New UK corporate governance law receive Royal Assent

The UK’s Companies (Audit, Investigations and Community Enterprise) Bill has received Royal Assent and will help protect Britain against Enron style corporate scandals - as well as creating a new type of company specifically designed for social enterprises.

The act implements safeguards recommended by post-Enron/WorldCom reviews. In particular it strengthens the independent regulation of the audit profession and the enforcement of company accounting requirements, both concerns highlighted by the Enron and WorldCom scandals. It gives auditors greater powers to get the information they need to do a proper job, and increases company investigators' powers to uncover misconduct.

Trade and Industry Minister Jacqui Smith said:
"The UK has one of the best systems of corporate governance in the world. This Act contributes to a comprehensive package of measures aimed at strengthening investor confidence in corporate governance, company accounting and auditing practices here in Britain.

"This is another key milestone on the journey to create the very best framework for thriving, competitive and responsible businesses. There is still much to do.

"One of the next steps will be to introduce a new Operating and Financial Review for quoted companies which will provide investors with new and more meaningful information about companies' business opportunities, risks and future prospects. We then intend to publish for consultation draft clauses implementing the wide-ranging Company Law Review, the biggest overhaul of company law in a century.

"Together these measures will ensure that our system of corporate law and governance reflects the reality and needs of our modern economy."

The act will improve the reliability of financial reporting and the independence of auditors and auditor regulation by:
* Requiring directors to make a statement in the directors' report about the disclosure of relevant information to their auditors;
* Giving the Government the power to require large and quoted companies to publish details of non-audit services provided by their auditors;
* Requiring the professional accountancy bodies that supervise auditors to sign up to independent auditing standards, monitoring and disciplinary procedures;
* Strengthening the role of the Financial Reporting Review Panel (FRRP) in enforcing good accounting and reporting, by giving it new powers to require documents and broadening its scope;
* Allowing the Inland Revenue to pass information about suspect accounts to the FRRP.

The act also strengthens company investigations by:
* Improving investigators' access to relevant information;
* Reducing the possibility of delay or obstruction by companies under investigation;
* Removing a possible deterrent to individuals volunteering information when complaints are vetted for possible investigation;
* Introducing more effective sanctions.

•Date: 2nd Nov 2004 • Region: UK •Type: Article •Topic: BC general
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