Clause aims to tackle audit liability limits

Attorney general Lord Goldsmith said ministers had reacted to the threat by
adding a new clause to the company law reform bill giving the trade secretary
power to make regulations about how limited liability agreements are expressed.

Speaking during a Lords debate on the bill, he said the clause had been
introduced to meet warnings from mid-tier firms that there was a risk of
liability limitations developing in a way that would damage competition in the
audit market.

He said ministers did not believe limited liability agreements would have
that effect but thought it prudent to take the power so as to be able to respond
to ‘any problems’.

Other amendments removed confusion over whether auditors would be forced to
negotiate a monetary cap, rather than proportionate liability. Trade minister
Margaret Hodge now has the job of seeing the companies bill through its final
stages and is expected to use it in part to address competition issues.

Baroness Noakes, a member of the Lords and a former ICAEW president,
described the latest moves as the government acting ‘in a positive and
constructive way’.

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