BusinessCorporate FinanceCourt threat over directors’ reports

Court threat over directors' reports

Company directors could face court action if annual reports fail to tally with the accounts, under new rules over directors' statements

The Financial Reporting
and Review Panel
will now have the power to examine directors’ reports, it
said this week.

The watchdog will also look at whether the information in the business review
is consistent with that disclosed in the company’s other announcements and
whether the business review is balanced in dealing ‘even-handedly’ with the
positive and negative aspects of the development, performance and position of
the business.

The panel selects around 300 accounts to look at in detail each year, using
tip-offs, media reports and other pro-active methods.

‘We will not name companies but where there is a correction to accounts, we
may publish a specific press notice,’ said Bill Knight, the chairman of the
panel.

He said instances of directors reporting inaccurate facts, failing to give a
balanced assessment of the company’s position as well as a failure to comply
with statutory requirements, could result in action from the FRRP.

‘But normally we don’t have to go to court because we solve issues by
agreements and companies agree to make the changes,’ he said.

The panel’s recommendations to companies are often followed to the letter.
Last year a probe it conducted resulted in the dismissal of struggling music
company Sanctuary’s chief executive Andy Taylor.

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