The National Association of Pension Funds (NAPF) and Confederation of British Industry (CBI) have welcomed proposals from the Company Law Review steering committee's final report on the modernisation of UK company law.
The NAPF welcomed the recognition that the priority for company directors is to represent the interests of shareholders. It urged the UK government to bring forward a White Paper by mid-2002, followed by legislation to reach the statute book during the lifetime of this Parliament.
David Morgan, chairman of the NAPF working party, said that existing company law dates back to Victorian times and is in need of modernisation to boost the competitiveness of UK enterprises. “We particularly welcome the proposal for a Companies Commission to ensure that this modern approach to company law is maintained and strengthened if necessary,” he said. CBI deputy director-general, John Cridland said: “We support proposals that should make the UK a better place to do business. However, any changes must allow firms to operate as freely as possible.
“So we want changes in company law to strike a balance between encouraging business growth and securing an appropriate degree of accountability.
The CBI supports the development of a model constitution imposing a minimum level of acceptable regulation for small companies. The body favours an inclusive approach to directors' duties, whereby the board is primarily accountable to the shareholders as the owners of the business, but has regard to the interests of employees and other stakeholders. The CBI supports reducing the maximum contract length for directors from five to three years, but feel that this should be general and not just for initial appointment.
The confederation also backed the establishment of the Company Law and Reporting Commission (CLRC) to keep company law under review. “It is too early to assess whether the CLRC will also be the appropriate body responsible for financial reporting and corporate governance where the existing institutional mechanisms have worked well,” it said.
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