The London Stock Exchange has responded to DTI's White Paper on Company Law Reform.
We are supportive of aims to modernise the company law framework, especially since the last significant legislation in this area was the Companies Act 1989, and circumstances and technology have clearly changed since then. The main points of our response are as follows:
- “Think small first” – whilst we welcome proposals to simplify and lessen regulation for smaller companies, we believe that tests should be based not only upon a company’s status as either public or private, but also upon whether a company is “economically significant”.
- Directors’ duties - the introduction of a statutory statement of directors’ duties will provide welcome clarification of the current common law structure of directors’ duties, which relies upon extensive case law. However, there needs to be full and clear guidance on the duties and there should be clear remedies set out for breaches of each duty.
- Offences - we have some concerns over the extension of criminal sanctions for breaches of directors’ duties and also over definitions relating to breaches of duties.
- Auditors’ liability - we agree with the proposal to allow auditors to limit their liability subject to shareholder approval. We believe that the DTI should also consider introducing proportionate liability for directors.
- Resolutions and General Meetings - we are supportive of proposals in this area, which will help to simplify the logistics of meetings and resolutions, and to take advantage of developments in communications technology.
- Shareholder rights - we are strongly supportive of initiatives to enhance shareholder rights; the Exchange is already significantly engaged in this area, and is chairing a working group of interested parties with the aim of working towards all shareholders having the same rights to voting.
- Transparency Directive - we agree with proposals to transfer responsibility for the shareholder disclosure regime to the FSA and to extend the scope to cover issuers whose shares are admitted to trading on markets other than regulated markets in the UK, such as AIM.