. The amended provisions enable the Secretary of State or the official receiver to request information, books or papers relevant to a person's conduct as a director of an insolvent company directly from any person, including from officers of the company themselves. At present, this request may only be made to a liquidator, administrator or administrative receiver (an officeholder) to provide information, books and papers about any person's conduct as a director. There is a view, however, that this can place an administrative burden on the relevant officeholder and cause unnecessary delays to the insolvency process, as well as to the application for a director's disqualification. Some might comment however, that this proposed new power is too wide. Information obtained from any person in relation to a director's conduct may be taken out of context or may even be at risk of being tampered with, whereas a liquidator, for example, is an independent officeholder who may consider and check the information in context, before it is handed to the Secretary of State or official receiver, which would save time in the overall process.
The draft Bill will be scrutinised by a joint committee of MPs and peers, with legislation being brought forward in due course. On 29 July 2013, the joint committee issued a call for evidence on the Bill to assist its review. Click here to see a copy of the call for written evidence. The joint committee will take both written and oral evidence and make its recommendations in a report to the Houses of Parliament by 16 December 2013.
Click here to see a copy of the draft Bill and explanatory notes.
BIS publishes model documents for employee owned companies
On 4 July 2013, the Department for Business, Innovation and Skills (BIS) published a pack of model documents for companies with employee ownership, along with guidance notes for their use. Click here to view the documents. The Nuttall Review of employee ownership in the UK made a number of recommendations aimed at making employee ownership less complicated for businesses and employees. The model documents have been published in response to meeting a key Nuttall recommendation to develop "off-the-shelf" toolkits for businesses wishing to move to employee ownership. For background information on the Nuttall Review, click here to read our article in the March 2013 corporate newsletter.
The model documents are designed to help existing businesses move towards employee ownership by suggesting a particular ownership structure and the legal documentation that would be needed to support it. The documents can, however, also be tailored for a specific use, including for use in establishing a new business with employee ownership.
The pack of model documents includes:
- articles of association for the company with employee ownership,
- a trust deed for an employee benefit trust (EBT) that would hold a significant stake in the company, and
- articles of association for a trustee company for the EBT.
BIS has also published a useful guide for employees which can be viewed here. The brief guide explains what is meant by 'employee ownership', the associated benefits and how to put forward a proposal to employers.
On the same day, other governmental bodies published related documents to promote employee ownership and complement the pack of model documents now available. HMRC published an introduction to tax issues for an EBT of the kind set out in the model documents, whilst HM Treasury published a related consultation on proposed tax reliefs to promote indirect employee ownership.