The Government published a White Paper, Company Law Reform, in March 2005 in response to requests for a review of company law. The proposed reforms will be introduced through the Company Law Reform Bill during this session of parliament, before November 2006.

The main themes and key issues are:
Improving and encouraging shareholder engagement and a long-term investment culture by promoting wider participation by shareholders and ensuring decisions are based on long term, rather than short term, considerations;

Ensuring more appropriate regulation of business and introducing a Think Small First approach by considering those areas of law most relevant to small business;

Making it easier to set up and run a company by removing unnecessary burdens on directors and streamlining the rules on company names and trading disclosures. The Bill also aims to bring clarity to the duties of company directors by bringing them into statute law;

Providing flexibility for the future business environment by introducing a new reform power to allow updating and amendment of the company law framework as circumstances dictate, subject to safeguards for full consultation and appropriate parliamentary scrutiny;

- Specific to small private businesses, the Bill will provide a separate default constitution, abolish rules on the provision of financial assistance for the purchase of the company's own shares, abolish the requirement for a company secretary and simplify decision making by the removal of required AGMs.

This Bill is a long time in the making - many of its reforms were actually first proposed some years ago - and it is hoped that it will find a smooth passage through the Parliamentary process - not least to rid us of the financial assistance rules for private companies.

Stephen Gibb is a partner specialising in corporate finance with commercial law firm Shepherd and Wedderburn. 0131 473 5211