- Company Law Review Steering Group (CLRSG) Modern Company Law for a Competitive Economy: The Strategic Framework (URN 99/654, DTI, 1999) Executive Summary para.2 (hereafter The Strategic Framework).
- The Chancellor's Budget Statement 22 April 2002, [2002] Simon's Weekly Tax Intelligence 509, 510.
- For a discussion of these pressures and some empirical evidence see J Freedman, “The Quest for an Ideal Form for Small Businesses—A Misconceived Enterprise?” in B Rider and M Andenas (eds.) Developments in European Company Law Vol. 2/1997 (London, Kluwer, 1999) (hereafter Freedman 1999).
- The empirical evidence, ibid, shows that red tape is regressive and so more of a burden for the very smallest firms. For the distinction between life-style businesses and entrepreneurial small businesses see D Storey, Understanding the Small Business Sector (London, Routledge, 1994) (hereafter Storey, 1994) p. 128 and J Carland et al., “Differentiating Entrepreneurs from Small Business Owners: A Conceptualization” Academy of Management Review 9, 2 (1984) 354 (reprinted in D Storey (ed.) Small Business: Critical Perspectives on Business and Management Vol. IV (London, Routledge, 2000), chapter 50.
- Think Small First (Small Business Service, 2001) http://www.sbs.gov.uk/content/consultations/TSFBookletea_w.pdf accessed on 4th Nov 2002.
- E Ferran, “Company Law Reform in the UK” (2001) 5 Singapore Journal of International and Comparative Law, 516–68.
- See supra n. 4 on lifestyle businesses. For the argument that the quest for an ideal form of small business is misconceived and a scenario showing how two businesses which appear similar may have very different aims and motivations, see Freedman 1999, supra n 3.
- Storey 1994, supra n 4, chapter 5, especially at p. 158.
- CLRSG, Modern Company Law for a Competitive Economy: Developing the Framework (URN 00/656, DTI, 2000) para 6.9 (hereafter Developing the Framework).
- Companies in 2001–2002 (DTI, 2002), Table A2 (http://ws5.companies_house.gov.uk/about/dticomp_0102.pdf accessed on 4th November 2002.)
- See the discussion in Part D below.
- Storey 1994 supra n. 4.
- DTI, Modern Company Law for a Competitive Economy March 1998 (hereafter the first Consultation Document) and Summary of Responses: http://www.dti.gov.uk/cld/comlaw/comlaw.pdf and http://www.dti.gov.uk/cld/comlaw/response.pdf: accessed 4th Nov. 2002.
- Discussed further in part D below. Think Small First was not an invention of the CLR team but was taken from general small business regulatory thinking- see now the Small Business Service Think Small First Performance Indicators. (http://www.sbs.gov.uk/default.php?page=/statistics/smallfirst.php).
- This figure includes “sole proprietorships and partnerships comprising only the self-employed owner-manager(s) and companies comprising only an employee director”; SME Statistics for the UK 2001 (www.sbs.gov.uk/content/statistics/stats2001.pdf accessed 4th Nov 2002).
- See, for example, J Freedman “Small Business and the Corporate Form: Burden or Privilege?” (1994) 57 MLR 555 (hereafter Freedman 1994); A Hicks, R Drury and J Smallcombe, Alternative Company Structures for the Small Business (London: Chartered Association of Certified Accountants, 1995) (hereafter ACCA).
- CLRSG, Modern Company Law for a Competitive Economy: Final Report (URN 01/942 (vol. 1), DTI, 2001 (hereafter Final Report Vol. 1), chapter 2.
- Ibid p 335.
- The Strategic Framework n. 1 supra para. 5.2.10.
- For further consideration of these issues see J Freedman, “Limited Liability: Large Company Theory and Small Firms” [2000] 63 MLR 317 (hereafter, Freedman 2000).
- Supra n. 1 at para 5.2.6.
- Supra n. 13.
- Ibid.
- See Freedman 1994 supra n. 16, 562 especially; ACCA, supra n. 16; Freedman 1999, n. 3 supra.
