The Government is acting more slowly than expected in implementing the Companies Act, the piece of legislation that is completely overhauling the way companies are governed.
Only a few parts of the Act are currently in force, and the remaining elements have been scheduled to become law in three stages between now and October 2008.
"I think there was an expectation that they were going to rush things through, all the good news deregulatory stuff so that they could say 'look how much we are doing for you guys'," said Martin Webster, a corporate partner at Pinsent Masons, the law firm behind OUT-LAW. "It is clear that that's not what has happened, though. A lot has been held back."
"I think they came up against a number of difficulties with the transitional processes in the change between old and new systems," said Webster. "And they are so nervous about getting things wrong because they've got a couple of things wrong in the past and the finger has been pointed, that they are doing a lot of consulting."
This October will see the implementation of clauses relating to directors' rights and duties and clauses increasing the rights of indirect investors. More complicated laws governing conflict of interest and company constitutions will be left to October 2008.
"Throughout its passage the Government consulted and listened carefully to a range of views. We have maintained this approach for the commencement timetable," said Margaret Hodge, Industry and Regions Minister. "We have been guided by a desire to see the benefits for business introduced as quickly as possible and observing common commencement dates."
"We have had further extensive discussions with a wide range of interested parties to make sure we have a timetable that gives business certainty, time to prepare and, wherever possible, early savings and administrative benefits," she said.
There are practical difficulties which have meant that some elements of the Act are delayed by longer than would be expected. "There are changes like the change that means directors' home addresses will not go on to accounts that you would think could be done tomorrow but they aren't," said Webster. "That is because some of them require a big change in the systems at Companies House."
Hodge said that the Government had tried to create as little disturbance as possible for companies. "One of the most important aspects to implementing the Act is providing the least burdensome and most efficient transition to the new regime for existing companies. We have already consulted stakeholders, but today's document provides the basis for further consultation. We also set out how we propose to deal with secondary legislation under the Act," she said.
The DTI yesterday published a consultative document on the policy issues related to secondary legislation which will need to be made under the new Act, and on transitional and savings provisions. It invites comments by 31st May 2007 (except for those issues relating to political donations and expenditure, for which the DTI requests comments by 1st May).
The DTI provided the following implementation timetable.
Companies Act implementation timetable
The following parts will be introduced from 1 October 2007:
Part 9 (Exercise of members' rights);
Part 10 (A company's directors), other than provisions relating to directors' conflict of interest duties, directors' residential addresses and underage and natural directors;
Part 11 (Derivative claims and proceedings by members);
Part 13 (Resolutions and meetings), and, related to this, sections 485-488 of Part 16 (Audit);
Part 14 (Control of political donations and expenditure);
Section 417 of Part 15 (Contents of directors' report: business review);
Part 29 (Fraudulent trading);
Part 30 (Protection of members against unfair prejudice);
Part 32 (Company investigations: amendments).
The commencement provisions in respect of Part 9 will be drafted so as to enable nominee investment operators to send indirect investors' requests to companies from 1 October to entitle indirect investors to enjoy information rights from 31 December 2007.
The following parts will be introduced from 6 April 2008:
Part 12 (Company secretaries);
Part 15 (Accounts and reports), other than section 417;
Part 16 (Audit), other than sections 485-488;
Part 19 (Debentures);
Part 20 (Private and public companies);
Part 21 (Certification and transfer of securities);
Part 23 (Distributions);
Part 26 (Arrangements and reconstructions);
Part 27 (Mergers and divisions of public companies);
Part 42 (Statutory auditors).
The following parts will be introduced from 1 October 2008:
Part 1 (General introductory provisions);
Part 2 (Company formation);
Part 3 (A company's constitution);
Part 4 (A company's capacity and related matters);
Part 5 (A company's name);
Part 6 (A company's registered office);
Part 7 (Re-registration as a means of altering a company's status);
Part 8 (A company's members);
Part 10 (A company's directors) - provisions relating to directors' conflict of interest duties, directors' residential addresses and underage and natural directors;
Part 17 (A company's share capital);
Part 18 (Acquisition by limited company of its own shares);
Part 24 (A company's annual return);
Part 25 (Company charges);
Part 31 (Dissolution and restoration to the register);
Part 33 (UK companies not formed under the Companies Acts);
Part 34 (Overseas companies);
Part 35 (The registrar of companies);
Part 41 (Business names).
In the light of further consultation with business, section 358 of the Companies Act 1985 will be repealed, which provides a power for companies to close the register of members, with effect from 1 October 2008.