Publication Of Consultation Document
When the manuscript of this book was with the publishers, the Company Law Review Steering Group established by the DTI in 1998 to conduct a fundamental review of core company law1 published its first consultation document entitled Modern Company Law for a Competitive Economy: The Strategic Framework. The consultation document is concerned with the overall strategic framework of company law. As such, it raises fundamental policy issues for consideration. It does not contain detailed suggestions for change but initial preferences in some areas are indicatedDetailed proposals are expected to follow later, with the intention being to present a final report in 2001.
Although timing considerations precluded a critical evaluation of the consultation document here, in the circumstances this book would have been incomplete without some reference to this important publication that is likely to shape the direction and content of company law in this country into the next millennium. Accordingly, there follows a summary of the main features of the consultation document which highlights aspects of it which are particularly relevant within the context of this book.
The consultation document sets out four presumptions that should govern the formulation of modern company law. These are against interventionist legislation and in favour of facilitating markets, including provision for transparency of information, wherever possible; in favour of minimising complexity and maximising accessibility of the rules; against creating criminal offences unless the subject-matter demands it; and in favour of allocating jurisdiction to the most suitable regulatory body, avoiding duplication and conflict.In line with the first presumption, the important role that contractual principles and the operation of market forces play in regulating the relationship between participants in companies is emphasised. Yet, the deregulatory agenda that is implicit in the first presumption is not unqualified, since it is accepted that the presumption must yield in circumstances where markets, combined with accountability mechanisms, cannot be expected to work.
This presumption is developed into a proposal for a radical restructuring of the companies legislation which is summarised in the consultation document as 'think small first'.
This phrase is intended to mean that the companies legislation should be drawn up with the small company in mind as the basic entity with additional requirements being added on, in discrete layers, for larger, more sophisticated or exceptional entities. If implemented, this would be a broad reversal of the current position, which is largely that the same rules apply to all companies irrespective of their profits, turnover, number of shareholders or employees or other measurement criteria but with some derogations and provisions for opting-out that can be utilised by smaller companies.
In general, the consultation document devotes considerable attention to the needs of small and closely-held companies" and to how these might best be catered for within a new legal framework. Wider questions about legal forms of organisation, with and without limited liability, are to be addressed in the next phase of the review.The multi-layered nature of the regulation applicable to companies is explored in the consultation document. It is noted that those involved with companies may need to consider not only the companies legislation itself butalso accounting standards, the Listing Rules of the London Stock Exchange, the City Code on Takeovers and Mergers and the Combined Code on Corporate Governance.
The consultation document explains that it is intended to review the present regulatory structure and distribution of functions which have developed on a piecemeal rather than systematic basis. However, in an early indication of the Steering Group's thinking on this matter, such review is not expected to lead to rationalisation of the system by means of more statutory regulation but, rather, for the trend to be away from prescriptive rules set out in statute towards more flexible rules in the form of codes of practice.
This suggestion links in with the presumption that the law should be broadly non-interventionist: in those circumstances where market forces alone do not work effectively, a code of practice from a regulatory body may be preferable to full-blown statutory regulation.
.
