The first 15 Parts of, most likely, 25 Parts, containing 952 sections of law have recently been published by the Company Law Review Group. It is likely that the complete Bill will be published around this time next year, and should be enacted by the end of 2012.

The 15 Parts deal exclusively with the private company limited by shares. The remaining Parts, yet to be published, will deal with PLCs, designated activity companies, guarantee companies, unlimited companies, investment companies, unregistered companies and external companies. The main features of the new model private company and reforms provided for in the first 15 Parts published include:

  • It will be limited by shares; private companies limited by guarantee will be subject to the legal regime which will be prescribed for designated activity companies;
  • It will have the same contractual capacity as a natural person – private companies will not have an objects clause and so will not be subject to the doctrine of ultra vires;
  • It may have only one director (currently private companies must have two directors); accountability in governance will be increased as there will be no need for passive directors;
  • It will not be permitted to list debt securities;
  • It will have a one-document constitution – the memorandum and articles will be replaced by one document;
  • The same internal obligations will apply to all private companies, unless their constitution provides otherwise;
  • All private companies will be permitted to have “written” AGMs – where the members consent, the need for an annual physical meeting can be dispensed with;
  • The Bill codifies directors’ duties as they have been developed by the Courts over the last 150 years, making the law more transparent and accessible;
  • One Summary Approval Procedure will enable regulated activities to be carried out (transactions with directors, loan acceptance, mergers etc);
  • Offences created by the Bill are categorised on a scale of 1 to 4, 1 being the most serious;
  • Directors’ compliance statements will be more proportionate and reasonable;
  • SME thresholds will be increased;  Reporting of offenses by auditors will only be required for category 1 and 2 offences, not categories 3 and 4;
  • The accounts of small groups of companies will be audit-exempt;
  • Company liquidators will have to be qualified accountants or solicitors

The process of company law reform commenced over ten years ago and is long overdue. Publication of the first 15 Parts is a welcome step in the process and we look forward to seeing the consolidated legislation next year.