At last it seems that the UK will have a modern set of rules to match the workings of the way in which small businesses operate today.
The Companies Act 2006, which we be introduced in its entirety in October 2008 will simplify both the incorporation stages of setting up a limited company and manner in which they are administered.
No More Company Secretaries
One of the most far reaching provisions contained within the act is the effective abolition of the company secretary.
UK limited companies are currently required to have an additional person or corporate body act in this role where there is a sole director.
In many cases where a person wanted to register a company, in order to satisfy this requirement, they often asked a wife, husband, girlfriend, boyfriend or mother to act in this capacity.
This often caused issues regarding what control or sometimes more concerning, what liability that person would be exposed to should they accept the position.
Bearing in mind that it is not a prerequisite for a person acting as a secretary of a private limited company to have any knowledge of corporate governance or law, the acceptance of such as position was often a blatant exploitation of a gaping loophole.
Under the Companies Act 2006, a person can form a company as a single individual and in cases where they are unable to find a willing participant for the secretarial role, would not have to suffer the expenses of using nominees and deal with complicated nominee agreements.
Simplified Company Constitution
Another seemingly archaic area of law which the Companies Act 2006 modernises is the memorandum and articles of association, the company’s constitution.
These documents typically stretched to thirteen pages and contained various clauses and dictums which were not understood by everyone.
The much shortened version will provide basic information on the state of the registration at the time of it inception and will not require alteration as the company changes over time.
Such events will be facilitated by the submission of statements to the Registrar at Companies House.
Combating Fraud
There are several high profile cases where nominees have been used as an instrument in attempts to commit fraud.
The increase in internet based business transactions has enabled the perpetrators to use a nominee director as a means to remain anonymous whilst they execute their illicit plans.
In line with this increased threat in modern business, the Companies Act will make it a requirement for sole director organisations to use an actual named person in that position.
This effectively removes the shield which unscrupulous individuals could hide behind in the attempts to remain hidden.
Future Companies Acts
As well as modernising the current structure of company formation and conduct of UK businesses, the 2006 Act may signal that the government, its representatives and advisors are actively seeking to review the provisions on a more frequent basis than that which was done in the past.
Some of the changes being introduced are quite significant and sweeping; they change some aspects of company incorporation far more than any other recent proposals have suggested.
It will surely benefit British business if future Companies Acts bears a closer resemblance to modern trading, increased threats and to the way in which entrepreneurs wish to conduct their affairs.
