The Institute of Directors’ Head of Corporate Governance, Dr. Roger Barker, has been appointed by the Government as Company Law Champion in the next stage of the Red Tape Challenge, and he wants the input of IoD members.
The Red Tape Challenge was launched by the Prime Minister in April 2011. It gives business and the public the chance to have their say on regulations in a number of key policy areas. The government’s logic is that it is those who have to grapple with red tape day-in, day-out, who best understand the true burden of excessive regulation, and are able to point out which rules unnecessarily slow business and society down. The aim is to review these suggestions and work towards abolishing the most burdensome of the 21,000 regulations active in the UK today.
For a three week period (between 26th January and 16th February 2012) the focus of the Challenge is Company Law. The IoD will work with its members and the wider business community to consider ways in which Company Law regulations can be improved, simplified or abolished.
As Company Law Champion, Dr. Barker will assist the Government in the evaluation of the business community’s proposals. He will seek to champion any ideas that could lead to a simplified and more business-friendly legal framework.
Areas of company law regulation which will be considered by the process include the following:
- Internal workings of companies and partnerships: Rules on shares and share capital, requirement to hold information at business premises and rules on meetings and resolutions.
- Accounts and returns: The content, form and auditing requirements of financial accounts and other reports.
- Business names: The rules covering company names
- Disclosure of company information: The regulations covering the information companies must supply to the official register.
Commenting on his role as Company Law Champion, Dr. Barker said:
“The Red Tape Challenge is an excellent opportunity for companies to get their voice heard and help inform government thinking and policies. Companies need to spend time on doing business, creating jobs and growing – not spending time filling in forms for no good reason.
“We must be sure that regulation is proportionate and that the company law framework protects companies and their creditors, whilst minimising red tape and making the running of a company as simple as possible. I look forward to seeing some new and exciting proposals from business to help inform this important work.”
Contributions will be used by government to produce a set of proposals on regulatory reform. These proposals will then be reviewed by a ministerial ‘Star Chamber’ over a period of three months, with the presumption that all burdensome regulations will go unless Departments can justify why they are needed. Departments then put their proposals to the Reducing Regulation Committee and seek policy clearance.
IoD members are best-placed to offer authoritative insight into the real impacts of complex UK Company Law on the running of a business. As experienced representatives from a wide cross-section of the British business community, Dr. Barker is very keen to hear your ideas on this topic. You are encouraged to submit your views on company law regulation to the Government’s Red Tape Challenge website, where an online debate is taking place. Alternatively, you may send comments directly to Dr. Barker at the IoD (roger.barker@iod.com).
An unpopular and unconventional proposal I know but I would like to see limited liability removed from shareholders of PUBLIC (NOT PRIVATE) companies. This would remove the moral hazard and produce a much higher degree of shareholder engagement and accountability for the directors. It would also provide additional protection to the company’s creditors in the event of insolvency and there being insufficient funds to repay them. Removing limited liability from PUBLIC companies may also cause them to downsize and to spin of assets to smaller, private limited companies. This would create increased competition and more opportunities for would be entrepreneurs and job seekers. At the moment, the likes of bid public companies, especially when vertically integrated such as the energy suppliers and the pub groups, have a stranglehold on the market and erect barriers to entry. This is anti-competitive behaviour that needs to be curtailed. Regulation is inadequate because they get captured by those they are set up to regulate. It’s better to have many buyers and sellers, as posited by perfect competition, so that competition is guaranteed by market structure. Removing limited liability may also cause the banks to break up and multiply in number so that no one bank is “too big to fail” and so they start lending at competitive rates. Pension funds who have invested in the shares of public companies could find other ways of investing once limited liability had been removed from public companies. Bonds would become safer once limited liability had been removed. As I say, these ideas are likely to be dismissed but limited liability for public companies, whilst very helpful for economies in their growth stages, operates against the public interest in economies that have reached their limits to growth, as in the UK. To rejuvenate the economy, we need fewer giants and many many more small companies vying with each other on price and innovation.
Would be great to see what happens.