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More regulation or deregulation? ...whichever your viewpoint, there are some interesting changes.

A number of regulatory changes are to come into effect on the back of Companies Act 2006. The most interesting issues, that are being implemented with effect this month, are outlined below.

  • Directors’ duties are in statute now

If you are a company director you will need to know and adhere to your obligations under company law. Previously a recommended practice, your obligations to prepare financial statements, safeguard assets, implement controls etc are now part of the law! Of course you are likely to undertake these as part of your day to day running of the company, but you should be aware of the change in status of these obligations.

  • No need for company AGM’s (part 13)

There is no longer a legal requirement for private companies to hold an AGM. For most owner managed business this is a welcome move, the benefits rarely exceed the costs. However note that 10% (5% in some circumstances) of the shareholders can demand an AGM. As a result of no longer requiring an audit, there are a few ‘knock on changes such as the automatic re-appointment of auditors in private companies.

  • The business review (S417)

Of late the ASB has encouraged a more ‘chatty’ approach to the Business review in the directors’ report, emphasising more commentary on non financial factors, including KPIs, internal management processes, and industry performance (small entities are exempt). The ASB have further iterated the importance of the business review, and the director’s accountability to the company’s shareholders. There is a reluctance for directors to get too ‘close and personal’ with the Business review, as they are ever cautious about divulging information in an increasingly competitive business environment. The key is balance… the business review needs to meet its objective of informing the readers of the annual accounts, of the financial performance and position of the company. Despite the reluctance of many directors, you must remember you are not the only one out there facing the same dilemma!

For more information on the new companies act 2006, follow the links below…

http://www.berr.gov.uk/bbf/co-act-2006/index.html

ICAEW

alternatively please feel free to contact us directly.

 

 

 

Date: 14th October, 2007
Author: Gary Farnes

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