In 1,500 clauses the new Act pulls together and replaces all the
previous Acts that constituted company law.
The legislation clarifies exactly what directors' duties are,
allows shareholders to sue directors if the company is not run in
the best interests of shareholders, and forces companies to
disclose information about its suppliers.
"Most of the Act does not come into force until 2008, so there
is no immediate panic," said Martin Webster, a company law expert
at Pinsent Masons, the law firm behind OUT-LAW. "But companies
should be preparing for it now."
The Act demands that directors of companies give some
consideration to how their decisions affect the interests of the
community, the environment and suppliers.
The clarification of a director's role is a crucial part of the
legislation, said Webster, but may not result in as clear-cut a
situation as was planned.
"The codification of the directors' duties means that we don't
have to look back at the law of 150 years' worth of judges
decisions, we can open the statute book and see it in a couple of
pages," he said. "Except that when you look at the statutes and see
how we are to interpret them it says go back and look at all the
old case law."
"It is quite well drafted, though, and is a consolidating
statute, which means we can throw away the 1985 Act, because this
is all in one Act," he said.
Business strenuously objected to the late insertions of clauses
requiring that companies list suppliers. The move is designed to
increase the social responsibility of companies by making it more
difficult to pass problematic activity – such as pollution,
environmental damage or poor work practices – down the supply
chain.
The government appeared to back off slightly under the weight of
the objections, saying that the law did not require a full and
exhaustive list of suppliers. Some firms were worried that the
lists would open them up to protests from animal rights
campaigners. It was partly to thwart such action that the law no
longer requires directors to supply their home addresses.
A copy of the Act is not expected to be available online for
approximately two weeks.
