Generally we welcome the proposals for the updating of company law - which is much needed. However, we have reservations on some points:
We believe that the privilege of limited liability is fundamental to commerce’s flourishing, but that it means that the position of creditors must be a factor to be taken into account by directors both in policy making and in making disclosures.
We believe the proposed abolition of the corporate director to be an error, affecting both occupational pension funds and corporate finance structures. We suggest other ways of dealing with the issues.
We believe that certain conditions should be met before liability to criminal sanction may be extended
1. Consideration of risk in the company in the OFR
We believe that directors should explicitly consider in the OFR the risk exposure of the company not just from the individual factors they discuss but, more importantly, looking at the overall situation.
2. Omission of material factors from the OFR on grounds of commercial sensitivity
We believe that this should be available to directors, but subject to disclosure that something has been withheld – the consequences of which would greatly limit the use mad of the exemption.
3. “Safe harbour”
As regards forward looking material in the OFR, we believe that protection for reasonable, good faith, matter is essential if these areas of the OFR are not to be reduced to a blandness which makes them of no use at all.
We believe that removal of the requirement for a company secretary in private companies should be reconsidered.
As the Accounting Standards Board is developed into the Standards Board, we believe that the opportunity should be taken to review its funding and composition.