- See L Sealy, The Private Company: The Law at Present, unpublished conference paper (Choice of Corporate Form, 4th October 2002, IALS) commenting that one of the objections to current company law for small firms is that “Decisions taken honestly and in good faith by small companies can founder on the obscurity of company law”, although he acknowledges the importance of the statutory written resolution procedure now available.
- For example through the principle in In re Duomatic [1969] 2 Ch 365, discussed further in Part D below.
- Such as section 381A of the Companies Act 1985, discussed further in Part D below.
- Storey 1994, n. 4 supra, 156; Quarterly Surveys of Private Business: Priorities for Action (The Forum of Private Businesses, Cheshire); response of Law Society Company Law Committee to The Strategic Framework (London, Law Society, 1999).
- Sealy, supra n. 25. For a discussion of whether to target legislation on lay people or professionals and other valuable discussion of the task of rewriting legislation see Tax Law Review Committee, Interim Report on Tax Legislation (London, Institute for Fiscal Studies, 1995) especially ch. 5.
- On the experience of the Tax Law Rewrite see the various documents at www.ir.gov.uk/rewrite.
- See F Easterbrook and D Fischel, The Economic Structure of Corporate Law (Cambridge, Massachusetts, Harvard University Press, 1991), 34.
- The author's empirical research suggests that most business owners do seek professional advice of some kind on set up but the majority consult accountants rather than lawyers—J Freedman and M Godwin, Legal Form, Tax and the Micro Business, Small Business Research Programme Working Paper (London, IALS, 1991).
- These arguments are discussed at greater length in Freedman 1994 supra n. 16.
- J Callison and A Vestal “They've created a Lamb with Mandibles of Death”: Secrecy, Disclosure and Fiduciary Duties in Limited Liability Firms”, (2001) 76 Indiana Law Journal 271.
- These are collected together in a Small Business Summary available on www.dti.gov/cld/small.pdf.
- Modernising Company Law Cm 5553-I and II, (London, TSO, 2002) (hereafter the White Paper).
- See figures in text to n. 11 supra.
- Final Report n. 17 supra, para 4.16; White Paper n. 36 supra para. 2.5.
- Developing the Framework n. 9 supra, para 7.101.
- White Paper n. 36 supra, para 1.5.
- Developing the Framework, supra n. 9, ch 7, especially paras 7.106; 7.117; 7.124.
- CLRSG, Modern Company Law for a Competitive Economy: Completing the Structure, (URN 00/1335, DTI, 2000), para 2.35.
- Text to n. 19, supra.
- For a full discussion of the history of the LLP see J. Freedman and V. Finch, “Limited Liability Partnerships: Have Accountants Sewn up the ‘Deep Pockets’ Debate?” [1997] JBL 387 (hereafter Freedman and Finch). For further discussion on the suitability of the LLP for small firms see V Finch and J Freedman, “The Limited Liability Partnership: Pick and Mix or Mix up?” [2002] JBL 475 (hereafter Finch and Freedman).
- See Law Commission Consultation Paper N 159, Partnership Law, A Joint Consultation Paper (London, TSO, 2000).
- The Strategic Framework n. 1 supra para 5.2.11
- n. 9 supra chapter 9.
- Williams v Natural Life Health Foods Ltd [1998] 2 All ER 577; Finch and Freedman, supra n 44 at pp 483–8; J Whittaker, “Professional LLPs: Liability in Negligence after Merrett v Babb” [2002] JBL 601. The House of Lords in Standard Chartered Bank v Pakistan National Shipping Corp (No 2) [2002] UKHL 43, [2002] 2 All ER (Comm) 931 made it clear that a company director would be liable for his own fraud and this would certainly apply to an LLP member, but the Williams case was distinguished. Liability for negligent misstatement continues to depend entirely upon whether the agent, be he a company director or an LLP member, has assumed personal responsibility. The circumstances in which a company director may rely on the existence of his limited liability company to negate any assumption of personal liability, as in Williams, remain less than fully clear and the effect of being a member of an LLP is even less clear. Although Lord Hoffman in Standard Chartered Bank did not think that the decision in Williams turned on company law, the existence of a company was a fact relevant to whether personal liability had been assumed by the director. The LLP legislation could have stated that the liability of a member for negligence was unaffected by the existence of the LLP itself, but instead the matter was expressly left to the courts by the government.
