“Modernising Company Law”: The Government's White Paper
| Date | 01 May 2003 |
| DOI | http://doi.org/10.1111/1468-2230.6603005 |
| Author | Robert Goddard |
| Published date | 01 May 2003 |
REPORTS
‘‘Modernising Company Law’’:
The Government’s White Paper
Robert Goddard
n
Introduction
The call to reform and modernise continues to be a popular refrain of the Labour
Government. It has encompassed public institutions, the political process and
legal system. It may surprise some to learn that it has reached company law, a
subject that has, as George (now Lord) Robertson once observed in the course of
parliamentary debate, ‘‘the ability to empty the Chamber quicker than any other
subject’’.
1
The Government’s recent focus on company law began in 1998 when
the (then) Secretary of State for Trade and Industry, the Rt. Hon. Margaret
Beckett MP launched Modern Company Law for a Competitive Economy
2
: the
first in a series of lengthy and detailed consultation documents concerned with the
reform of core company law.
3
That process of review – conducted by an
independent Steering Group – was more or less completed in 2001 with the
publication of the Group’s Final Report.
4
In July 2002, the Government offered
the first part of its response in the form of the White Paper Modernising Company
Law,
5
endorsing the ethos of the Final Report and accepting many, but not all, of
its recommendations.
This article introduces the White Paper with a specific objective in mind: to
determine the role and purpose ascribed to company law. At first glance this task
may appear unduly narrow. This impression is short-sighted because it overlooks
the fact that by considering the Government’s view of company law, it is possible
to understand its attitude towards corporate activity. Indeed, it enables us to
answer this question: how does the Government perceive its role in regulating
companies, their directors, shareholders and those affected by corporate activity?
Before exploring this question, some background detail is required. This will
n
Lecturer in Law, Aston University. I am grateful for the helpful comments provided by the
anonymous referees. Some of the themes in this article are drawn from my doctoral research,
conducted at the Faculty of Law, University of Cambridge, with reference to which I gratefully
acknowledge the financial support of the AHRB and the supervision provided by Professor Brian
Cheffins.
1 HC Deb vol 972 col 112 22 October 1979. He also observed that ‘‘The triumph of boredom over
suppression was the hallmark of the progress of the last Companies Bill.’’
2Modern Company Law for a Competitive Economy (London: DTI, 1998).
3 The principal consultation documents were: Modern Company Law for a Competitive Economy:
The Strategic Framework (London: DTI, 1999), hereafter ‘The Strategic Framework’;Modern
Company Law for a Competitive Economy: Developing the Framework (London: DTI, 2000),
hereafter ‘Developing’; and Modern Company Law for a Competitive Economy: Completing the
Structure (London: DTI, 2000), hereafter ‘Completing’. Other consultation documents were
published dealing with, for example, company formation and capital maintenance, oversea
companies and the registration of company charges.
4Modern Company Law for a Competitive Economy: Final Report: Vols I and II (London: DTI,
2001), hereafter ‘Final Report’.
5 Cm 5553-I and II.
rThe Modern Law Review Limited 2003. (MLR 66:3, May). Published by Blackwell Publishing Ltd.,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
402
include an overview of the Department of Trade and Industry (DTI) Review,
necessary not only to set the scene but also because the Review provided the
foundation for the White Paper’s recommendations.
Company law reform: background
The DTI Review
6
Established in 1998, the Review was the most extensive of its kind since the
modern foundations of company law were established in the middle of the
nineteenth century.
7
This is not to suggest that company law has remained
unchanged since then. Reform and amendment have taken place in a typically
piece meal fashion and company law has been repeatedly subject to review.
8
Thus,
during the first 60 or so years of the twentieth century, a pattern of regular review
was established. This culminated in the Loreburn, Wrenbury, Greene, Cohen and
Jenkins reports.
9
Although valuable, these reports were often criticised for their
failure to consider and discuss the underlying philosophy and values of company
law.
10
It was with the last of these reports – that of the Jenkins Committee in 1962
– that the established pattern of regular review disappeared. New concerns
nevertheless emerged: after 1972, the implementation of European Directives
became imperative; the 1980s saw the criminalisation of insider dealing; the 1990s
were witness to the work of the Cadbury, Greenbury and Hampel committees;
11
and during the closing years of the century, the Law Commissions examined
shareholder remedies and directors’ duties.
12
It was against this background that
the Review was undertaken.
The Review’s remit was the main components of company law, excluding
insolvency and financial services. Surprisingly the subject of directors’
6 See further the papers in J. De Lacy (ed), The Reform of UK Company Law (London: Cavendish
Publishing, 2002) and an article by a member of the Steering Group: Lady Justice Arden,
‘Reforming the Companies Acts – The Way Ahead’ [2002] JBL 579. For earlier discussion, pre-
dating the completion of the Review, see The David Hume Institute, Hume Papers on Public
Policy, Vol 8, Number 1, Corporate Governance the Reform of Company Law (Edinburgh:
Edinburgh University Press, 2000).
7 For an account of the Review process, see J. Rickford, ‘A History of the Company Law
Review’in J. De Lacy (ed), The Reform of UK Company Law (London: Cavendish Publishing,
2002). Horrwitz observes: ‘‘the foundations of modern British company law were laid in 1856
when liberalism was at its peak. The guiding principle then fixed was fullest freedom for
shareholders in the formation and management of companies on the condition that fullest
information was given to the public’’ (W. Horrwitz, ‘Historical Development of Company Law’
(1946) 62 LQR 375, 386). For background to the mid-nineteenth century reforms, see F. Hyde,
Mr Gladstone at the Board of Trade (London: Cobden-Sanderson, 1934), chapter 8.
8 For an early discussion of company law reform, see E. Manson, ‘The Reform of Company Law’
(1889) 5 LQR 61.
9 Respectively: (1906) Cd 3052; (1918) Cd 9138; (1926) Cmd 2657; (1945) Cmd 6659; and (1962)
Cmnd 1749.
10 See, for example, Lord Wedderburn’s criticism of the Cohen and Jenkins Reports: Fabian Tract
363: Company Law Reform (London: The Fabian Society, 1965).
11 Respectively: Report of the Committee on the Financial Aspects of Corporate Governance
(London: Gee, 1992) (hereafter ‘The Cadbury Report’); Directors’ Remuneration: Report of a
Study Group chaired by Sir Richard Greenbury (London: Gee, 1995); The Committee on
Corporate Governance, Final Report (London: Gee, 1998).
12 Shareholder Remedies, Cm 3769, Report 246 (London: The Stationery Office, 1997); Company
Directors: Regulating Conflicts of Interest and Formulating a Statement of Duties, Cm 4436,
Report 261 (London: The Stationery Office, 1999).
Modernising Company LawMay 2003]
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