Limited liability partnerships could become a reality for UK accountancy firms by next summer following government draft legislation released last week.
The long-awaited Department of Trade and Industry’s LLP bill will limit the losses of innocent partners to their financial stake in the firm.
The move, part of a major shake-up of the accountancy profession, was welcomed by leading accountants and finance directors, with 59% of FDs backing the reform in this week’s Big Question survey.
Trade secretary Peter Mandelson also outlined the government’s plans for independent regulation of the profession, but stepped back from a fundamental review of the law of joint and several liability. Instead, he said the matter would be covered by the ongoing company law review.
Under the government’s proposals, which closely mirror the profession’s, a series of independent bodies will be created to monitor accountants’ ‘public interest’ activities.
A revamped Auditing Practices Board will operate alongside an Ethics Standards Board. Both will be overseen by a review board, while an independent Foundation – funded by a ‘no-strings’ endowment from the professional bodies – will make board appointments. At least 60% of the boards’ membership will consist of independents, representing consumers and the public interest.
LLPs, which firms are expected to rapidly adopt, will operate as professional partnerships, but will be forced to disclose plc-style accounts and introduce appropriate insolvency arrangements. A clawback measure has been included to ensure a partnership’s assets cannot be distributed if insolvency is looming.
KPMG partner Sue Chisman said firms must consider the impact on staff and clients of profit-share knowledge. Christopher Pearce, chairman of the FD 100 Group and Rentokil Initial’s FD, said: ‘LLPs must be coupled with proper financial disclosure provided in the proposed legislation.’
English ICA president Chris Swinson, who led the profession’s regulatory review, welcomed the consultation document. ‘I’m pleased we put up something the government felt able to go with. It says a profession that thinks hard about its professional duty will be taken seriously.’
Swinson said a 50:50 split of independents to accountants would be more appropriate to avoid ‘nervousness’ of where ethical standards will go.
The second largest improvement in ‘significant’ levels of financial distress since the EU Referendum was in professional services, found research from Begbies Traynor
Just one half of UK practices have implemented a pricing structure around auto enrolment implementation and advice - with many suffering increased costs
Deloitte's north-west Europe foray; BDO, Smith & Williamson investment paths; Shelley Stock Hutter; and Wilkins Kennedy discussed by editor Kevin Reed on our Friday Afternoon Live broadcast
Accountants should alter their perspective on auto-enrolment to maximise business opportunities, according to Eric Clapton.