Legal advice: Company Law Reform Bill to help smaller pubs

By Lucy McNamara and Briony Edwards of thePublican.com's team of legal experts from London solicitors Joelson Wilson.​

Big is not always best and with the recent publication of the Company Law Reform Bill at the beginning of November, this has finally been acknowledged.

The government has, at last, recognised that many of the provisions in the current Companies Act 1985 have little or no relevance to the smaller company and has decided to tackle this head-on. The bill intends to make it easier for smaller companies to be established, which in turn will help them to thrive and achieve their full potential in their chosen industry.

Strange as it may seem, it has finally been accepted that company law is a rather complex beast, so without further ado (well, after just over 20 years) an attempt has been made to rectify the complexity by replacing it with clear and comprehensive guidelines (although only time will tell). For smaller businesses, the proposals signify a reduction in the amount of unnecessary red tape which smaller businesses are faced with, by keeping regulatory obligations to a minimum.

There are quite a few changes in the pipeline for smaller companies, a taster of which follows: a new model of articles of association (keeping the internal workings of a smaller company brief and to the point); the abolition of the requirement for a company secretary; there would be a statutory statement of directors' general duties; private companies would no longer need to hold an Annual General Meeting unless they opt to do so.

It will also be easier for companies to take decisions by way of written resolution. Written resolutions would be carried by way of a simple 75 per cent majority of eligible votes, rather than requiring unanimity, as at present.

Another change will be to the rules on providing financial assistance to potential or actual shareholders. The fact that this is largely irrelevant to most private companies has finally been appreciated and the rules are therefore being abolished. Companies House will also be undergoing a facelift in order to assist the smaller company.

It has been said that in the year 2007, Companies House will offer web incorporation and will provide easier access to material which is relevant to small companies, for example, the new and improved private company articles of association.

It has been estimated by the Government that the totalnet savings to companies of this reform of company law could be around £250m a year, £100m of which would be the result of savings for small businesses.