The Government has started off 2007 by issuing a formal policy commitment to cut red tape by 25% by 2012. Some in business will greet this announcement with relief - others will prefer to believe it when they see it. Regardless of such commitments, the Government’s law-making machinery inevitably steams on and the following new measures are due to come on stream during 2007, writes John Davies.

Companies Act 2006

The biggest single statute in the history of UK legislation is scheduled to come into effect in stages during 2007 and 2008. The exact dates for bringing the Companies Act 2006 into force have still to be decided but the Government has said that it hopes that most it will be in force by October 2007 and that, whatever happens, it will all be in force by October 2008.

In drafting the Act, the Government set out to streamline the framework of legal rules which govern the administration of private companies. There are some measures in this area but for many companies they will not materially lessen the compliance burden that already exists.

The two main reforms presented as helping to lighten the burden for small companies are as follows:

AGM

No private company will in future be required to hold an Annual General Meeting (or to lay its annual accounts before its members in general meeting). Private companies that wish to take advantage of this exemption for the first time should however check their articles of association - if these have not been amended for many years they may still require or expect the company to hold an AGM. Such provisions may need to be amended so as to enable the company to take full advantage.

The company secretary

No private company will in future be required to appoint a company secretary. Private companies that might wish to take advantage of this change should however think about all the implications - abolishing the post of company secretary does not mean that all the work which is usually undertaken by the secretary is also abolished - all companies, including small private companies, will still have to comply with all the legal rules. Directors of companies that wish to do away with the post of secretary in their company should therefore acknowledge that the responsibility for dealing with all these matters will revert to them.

What may be of more practical use to companies large and small is that the law will in future respect the right of companies to send official documentation, eg notices of meetings and written resolutions, to members by e-mail as well as in hard copy format. It is likely that the new default articles of association will be amended on a similar basis so as to acknowledge the entitlement of directors to conduct their affairs in electronic form.

One significant change to company law which has already taken effect is that companies must now include the same information that they have long been obliged to include on their hard copy stationery - their company registration number, the address of their registered office, the country in which they are registered - on their web site (if they have one). More information is available at:

www.dti.gov.uk/bbf/co-act-2006/index.html

Employment law

As from April 6, the legal right for an employee to ask to work under new, ‘flexible working’ arrangements is extended. Currently, this right applies to employees who have natural or adopted children up to the age of six or disabled children up to the age of 18. This right is now extended to staff with caring responsibilities for adults. As is the case at present, the legal right is only to ask the employer for ‘flexible working’ arrangements. There is no absolute right to have the request acceded to, although a refusal on the part of the employer must be justified by reference to one or more of the prescribed grounds, such as the burden of additional costs which approval would impose on the business.

From April 2007, the Work and Families Act 2007 will extend maternity and adoption pay from six months to nine months, see

www.dti.gov.uk/employment/workandfamilies/index.html for more details.

Also, it has become routine to upgrade the rate of the national minimum wage in October of each year. We can therefore expect the current rates (£5.35 an hour for adults and £4.45 for those between 18-21) to be revised again later this year.

www.hmrc.gov.uk/nmw/ has more on this.

Recovery of NHS treatment costs

One new measure which has already been introduced, as from 29 January 2007, and which will have important implications for all businesses, concerns the entitlement of the NHS to recover the cost of treating injuries of any kind where those injuries have been caused by negligence. This will affect cases where an employee, or a customer or client, incurs some injury on business premises and as a result has to undergo some form of NHS treatment. Where the injured party successfully sues the business the NHS will in future be able to recover the costs of the treatment from that business. The NHS claim will be capped at £37,100.

In the vast majority of cases, claims from the NHS under these new regulations will be met out of employers’ insurance policies, although those policies may impose a cap on the amounts that may be paid out under them - in such cases, the employer will be required to fund the difference. Those businesses which do not take out employers or public liability insurance - it should be remembered that the former is compulsory - should be aware that, should they be faced with a claim under these new regulations, they will have to meet it themselves.

Discrimination on the grounds of sexual orientation

A measure which has attracted considerable interest, and a little controversy, is the government’s proposal to extend the existing prohibition against discrimination on the grounds of sexual orientation in the field of employment to the provision of goods and services. These new rules, due to come into effect in April, will add to the already substantial raft of legal rules governing discrimination.

The effect of this latest reform will be to make it illegal to discriminate against any person in the provision of business services on the grounds of sexual orientation. Thus, a business will not be entitled to deny access to goods and services on the grounds that a prospective client or customer is or may be homosexual (or indeed is heterosexual, or bisexual).

In the majority of conceivable cases, the sexual orientation of a prospective client or customer will not be an issue for the provider and the new regulations will have no impact - the well publicised opposition to the government’s proposals from, for example, adoption agencies and small hotels are likely to be isolated exceptions. But as with all similar legislation, businesses will have to ensure that their staff are aware of the effect of the new rules since they will be liable for the actions of their staff whether or not those actions are done with their knowledge or approval.

Fraud

A new Fraud Act comes into force in 2007. This new Act updates the law in this area and introduces a number of new offences which may be committed by companies or individuals. These new offences of fraud include fraud by false representation, fraud by failing to disclose information and fraud by abusing a position. The offences carry maximum jail sentences of ten years. Further details are available at

www.opsi.gov.uk/acts/acts2006/20060035.htm

Corporate Manslaughter

Still before Parliament is a measure that will impose a new criminal offence on businesses that cause death. Incongruous as it may sound, the common law offence of corporate manslaughter has existed for many years but has proved notoriously difficult to bring about convictions. The aim of the Corporate Manslaughter Bill is to make it easier for this to be done. Under the Bill a company would commit an offence if a person to whom the company owes a duty of care dies as the result of a gross breach of that duty of care; further, the death must have been caused by serious failings in the way that the company is managed or governed.

A company found guilty under this new offence will be subject to a unlimited fine and, unless the terms of the Bill are changed before it becomes law, there will be no personal consequences for the company’s directors. This has caused many to query the need for the news legislation at all, since very heavy fines may already be imposed on companies for breach of health and safety rules.

John Davies is Head of Business Law at the Association of Chartered Certified Accountants.