PracticeConsultingCharles Monaghan – Focus needed as time ticks by

Charles Monaghan - Focus needed as time ticks by

The president of the Scots ICA raises some important questions for the DTI's company law review

The trade department’s review of company law has absorbed much quality time and effort from the DTI and others. It has also yielded a great deal of quality analysis. But recent press articles cast serious doubts about whether this important process will come to fruition.

The Companies Bill is not intended to be tabled until after the next election. It is not clear what other legislation will be vying for attention, but there will undoubtedly be pressure on parliamentary time. If it is unlikely that sufficient time will be available, it would be better to select a number of key issues to take forward.

The current scope of the review is very broad, and the efforts of those involved are in danger of being dissipated across too wide an area.

There are also a number of fundamental issues that need to be addressed first to form the bedrock on which any other, more specific, areas should be built. If such issues are not grasped now, this will create uncertainty and extra work for the DTI working groups.

Such issues could include whether company law should be based on ‘enlightened shareholder value’ or on a ‘pluralist’ approach. In my opinion, on the assumption that companies obey general laws on the environment, employment and so on, the enlightened shareholder value approach is more practical.

While the pluralist approach may be pleasing in theory, it is not clear that directors have a mandate to make decisions where the interests of different stakeholders conflict.

In addition, a logical framework for defining the roles and responsibilities of executives, non-executives, company secretaries and auditors should be developed. The key would be that all parties should carry real responsibility for the discharge of their duties. That would require the introduction of compulsory directors’ indemnity insurance, levelling the playing field between directors’ and auditors’ responsibilities.

Given the time pressure, it will be helpful to take decisions on such fundamental matters early and to tailor the company law reform project to the parliamentary time available.

Related Articles

5 tips for SMEs to protect cash flow

Accounting Software 5 tips for SMEs to protect cash flow

5m Alia Shoaib, Reporter
Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

Consulting Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

11m Stephanie Wix, Writer
Managing partner Q&A - the year ahead: Richard Toone, CVR Global

Accounting Firms Managing partner Q&A - the year ahead: Richard Toone, CVR Global

12m Kevin Reed, Writer
Deloitte 'self-imposes exile' on government contracts to defuse PM row

Accounting Firms Deloitte 'self-imposes exile' on government contracts to defuse PM row

12m Kevin Reed, Writer
Managing partner Q&A - the year ahead: Julie Adams, Menzies

Accounting Firms Managing partner Q&A - the year ahead: Julie Adams, Menzies

12m Kevin Reed, Writer
Friday Afternoon Live: Deloitte's tech thing; PAC wants HMRC 'contingencies'; and Sports Direct

Business Regulation Friday Afternoon Live: Deloitte's tech thing; PAC wants HMRC 'contingencies'; and Sports Direct

1y Kevin Reed, Writer
Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes

Audit Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes

1y Kevin Reed, Writer
New head of equity capital markets for KPMG

Accounting Firms New head of equity capital markets for KPMG

1y Stephanie Wix, Writer