U.K. Companies Bill 2006

This Bill (formerly known as the Company Law Reform Bill) is expected to receive Royal Assent later this year with implementation due October 1, 2007. For the first time, the Bill will codify directors' duties in legislation.

These include duties for directors to:

• Promote the success of a company having regard to—among other things—the long-term consequences of any decision; the interests of employees; the impact of the company's operations on the community and the environment; the company's reputation.
• Exercise reasonable care, skill and diligence.
• Avoid conflicts of interest.
• Not to accept benefits from third parties.
• Declare interest in any transaction or arrangement.
• Exercise independent judgment.

The Bill will also allow shareholders to bring derivative actions in respect of any "negligence, default, breach of duty or breach of trust by a director." Any proceeds of such litigation will accrue to the company and not the individual shareholders bringing the action.

Previous restrictions on corporate indemnification of directors and officers were removed under the Companies (Audit, Investigation and Community Enterprises) Act 2004, although under the Companies Bill, indemnification remains unlawful for damages awarded to the company, fines and penalties in criminal and regulatory proceedings, and defense costs incurred in unsuccessfully defending proceedings.