3rd May 2006
Generally the ACT welcomes the overall tone and direction of the package of measures announced by the DTI on 3 May 2006.
Our Association has been a long standing supporter of good narrative reporting as a means to provide shareholders with a balanced explanation of the company’s business, its development and prospects. In particular the new encouragement of a forward looking element giving the management’s perspective is most valuable. Our concern has been that any willingness to be open on thoughts about the future was bound to be constrained by the greater risk of being held culpable for statements that turned out to be wrong with the benefit of hindsight.
Indeed, widespread comments on the risks of future looking statements have drawn attention to risks in narrative reporting generally. This means that without some specific encouragement, from clarification of the limited nature of liability for narrative statements, even current/backward looking discussion is likely to be subject to more conservative review.
We have been concerned that the mandatory or voluntary OFR , and now the Business Review may:
Accordingly we have been very keen to have some form of protection granted to directors for statements honestly made, in good faith and not recklessly.
