A blog by Martin Williams, external affairs spokesman of Graydon UK, focusing on business risks - from fraud to late payment. Martin has has spent the last 35 years in the credit information industry, and has been with Graydon UK, one of the top five commercial credit agencies in the UK, for the last 20. Apart from his PR duties, he teaches credit analysis to risk professionals and helps educate SMEs on the importance of maintaining a good credit rating. Martin is a Fellow of the Institute of Credit Management and is a sitting member of the Institute's Think Tank. He was also honoured by Credit Today, after being included on their Credit 100 list of people who have had the greatest impact in the credit industry during 2008, 2009 and 2010.
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03 Mar 2009
The European Parliament and Council of ministers are now considering whether to pass new EU law abolishing the need for businesses under 1 million euro turnover to file accounts at official registries. According to Internal market and Services Commissioner Charlie McCreevy, this would relieve microbusinesses of administrative burden in tough economic times.
If this became law in member states like the UK, I reckon this could lead to a stampede of private businesses (sole traders, partnerships etc) registering as incorporated companies at the CRO.Why? Well, private businesses have traditionally stayed private in the past because they didn't want to reveal their financial positions to all and sundry at Companies House. The downside of remaining private is that business owners have unlimited liability for debts. Under the proposed new law, small businesses will be able to register as limited liability companies, and still not reveal their accounts if their turnover is under 1 million euros per annum. I'd say that would be a pretty attractive proposition! Whoever said small is beautiful may well have been right!
Visitor comments
Limited liability and public disclosure go hand-in-hand. This is the bargain between companies and society. It is fundamental and scale is irrelevant.
How can you have limited liability to persons who are not supplied with information to make informed decisions?
Will they still need to produce statutory accounts? If so, abbreviating them is done via a click of the computer mouse. Even if these companies are not legally required to produce statutory accounts, any substantial lender (or non-close company) is still highly likely to require them.
The move surely shifts the balance in favour of those who would utilise the limited liability for nefarious purposes while offering limited advantage to bona fide businesses.
Posted by: Dave , 04 Mar 2009
All good points Dave.
I reckon this subject is going to get a lot of attention in the next few weeks. I'm putting out a press release about it tomorrow, and Philip king, Director General of the institute of credit management is quoted in it sharing our views.
Posted by: martin williams , 04 Mar 2009
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