BusinessCompany NewsFRS 17 could lead to lawsuits

FRS 17 could lead to lawsuits

Company directors could face lawsuits running into the millons, due to the impact of the new pensions accounting standard - FRS 17 - on company reserves, warns KPMG's legal arm.

KLegal warns directors, still running final salary pensions schemes, that FRS 17 could lead to unlawful distributions to shareholders, even if a scheme shows a surplus.

Sharene Tan, senior solicitor in KLegal, KPMG’s associated law firm, said: ‘It is not widely recognised that companies which have recorded pension surpluses could still have insufficient distributable profits to pay dividends or return shareholders’ funds lawfully.’

Tan urged directors to examine the potential impact of FRS 17 on their individual company accounts to avoid unlawful distributions or unlawful reductions of capital.

‘Apart from the embarrassment, directors could be held personally liable to claims of millions of pounds if they are negligent or otherwise breach their duties about this,’ said Tan.

Ian Sykes, director of KPMG pensions, recommended directors move to distinguish between a pension asset and liability and the impact of that asset or liability on the company’s reserves.

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