- See, for example, M Palmer, “Tax Transparencies in the UK”, (2002) 131 Offshore Investment, 8. The LLP is more likely to be of interest as a tax-planning device and for joint ventures than for ordinary small trading firms.
- For further problems see M Blackett-Ord, “Limited liability partnerships and the problem with legal uncertainty” [2002] NLJ 1590.
- n. 17 supra at para 2.7.
- For example, J Birds, “A New Form of Business Association for the Twenty-First Century” (2000) 21 Company Lawyer 39; J Lowe, “Limited Liability Partnerships Act 2000”, Company Law Club Newsletter Special Edition 15/09/00.
- Companies Act 1985, s 379A.
- Final Report n. 17 supra para 4.20.
- White Paper n. 36 supra paras 2.10–2.19.
- Final Report n. 17 supra para 4.22.
- White Paper n. 36 supra para 12.12.
- Ibid, paras 2.26–2.30.
- Ibid, draft clauses 172 and 173.
- Final Report n 17 supra, para 4.3.
- The Draft Deregulation of Private Companies Order 1996, Accompanying Statement by the Department of Trade and Industry, April 1996.
- The principle in In re Duomatic [1969] 2 Ch 365.
- See, for example, Atlas Wright (Europe) Ltd v Wright [1999] BCC 163.
- White Paper n. 36 supra, para 2.35.
- J Freedman and M Godwin, “The Statutory Audit and the Micro Company—An Empirical Investigation” [1993] Journal of Business Law 105.
- Hence the proposal in the CLR and White Paper to reduce the time for filing private company accounts from 10 months to 7 (White Paper n. 36 supra para 4.24.). Though not deregulatory in itself, it makes the filed accounts that much more useful, compensating to a small degree for the fact that they may not be audited.
- See Freedman 1999, n. 3 supra.
- Companies Act 1985 (Audit Exemption) Regulations 1994 (SI 1994/1935).
- Companies Act 1985 (Audit Exemption) (Amendment) Regulations 1997 (SI 1997/936).
- Companies Act 1985 (Audit Exemption) (Amendment) Regulations 2000 (SI 2000/430).
- Developing the Framework n. 9 supra para 8.41–8.48.
- The Auditing Practices Board, Findings of the Field Trials of the Independent Professional Review, (London, CCAB, 2001).
- See text to n. 11 supra; Final Report n. 17 supra paras 4.29–4.31.
- White Paper n. 36 supra paras 4.21–4.22.
- C Pratten, The Audit Exemption Regime, Cambridge Discussion Paper in Accounting and Finance, AF21, March 1996.
- White Paper n. 36 supra para 4.26.
- J. Short, unpublished conference paper presented at Using the Law to Promote Competitiveness and Enterprise: Will Corporate Reform Deliver (July 2002) (Cambridge Centre for Corporate and Commercial Law).
- White Paper n. 36 supra chapter 3.
- Developing the Framework n. 9 supra para 3.14.
- Final Report n. 17 supra para 7.46 et seq.
- White Paper n. 36 supra para 3.18.
- J. Callison, “Venture Capital and Corporate Governance: Evolving the Limited Liability Company to Finance the Entrepreneurial Business” (2000) 26 Journal of Corporation Law 97.
- See J McCahery and E Vermeulen, “The Evolution of Closely Held Business Forms in Europe” (2001) 26 The Journal of Corporation Law 855.
- Centros Ltd. v Erhvervs-og Selskabsstyrelsen, Case C-212/97 (1999) 2 CMLR 551.
- Report of the High Level Group of Company Law Experts on A Modern Regulatory Framework for Company Law in Europe (Brussels, 4 November 2002) (http://europa.eu.int/comm/internal_market/en/company/modern/consult/report_en.pdf, accessed 11 November 2002).
- M Siems, “Convergence, Competition, Centros and Conflicts of Law: European Company Law in the 21st Century” (2002) 27(1) European Law Review 47.
- Their Report (n. 85 supra) is very much influenced by the CLR.
- Callison and Vestal n. 34 supra. Indeed the LLP falls into this category of confused creations.
Journal of Corporate Law Studies
Volume 3, 2003 - Issue 1