As predicted by Accountancy Age, the Company Law Review steering group has recommended in its final report the abolition of the annual statutory audit for companies with a turnover of less than £4.8m, a balance sheet of no more than £2.4m and no more than 50 employees.
Presented this morning and ending three years’ consultation, the final report on the company Law review has recommended a plethora of changes that is intended to lift the weight of legislation on small privately managed companies.
Upbeat about the proposals, trade and industry secretary Patricia Hewitt said: ‘British company law used to be the best in the world. It is not anymore.
‘This is our opportunity to bring company law from the 19th century to the 21st and to give Britain the best regime of company law in the world.’
She praised the steering group that led the review for its emphasis on small businesses.
‘Ninety per cent of UK companies have fewer than 50 employees. Most of the one and a half million registered at Companies House are small companies with only one or two shareholders. They find themselves caught up in the jungle of company law. They bear unnecessary costs in order to comply with the company law regime. We want to make it easier for them to do business in the UK,’ said Hewitt.
Other recommendations include the simplification of the format for small company accounts though companies should no longer be able to file abbreviated accounts. The time limit for filing of accounts should be shortened from ten months to seven after the financial year-end.
Small companies should no longer hold agms or lay accounts in general meetings or appoint a company secretary, suggested the steering group which was headed by Jonathan Rickford, company law review project director. Other members of the group included Sir Bryan Carsberg, former secretary general of the International Accounting Standards Board, Rosemary Radcliffe, chief economist at PricewaterhouseCoopers and Richard Sykes QC, chairman of the Financial Reporting Review Panel.
Rosemary Radcliffe, said: ‘The three main strands to our recommendations are the major reshaping of the law, providing a legal framework for all companies whatever their size and ensuring the law can remain up-to-date and responsive to changes.
‘One per cent of all companies are public companies. Only a fraction of those are listed. There was much irrelevant obstruction to small companies. We aimed to simplify the law for small companies.’
Proposals to ensure a form of assurance remains for those companies to be exempt from the annual audit have been retained, said Sir Bryan. But the steering group is awaiting the results from field tests on the independent professional review, or IPR, conducted by the Auditing Practices Board.Sir Bryan said: ‘It [the IPR] hasn’t been dropped. There is not enough evidence yet to base our decisions on.’
Hewitt added: ‘The government will move forward on an evidence-based policy.’
The next stage for company law proposals will be publication of a government bill, said Hewitt, when it will be subject to parliamentary and further public scrutiny before ultimately leading to legislation.
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