The UK has long enjoyed a reputation as a favoured country in which to incorporate a company. However, in recent years company law has come in for criticism because it has been seen as failing to reflect the commercial realities of running a business in the 21st Century.

Traditionally, company law in the UK has been written with large companies in mind. Not surprisingly, owner-managed businesses, which tend to dominate the small and medium-sized enterprises (SME) marketplace, are especially critical.

Now, after years of intensive lobbying from the business community it appears that change may be on the way, which it is estimated could save UK companies £250m a year.

The Department of Trade and Industry has published a White Paper on company law reform in conjunction with a draft bill. In general terms the reforms aim to:

* Make the setting up and running of a company easier;

* Enhance shareholder engagement;

* Foster a long-term investment culture;

* Reduce business compliance costs.

Such a package certainly sets the scene and raises expectations. The only hurdle that remains is the need for the legislation to be genuinely effective, and for it to be welcomed by those owner-managed businesses that it is intended to assist.

As a result of directors' fears over personal targeting by extremist groups, directors appointed in the setting up of new companies will now be given the option of providing a service address for the public record. A home address will still be required, but it will be kept separately and access to it will be restricted.

The Government also proposes publishing a simplified set of model articles of association for private companies limited by shares, a separate set for public companies limited by guarantee and a new full set of model articles for private companies limited by guarantee.

The Government is still considering the public's replies to the White Paper, but we should expect a Government response sometime this autumn. The actual difference any reforms ultimately make and the effectiveness of this attempt at easing the burden of regulation felt by business remains to be seen.

But the premise upon which it is based - simplifying a complex and sometimes overly restrictive area of law - must be welcomed.

* Ross Paterson is a solicitor in the business and company law team at Blackett Hart & Pratt in Darlington. For more information, call (01325) 466794.

Published: 04/10/2005