Mar 31 2005
‘Not as tough as Sarbanes-Oxley but a step in that direction’ is the overriding message on UK company law in Deloitte’s latest Corporate Governance Update. Reacting to the recent publication of the Company Law Reform White Paper, the Update warns of tougher penalties for accounting offences and liability for legislation breaches extending beyond directors and company secretaries.

Deloitte Audit Partner Martyn Jones said: “The Government has taken a lead from the US in deterring corporate misconduct although the measures outlined in the White Paper are not as severe as Sarbanes-Oxley legislation.

“The consultation period is an opportunity for directors to shape a new framework of company law which is relevant to business needs. Giving input to the regulatory impact assessment on the costs and benefits of implementing the Government’s proposals will help ensure the new law supports the UK’s competitive position internationally.”

Key proposals outlined in the White Paper include:

* Managers and delegates to be held liable for legislation breaches in addition to directors and company secretaries.

* A new offence for knowingly or recklessly delivering misleading, false, or deceptive information to registrars.

* Penalty of seven year prison sentence, a fine, or both for defective accounts (this currently stands at a maximum of two years).

* Seven year prison sentence for dishonestly failing to keep accounting records.

* An increase from seven to ten year prison sentence for fraudulent trading.

* Introduction of a statutory statement summarising directors’ duties and demonstrating their performance.

* Clarifying director’s general duties in areas of conflict of interest.

* Removing the legal requirement for a company secretary for private companies (although the existing tasks performed by company secretaries will remain along with some addition duties).

In addition to company law reform, the Deloitte guide examines the possible impact of the DTI consultation on extending the use of summary financial statements and consultative documents on European Company Law and Corporate Governance on UK companies.

The Deloitte guide can be viewed in full at www.deloitte.com