BusinessCompany NewsEU directive puts pressure on directors

EU directive puts pressure on directors

An EU directive, set to be introduced in the middle of 2006, will see company directors facing the risk of lawsuits from shareholders across Europe if they accidentally omit important information from annual reports.

Link: EU-wide recognition for ‘accountant’ qualification

Known as the Transparency Directive, it will enable shareholders to sue if they lose money as a result of misinformation in the annual report.

It will mean a massive extension of directors’ liability in the UK – under English law, although directors can be sued over errors in their company prospectus, they cannot be sued over their annual report.

Companies will be forced to conduct due diligence and run extensive checks of their annual reports.

The directive will affect all listed companies.

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