Tories promise to scrap compulsory OFRs

The Conservatives have promised an incoming Tory government would to scrap compulsory OFRs. The pledge is contained in a de-regulation package in their Manifesto for Business.

Link: Business at heart of Tories’ election manifesto

Shadow Industry Secretary Stephen O’Brien said the Tories were opposed to ‘a compulsory measure that would increase liabilities, reduce entrepreneurship and slow economic growth’.

Mr O’Brien said: ‘it is the job of directors to focus on the risks and “downsides” of business decisions. But the broad and forward-looking requirements of the OFR will drive directors in an overly risk-averse direction.’

He added: ‘If a Conservative Government decides to retain the OFR, therefore, it will be on a voluntary basis.’

The decision follows the EU Modernisation Directive, which requires directors of large and medium-sized companies to provide an annual ‘fair review’ of the principal risks facing their businesses, including key performance indicators.

The requirements are similar, but less stringent, to those of the Government’s for all quoted companies to produce an Operating and Financial Review (OFR) alongside their annual accounts and reports.

Rather than opting for minimal regulation of quoted companies in the UK by only implementing the provisions of the Modernisation Directive, Labour has decided to combine the Directive’s requirements along with a statutory OFR.

During the public consultation on the draft OFR regulations, businesses expressed a strong preference for the introduction of a statutory ‘safe harbour’ provision for forward-looking statements in the OFR, as exists in the United States.

Nevertheless, instead of abolishing the forward-looking information requirement, the Government responded that it ‘does not believe that a safe harbour provision is appropriate in UK company law’.

The Government therefore intends to drive up the compliance costs by one third to introduce additional requirements that will increase directors’ liability and exacerbate blame and claim.

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