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Company law reform
The Company Law Reform Bill was published on 3 November. Company law will be substantially rewritten to make it easier to understand and more flexible. The aim is to help keep the regulatory burden on business to a minimum, promote shareholder engagement and encourage a long-term investment culture. It is estimated that business benefits from these proposals are likely to total around £250 million a year. This includes an annual £100 million benefits for small companies from:
- restructuring those parts of company law most relevant to small businesses making it easier for them to understand what they need to do;
- simpler rules for forming a company;
- abolition of the need for a company secretary;
- making AGM opt in rather than opt out; and
- new model articles.
The Bill clarifies directors' duties, encourages greater use of e-communications, removes the need for hard copy share certificates, and gives all directors the option to file a service address on the public record rather than a private address.
Other proposals relating to audit include allowing shareholders to agree to limit the auditors' liability to the company, giving greater rights for shareholders to question auditors and named partners, and requiring audit reports to give the name of the individual lead auditor. A new offence for recklessly or knowingly including misleading, false or deceptive matters in an audit report is also to be included.
The Bill implements the EU Takeover Directive, as well as the company law aspects of the European Transparency Directive (relating to disclosure of shareholdings) and the EU Audit Directive.
A power is provided to require institutional investors to disclose how they have used their votes.
Department of Trade and Industry press release dated 3 November 2005
EU tax
The European Commission has published the latest in its series of Taxation Papers (Working Paper No 8). This paper is entitled 'Formulary Apportionment and Group Taxation in the European Union: Insights from the US and Canada'. Continuing the theme of a consolidated company tax base for the EU, the paper examines the use of formulary methods in Canada and the US to distribute income across national boundaries.
The paper is available from the European Commission website at http://europa.eu.int/comm/taxation_customs/taxation/gen_info/economic_analysis/tax_papers/index_en.htm.
Enterprising result
The UK tax system is perhaps less cumbersome for UK business than some might have thought, according to a recent survey of the FTSE 350, UK private companies, AIM listed companies and foreign subsidiaries. 69% of respondents from large private companies said that the UK tax régime is 'fairly good' for enterprise, in response to the question, 'Do you think the UK tax régime is good for enterprise?' posed by PricewaterhouseCoopers in the Lighthouse Global Tax Tracker 2005.
Kevin Nicholson, UK head of enterprise and private companies and clients, PricewaterhouseCoopers, said that it was 'good news that the UK tax system is considered satisfactory for enterprise by a significant proportion of businesses'. He thought this was partly because of a 'number of initiatives introduced by the Government to support business enterprise, e.g. low headline tax rates and tax incentives such as 10% taper relief and tax credits for research and development'.
However, PricewaterhouseCoopers still argues that more could be done to help businesses through the UK tax system's administrative processes. Mr Nicholson said that the process for applying for research and development relief can be 'quite confusing and complex, particularly for smaller businesses'.
VATRat
Chris Tailby, director of the Anti-Avoidance Group at HMRC, has won the VATRat award for 2005. A lifetime achievement award was presented to Hugh Mainprice for his services to VAT.
Chris Tailby received his award in recognition of his efforts to combat VAT avoidance. Acknowledging that this might be a controversial award in the opinion of VAT advisers and clients, Alan Pearce, national VAT partner at Baker Tilly, said that 'it should be recognised that the culture of VAT avoidance has changed significantly in recent years. The change in attitude, particularly towards aggressive VAT planning, is no doubt largely due the work of Chris and his team at HMRC'.
As a Government lawyer in the 1970s, Hugh Mainprice was involved in the drafting of the UK's original VAT legislation. He subsequently went into private practice and has been involved in many of the VAT leading cases. Although now in his 70s, he is still practising and appears in VAT tribunals.
Congratulations to both Chris Tailby and Hugh Mainprice.
