The reform will save businesses £250 million a year, the DTI claims, with small companies benefiting to the tune of £100 million a year as a result of targeted changes.
According to the DTI, these include:
The DTI says businesses in general will benefit from a range of measures put forward in the proposals for the Company Law Reform Bill.
In particular there will be greater clarity on directors' duties, including making clear that they have to act in the interests of shareholders, but can pay regard to the long as well as the short term, taking due account of the interests of employees, suppliers, consumers and the environment.
The DTI is proposing a greater use of e-communications and intends to remove the need for hard copy share certificates. It will also use the bill to implement the Takeover Directive, placing the work of the Takeover Panel on a statutory footing.
Taking account of directors' fears over targeting by such organisations as animal rights activists, the DTI has also put forward an option for all directors to file a service address on the public record rather than a private address.
In addition, the proposals seek to promote shareholder engagement through enhancing the powers of proxies and making it easier for indirect investors to be informed and exercise governance rights in the company.
Finally, the draft package also includes proposals on auditor liability and audit quality, including:
The DTI is consulting on the proposals, and would like comments by 10th June. The aim is then to introduce a bill as soon as Parliamentary time allows.
A separate consultation document, also issued by the DTI yesterday, covers a further recommendation of the Company Law Review: the extension of the option to prepare and distribute summary financial statements to all companies.
This consultation includes proposals for allowing companies that prepare their accounts using international accounting standards to continue to take advantage of the summary financial arrangements.
"We needed a thorough overhaul of the law to make it more suited to the needs of our companies and the measures set out in the White Paper will help us achieve that," said Trade and Industry Secretary Patricia Hewitt.
"The proposals are part of a wide programme of action to boost enterprise, encourage investment and promote long-term company performance. These measures represent a significant step forward in ensuring that our company law remains up to date, flexible, and accessible for everyone who uses it," she added.
