Year 2000 - Bug poses threat to buy-outs
Year-2000 computer problems could scupper management buy-outs in the current financial year, the Auditing Practices Board warned this week.
The potential roadblock was identified in a new APB guide issued this week on the Millennium Bug’s impact on ‘financial assistance transactions’ such as buy-outs and share buy-backs.
Section 156 of the Companies Act stipulates that directors’ opinions on solvency and cash flow forecasts in documents supporting such transactions cannot be qualified by auditors.
The APB guide was produced in around six weeks by a working party led by KPMG audit partner John Kellas.
‘The issue came to a head before Christmas as people saw that the 12-month look-ahead would cross into the year 2000. Both accountants and the British Venture Capital Association expressed concern,’ said Kellas.
The worry for auditors was that if they signed such declarations from companies that later could not settle debts because of year-2000 computer blips, they could be sued.
Year-2000 problems are the directors’ responsibility, said the APB, but auditors should judge whether there is a reasonable basis for the directors’ statements.