A quarter of small businesses have not even heard of the Act which represents the biggest shake-up of corporate law in more than 20 years, it has been claimed.
A study by Leeds Legal, a partnership of law firms in Leeds, has uncovered an alarming lack of awareness and understanding of the Companies Act, which was passed last November, among directors of small businesses.
Not only had a quarter of small business leaders not even heard of the Act, a further third did not know any of the new law’s implications, the research found.
“Unfortunately, the Companies Act 2006 was launched amidst a plethora of other legislation and it appears to have bypassed many business owners, managers and directors,” said Richard Mansell, chief executive at Leeds Chamber of Commerce and Industry.
Businesses have until October 2008 to comply with many of the Act’s provisions, but several key elements will come into force in October this year.
Under the Act, directors have a number of new obligations to comply with, such as promoting their company’s success and exercising independent judgment.
When exercising these obligations, directors will now have to consider the effect of their actions on a wider group of stakeholders – not just shareholders - but also employees, consumers, suppliers and the environment.
According to Andrew Bradley, corporate finance partner at Shulmans in Leeds, increased awareness among small firms will be both vital and beneficial.
“For the first time ever the new Companies Act has been framed with small businesses in mind to ensure simpler procedures in running existing private companies and setting up new ones,” he said.
© Crimson Business Ltd. 2007