Speaking to reporters at the Department of Trade and Industry (DTI), industry and regions minister Alun Michael said that the Company Law Reform Bill is an attempt to clarify the process of starting and running a business.
The bill was published today and if passed will abolish the need for a business to appoint a company secretary, introduce simpler rules for starting up and allow companies to opt out of holding annual shareholders' meetings.
Michael stressed that the legislation simply aims to give firms more choice and falls under its wider programme to encourage enterprise and growth.
In particular, it removes the burden from smaller firms to comply with legal processes that have little relevance to the operation of their business.
"We want to make it less onerous to take part in company activity," Michael said. "None of this is de-regulation for the sake of it."
The bill resets the balance between large and small companies, he said, and makes company law more transparent, in line with European directives, and easier for all to use.
"Companies need to look only at the elements relevant to them," he added.
Press reports yesterday cited concern that by giving greater clarity to director's duties and stating that they must act in the interests of their shareholders, the bill will give company investors greater power to sue directors for negligence or breach of duty.
Michael stressed, however, that directors' duties will not change and shareholders will have no new powers. He called the press reports "a little surprising", given that the changes in the Company Law Reform Bill have been discussed since 1997 and shareholders' power to sue is already law.
There will be no fundamental change in the legislation. The bill aims to codify and give clarity to the conditions in which shareholder groups can sue a director on behalf of the company. In fact, it offers the director greater protection.
Essentially, Michael claimed, a case will only be heard if it's in the company's best interest. An individual investor seeking compensation will likely never take his case to court. But if a director sells a company's assets under their value, he may be liable for breach of duty.
The new law will clarify such instances to give all stakeholders in a company more certainty, the minister concluded.