Fundamentals, Developments and Trends in British Company Law – Some Wider Reflections. First Part: Overview and the British Approach

The paper describes current UK reforms in company law and corporate governance, primarily for non-UK readers. After a summary overall survey of UK reform activity, two main distinguishing features of UK law and their strengths and weaknesses are described – ie first, the common law fiduciary agency basis of company structure and governance; and second, the highly concentrated pattern of institutional shareholder ownership and control of listed companies and the resulting influence of such owners on governance and wider regulation. The second part of the paper covers current proposals to clarify and modernise these aspects. The implications of reformed fiduciary agency principles for corporate governance and company structures, eg in the UK-registered European company, are explored. The conditions on which the ownership structure and its effectiveness to discipline management depend and the latest developments in law and practice affecting company control and discipline are then analysed. These include the Operating and Financial Review (providing all stakeholders with broader information) and the new corporate governance code and the new regime governing board remuneration, a major development with general effects on governance. The conclusion is positive, but it is questioned whether the legal and factual conditions on which the effectiveness of the UK system depend can, or should, be replicated outside the UK, and whether substitutes are needed. Questions are also raised about the effects of regionalisation and globalisation of capital markets on the continuing effectiveness of the UK, and proposed wider EU, transparency based systems.