“One Size Fits All”—Small Business and Competitive Legal Forms

Abstract

This article examines the proposals of the Company Law Review Steering Group (CLRSG) and the subsequent Government White Paper in relation to small, closely-held businesses and evaluates them in the light of the nature and needs of this heterogeneous sector. It suggests that some types of deregulation attempting to cater for particular types of firm can actually introduce complexity (‘complex deregulation’). The article argues that, given the variety of businesses in this sector, and the dynamic nature of small businesses, a ‘one size fits all’ approach which starts small but can be adapted as a business grows (and also if it shrinks) is preferable to an attempt at precise tailoring of legal forms for different types of small business. In conclusion, it is maintained that the proposed reforms for small businesses are helpful and the fact that they are not radical is not necessarily a serious defect. The main criticism levelled at the Company Law Review (CLR) exercise is that the opportunity was not taken to examine thoroughly the role of limited liability for small firms and to consider the entire range of legal forms available to the small business and the relationship of these forms to each other. If we confine the examination to UK company law, however, we see that it is already flexible and sets up few barriers to entry for small firms operating in the UK. The proposals made by the CLR, as adapted by the White Paper, will maintain the attractiveness of the UK as a base for small businesses without, for the most part, removing creditor and minority protection as more radical changes might do.