Capital Maintenance
The consultation document makes three radical proposals under this heading: to permit companies to reduce their capital, without court approval, but subject to shareholder approval by special resolution and a declaration of solvency by the directors; to permit companies to give financial assistance subject to approval by disinterested shareholders by ordinary resolution and solvency certification; and the abolition of the requirement for shares to have a nominal or par value. To implement these proposals in relation to public companies it would be necessary to consider seeking amendments to the relevant provisions of the Second Company Law Directive.
These proposals reflect widespread acceptance that the detailed body of law governing capital maintenance is outmoded in many respects and that creditors' interests may be better served by other mechanisms such as solvency declarations. The suggestions broadly follow the pattern of de-regulation in other Commonwealth countries. That the law in the UK should not retain anachronistic requirements which have been abandoned elsewhere is important because of the need, emphasised in the consultation document, to ensure that the law provides a competitive infrastructure which is attractive to internationally mobile business and an efficient regime for domestic companies.
Modern electronic methods of communicating and storing information an capable of transforming the means whereby companies make informatioi publicly available and the way in which the participants in companies relatt to each otherAn example of how information technology might impact upor the mechanisms for corporate governance is that the ability to use electronic means to communicate quickly and cheaply is something that could by exploited by shareholders who are opposed to management proposals to dis seminate their views to other shareholders.
The barriers to effective com munication by shareholders within the traditional setting of paper-basee documents sent by post are examined in 7 of this book. To dat there is limited explicit recognition of the use of electronic data storage am retrieval systems within the existing companies legislation, but the potentia for electronic methods to supplant traditional forms of information storage and communication is already actively recognised in practice.The broad approach suggested by the consultation document in this are; is that the law should facilitate, rather than require, the use of modern elec tronic methods for the storage, publication and communication of informa tion relating to companies.
However, it is recognised that the permissiv rather than prescriptive approach may need to change over time if it become the norm for individuals, as well as businesses, to have access to these meth ods. Particular proposals that are put forward for consideration include: tha electronic means should be permitted for all information required to be sen to, or maintained by, the registrar of companies; and that electronic commu nications between companies and members should be expressly permitted.The impact of technological advances on company meetings, including the scope for 'virtual meetings', is to be explored generally in the next phase of the review, when wider policy issues surrounding the role of the general meeting are to be examined.
The traditional approach to company law reform in this country has been for general reviews to be conducted on an infrequent basis (the last such general review being in 1962) with piecemeal changes being made between such reviews in response to particular situations, such as the need to implement a new directive, the emergence of a new problem in practice or the outcome of a government-appointed review of the law in a particular area. The consultation document suggests that consideration should be given to the establishment of a standing committee charged with the task of reviewing company law.
This is not the first time that a suggestion to this effect has been put forward and, as is noted in the consultation document, such bodies already exist in some other comparable countries.
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