Thousands of businesses are to be spared from red tape
Thousands of businesses are to be spared from red tape after Business Minister Jo Swinson announced the interim results from the Company and Commercial Law Red Tape Challenge.
The interim findings show that half of the 115 regulations on the day to day running of a company and the preparing and filing of their accounts are to be scrapped, merged or simplified. This will cut down the dead weight of the statute book by removing redundant legislation and ensure that the remaining regulations are simpler to understand.
Business Minister Jo Swinson said:
"The Companies Act is understandably a complex bit of law. However, there are many areas where this has resulted in companies unnecessarily being tied down by red tape. Businesses told us through this bureaucracy cutting exercise just how time consuming some of the form filling is and how the rules they have to abide by are completely redundant. We have heard them loud and clear and are now taking action.
"We are always trying to make sure that companies can get on with what they're supposed to be doing - running a business and creating jobs to help make the economy stronger. These changes are common sense and make business sense. We are determined to create a flexible business environment for companies to flourish in so they can compete globally and help grow the economy."
The Government also announced:
- Reform of the company and business names regime. Proposals include removing certain names from the list of words which require approval from specified bodies before being registered at Companies House. The list of 161 words and expressions contains, amongst others, examples such as; 'Accredited'; 'British'; 'Group'; 'International'; 'Benevolent'; 'Holding'; 'Institute'; and 'University'. Of course some names will still need approval such as those which may cause offence.
- Measures to simplify the regulations a company must abide by when displaying the company name at their premises, on paper or online. Currently, companies must display their registered name at their registered office, and all other business premises, and on all business documentation. The proposal will enable them to find all the rules together in one place.
- Proposals for companies with less than ten employees (micro-businesses) to be freed from red tape by removing certain accounting requirements. Under the micros exemption proposal, micro-businesses would be able to prepare much reduced annual accounts. There are 1.2 million micro-businesses in the UK and they will be able to draw up shortened balance sheets and profit and loss accounts and will remain exempt from the requirement to file the profit and loss account.
- Other amendments to the Companies Act which will simplify the system for companies to use assets to raise finance, streamline company annual reporting requirements and repeal certain filing obligations when companies change their auditors.
Head of Corporate Governance at the Institute of Directors, and company law sector champion, Roger Barker said:
"Although the Companies Act 2006 consolidated and simplified many aspects of legislation and case law, it still remains largely the province of corporate lawyers and other specialists, with little day-to-day impact on the functioning of many smaller companies. With that in mind, we welcome the Government's plans to develop straightforward and user-friendly guidance for directors, which will allow them to better understand important company documents, such as the articles of association, and their key legal responsibilities as company directors".
Chartered Accountant at Baker Tilly Tax and Accounting Ltd, and company law sector champion, Danielle Stewart said:
"It is great to see that the extensive work performed so far on the Company Law aspects of The Red Tape Challenge will now be progressed in so many ways. I am also delighted to report that many of the suggestions made by respondents to the various outreach programmes initiated by BIS have already resulted in some helpful changes to the way that SME proprietors can interact with Companies House and HMRC.
"I am looking forward to the outcome of the next stage of the work with Companies House, which I believe will have even greater positive impact for all companies operating in the UK."
Today's announcement is the first stage of the Company Law Red Tape Challenge covering proposals regulating the day to day running of a company. BIS is working with Companies House to consider what further improvements can be made in relation to information sent to Companies House, in particular, whether it is possible to reduce duplication of information sent to Companies House and Government. A second Red Tape Challenge announcement of proposals relating to regulations that deal with Companies House will be announced at a later date this year.