The Better Business Act 2024: "A small change in the law will make a big change in the world." (Mary Portas)

The Better Business Act 2024: "A small change in the law will make a big change in the world." (Mary Portas)
The Better Business Act Campaign 2023

I set up a new business last year. So did 899,9991 other people. I did it online and followed the helpful steps on the UK government website as I went along. The process took approximately 15 mins and cost me £12. My new company was registered within 24 hours. I hardly engaged my brain in the process, just ticked some boxes and clicked the Next button, anxious to get it done. Scary terms like ‘Memorandum of association’ and ‘articles of association’ were either already created automatically for me as part of my registration or required a tick selection of ‘standard’ or ‘default’ button. Whilst thankful for the automated, speedy, and cheap process (and suffering from the equivalent of white coat syndrome - surely the UK government company law experts know what they are doing), I went for the easy option. I now wish I’d given the process more time and due consideration. Or rather, I wish the standard, default, easy option was the best one. Because with hindsight, and I know I am not alone in thinking this, it isn’t.

So, what’s wrong with the standard, model articles of association?

There’s nothing wrong with them in the legal sense. They provide a good template for companies to start with. They are designed to be a ‘catch all’, simplifying what can be a complicated process. But they are now almost 20 years old and do not address the need for today’s businesses to be legally responsible for the wider implications of their day-to-day operations on society and the environment.

Can a nearly 20-year-old piece of legislation be updated?

Yes, and there is a coalition of 2,500 businesses working hard to achieve this. The Better Business Act2 campaign proposes an amendment to current company law and argues that it should be the duty of all Company Directors to operate the company in a manner that benefits not just the members of the business, but also wider society and the environment. The Better Business Act would like to see a change to the default purpose of a company to benefit its shareholders, with a mandatory triple bottom line purpose for all companies. In a survey of 2,000 UK adults, the Campaign found that 78% of them support the call to make businesses legally responsible for their impact on the planet and people.  If the Act succeeds and becomes law, companies will no longer be able to choose whether to align the long-term interests of people, planet, and profit; instead, it will be the default option.

What are the other benefits of reforming company law?

Research carried out by think tank Demos3 and backed by the Better Business Act coalition shows that purpose-led businesses ranging from B Corporations, social enterprises and community businesses following a stakeholder governance approach could boost GDP by 7%. On top of this, the research details that such businesses are looking at increased levels of R&D expenditure and capital investment along with backing pay rises for the lowest paid.

So, where has that left my business?

I amended my Articles, in accordance with relevant UK company law. This states that the shareholders can agree a change to the Articles by passing a ‘special resolution’, which is a 75% majority approval. I created a written resolution and added in the wording from the B Corp legal requirement stating that the purpose and operations of my business were to positively impact the wider society and the environment, not just me the shareholder. I sent my amended Articles and signed special resolution to Companies House, within a strict 15-day time frame and now on Companies House I can see my legal documents truly representing the values and purpose of my business, one that helps transform the economic system into a more inclusive, equitable and regenerative system that results in a material positive impact on society and the environment. It was a bit of a headache. How great would it be if next year’s cohort of business start-ups encountered a default and standard Articles of Association that automatically enrolled them in a new, better business model.

If you’re interested in finding out more about the Better Business Act, the campaign is celebrating Better Business Day 2024 on Thursday 16th May and you can find out more on their website.

1 NatWest and Beauhurst’s New Startup Index 2023

2 Better Business Act

3 Think Tank Demos research – The Purpose Dividend – Nov 2023