The Companies Act Changes When Employees Become 'the Workforce'

Posted on Jul 23, 2021. by NTI

Rather unusually we are opening this bulletin with a testette. What do you know about section 172 of the Companies Act 2006 (no cheating)?

That's right, it is the epicentre of that statute, describing as it does the relationship a director has with the company, its creditors and members. Any CPI, CII or Joint Board student worth their salt will know that it forms the mainstay of the definition of a director's fiduciary duty, and pretty much guarantees them a minimum of two marks in any professional insolvency exam they may be taking in the next 12 months or so.

It's odd, isn't it, what people get worked up about? We saw Dominic Cummings getting really ruffled about all sorts of things when being interviewed by the miserable Laura Kuenssberg on the BBC this week, most of which he had clearly made up to deflect from his equally miserable dentistry. Then there are what we now need to refer to as 'woke people', when before we simply called them 'the bored and testy', getting agitated about the new emoji depicting a pregnant man that is something to do with being non-gender specific and carrying a human foetus, which someone should explain to people with wombs.

The Better Business Act campaign doesn't have time to get aeriated about the above, they are far too busy wanting to change section 172, and are joined in the holding of that placard by the Institute of Directors. It is true that there is a very woolly definition within the section; it suggests that, when considering what directors should and should not do, shareholders come first. What we all need is a legal obligation putting social, environmental and shareholder interests on an equal footing.

Do you remember that section 172, like the rest of the Companies Act, refers to the “interests of the company’s employees”? Well, contractors, the self-employed, freelancers, seasonal workers, even zero-hours workers are up in arms about that.

"What about us?" they scream, in an exact paraody of some Michael Jackson song.

The Trades Union Congress is coming to their rescue. They have requested the Government to replace the word 'employees' with 'the workforce' throughout the 2006 statute and it looks like the Government is listening (as it is clearly the most important thing on their minds at the moment). Apparently, one argument in favour of change is in support of investors, who want a more complete picture of who is contributing to a company’s success and how they are treated. We in the NTI newsroom don't think they really care, but are not prepared to argue any more with angry, unreasonable people.

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