Deloitte, the Business advisory firm, welcomes the Company Law Reform Bill put before parliament today as a move to enhance the competitiveness of the UK.

Commenting on the Bill, Martyn Jones, Deloitte audit partner said: “We particularly support the Bill’s deregulatory measures and moves to create a more modern business environment that fosters entrepreneurship.  The UK economy will be enhanced if Britain becomes a more attractive place to incorporate.

“By including a reform power to update and amend company law faster, but with rigorous consultation and Parliamentary scrutiny, we can expect greater flexibility in company law when responding to change in the future.

“We support the Bill’s proposals to require directors only to approve annual accounts if they are satisfied that they give a ‘true and fair view’.  Maintaining the concept of ‘true and fair’ is an important factor in retaining investor confidence during the move to IFRS as the IFRS requirement to ‘present fairly’ has been interpreted by some as a lesser criterion which is unnecessarily rules-based.”

Deloitte did however reiterate its concerns that the current law on private company dividends is overly restrictive and maintains its recommendation for the Bill to bring in a distribution regime based on the new codification of directors’ duties.

Martyn Jones also raised some concern that the Government is attempting to implement the EU 8th Company Law Directive measures relating to auditors too early through the clauses on auditor regulation proposed in this Bill, commenting: “There is currently a lack of clarity about how the new regulatory regime for auditors under the EU 8th Directive might work consistently across Europe.  We need such clarity before measures for auditors are put in to UK statute.  A ‘wait and see’ approach would be better for Britain in the longer term.” 

In relation to the Bill’s proposals to limit auditor liability, Martyn Jones commented: “We are pleased that the Government is taking this issue forward.”

“A provision in the Bill relating to auditor resignation is designed to deter abuse of the process by auditors. However, this is not shown by recent case law to be the problem and we would like to see this changed to make it easier for auditors to communicate effectively as appropriate when they resign.

“We are also concerned that new provisions relating to a ‘knowingly or recklessly’ test for certain offences may mean that directors and auditors that make wrong judgements without attempting to deceive may be caught by a criminal offence.”