by Tom Walker of Wantage-based Charles Lucas Marshall

The Companies Bill is the first fundamental overhaul of company law since 1985. It has been designed to benefit small businesses, with the aim of simplifying corporate procedures, and will become law next year.

Significantly, it will also have a substantial impact on professional advisers and their clients.

The Bill runs to around 500 pages and 900 clauses and introduces wide-ranging reforms in a number of areas which will have an impact on directors, auditors and shareholders of private, public and quoted companies.

The Government's overall objective is to simplify and modernise company law to meet today's business needs and provide flexibility for the future.

It has estimated the measures could save businesses around £250m a year, including £100m for SMEs.

Much of current company law is drafted from the perspective of large public companies, whereas more than 90 per cent of businesses in the UK are small, private, owner-managed firms.

The Government wishes to change the emphasis of company law to recognise this and the specific objectives of the Companies Bill are to: l Ensure better regulation and a think small first' approach l Make it easier to set up and run a company l Provide flexibility for the future l Enhance shareholder engagement and a long-term investment culture The main points which small companies and should be aware of include: l The ability to form a company with only one officer who can also be the sole shareholder l Removal of the prohibition on giving financial assistance for private limited companies.

l Greater use of electronic reporting and filing l Changes to the rules on maintenance of share capital for private limited companies l New rules to allow company law to be updated more regularly l Confidentiality of directors' home addresses Under the Bill, a director's primary duty is to act for the benefit of members of the company as a whole.

However, when doing so, they must also have regard to the interests of employees, the impact on the environment, the desirability of the company maintaining a reputation for high standards of business conduct, and the need to act fairly.

This is an attempt to give effect to what the Department of Trade and Industry calls enlightened shareholder value.' The concern for directors is the potential need to produce audit trails' documenting how consideration was given to the necessary criteria when reaching decisions.

Another significant change is that only one director, rather than a director and secretary, is required when setting up and running a private limited company. In addition, the sole director can also be the sole shareholder.

There is no longer a requirement to have a secretary, although the responsibilities remain.

Directors must be over the age of 16 and, if there is a sole director, must be a person, rather than another corporate body.

Shareholders will be encouraged to take a more active role in the business.

They will have a new statutory right to sue directors on behalf of the company for negligence, default, breach of duty or breach of trust.

Pro forma articles of association for a private limited company will be replaced by simplified default articles, and the memorandum will no longer require an objects clause.

Existing companies can continue to use their original articles or adopt the new default articles by special resolution.

There is greater scope for private companies to conduct their business by written resolution, and they will no longer need to hold an annual general meeting.

Resolutions may be circulated to the members electronically - allowing most small companies to make decisions quickly and efficiently.

This article has merely been intended to provide a whirlwind tour of the forthcoming legislation which will have an enormous impact on all businesses, particularly small and medium-sized businesses and their advisors.

n Contact: tom.walker@clmsolicitors.co.uk