Bill delays could derail liability changes

Auditors’ hopes for a limit to liabilities could be hit by delays after the
company law reform bill met with opposition on several new fronts as it races to
gain royal assent before parliament’s summer recess.

The bill reached its crucial second reading in the House of Commons on
Tuesday and now enters the committee phase. But while general consensus had been
reached over clauses relating to auditor’s liability and responsibilities,
trouble is brewing over other parts of the bill.

There is stiff opposition from the City to the requirement for fund managers
to disclose their votes at company meetings, while hundreds of MPs have given
their support to more stringent requirements on narrative reporting.

The bill is on a tight schedule that will only see it become law in the
autumn. Any major changes to the content of the bill would require it to be
shunted back to the House of Lords. A DTI spokeswoman said such a move would
make it difficult to get the bill through before parliament ended, potentially
causing it to fall and forcing the whole process to start again in the new
parliament.

Potential delays to the bill’s progress have arisen as fund managers, such as
the Association of British Insurers which also kicked up a fuss over the
liability issue, fought to keep their voting secret at company meetings.

They reject DTI secretary Alistair Darling’s argument that to leave the
clause out ‘would signal indifference to transparency and openness and therefore
accountability’.

Investors believe such a measure will be counterproductive and far more
costly to implement than has been estimated.

At the same time, environmental lobby group Friends of the Earth has gathered
the support of more than 200 MPs to push for changes to the business review. It
is demanding that the review has a mandatory reporting standard and for an extra
level of auditing initially provided in the operating and financial review.