Corporate Reporting and Company Law (Cambridge Studies in Corporate Law, Series Number 5)

The Importance Of Disclosure As A Regulatory Device In Company Law Is Widely Recognized. This Book Explores The Disclosure Requirements Of Companies In Their Reporting Activities, And Seeks To Bring Together The Main Features Of The Reporting System. The Book Considers The Theoretical Basis Of The Corporate Reporting System And Describes The Regulatory Framework For That System. It Explores Financial Reporting And 'narrative' Reporting, Highlighting The Fact That Financial Reporting Requirements Are More Substantially Developed Than Narrative Reporting Requirements - A Consequence Of The Shareholder-centred Vision That Persists In Company Law. The Roles Of Those Responsible For Providing Corporate Reports And Those Entitled To Receive Such Information Are Examined. The Book Concludes With Some Broad Suggestions For Future Development, With Particular Focus On The Need To Recognize The Relevance Of The Communicative Role Of Corporate Reporting. The Use Of New Technology Also Presents Both Challenges And Opportunities For Improving The Regime. Part I. General Issues -- Pt. Ii. Financial Reporting -- Pt. Iii. Narrative Reporting -- Pt. Iv. A Way Forward Charlotte Villiers. Includes Bibliographical References (p. 311-324) And Index. Cover 1 Half-title 3 Series-title 4 Title 5 Copyright 6 Dedication 7 Contents 9 Preface 13 Stop press 15 Table of legislation 17 Table of cases 21 Introduction 23 Part I General issues 33 1 Disclosure theory and the limitations of corporate reports 35 Introduction 35 Summary of the disclosure system in English Company Law 35 Is a mandatory corporate disclosure system necessary? 38 Incorporation and limited liability 38 Prevention of fraud 39 Investor protection 41 Accountability 43 Corporate democracy 45 Efficiency 47 Standardisation of information 51 Alternative to regulatory intervention 51 Disclosure and the public interest 52 Criticisms of corporate information and disclosure 55 Why do these problems exist with company reports? 57 Conclusion 58 2 The regulatory framework 59 Introduction 59 Legislative requirements 61 Non-statutory mandatory requirements 64 Non-mandatory provisions 72 Conclusion 74 3 Persons responsible for presenting corporate reports and information 75 Introduction 75 Those who provide the information: the company secretary and the directors 76 The company secretary 76 Directors 79 Statutory provisions relating to the role of directors in company reporting and disclosure 80 The gatekeepers: non-executive directors and auditors 90 Non-executive directors 90 Auditors 95 Making the audit effective 101 Conclusion 105 4 Users of corporate reports 107 Different potential recipients of company information 108 Equity investors 109 Loan creditors 110 Business contacts 110 Analysts 111 Employees 111 Competitors 111 Government and related agencies 112 The public 112 The predicament involved in recognising a variety of users 113 Possible theoretical and legal models for the company 114 Competing or companion claims to information? 120 Conclusion 125 5 The Companies Register 127 The role of Companies House 127 Information required by Companies House when a company is formed 128 Information required to be sent to the registrar during a company’s life 130 Documents to be delivered to the registrar upon the company’s liquidation or insolvency 133 Information relating to oversea companies 135 The importance of the companies registrar for disclosure 136 Modernising the First Company Law Directive 139 European and international developments on the role of the Companies Registrar 141 Conclusion 142 Part II Financial reporting 145 6 Financial reporting 147 Introduction 147 Statutory reporting requirements 147 Duty to keep accounting records 147 Accounting reference period and accounting reference date 149 Duty to prepare accounts 149 Laying and delivering of accounts and reports 150 Form and content of the accounts 153 The directors’ report 155 The directors’ remuneration report 157 The auditors’ report 157 Recognition of the needs of small companies 158 Professional standards 159 The ASB’s Statement of Principles for Financial Reporting 160 Creating accounting standards 162 Legal status of accounting standards 163 The relevance of the true and fair view override 164 Characteristics of annual financial reports 166 What explains the apparent failure of financial reports to meet their users’ needs? 170 What makes financial information useful? 174 What are the main features of each of the qualities of usefulness? 176 Conclusion 180 7 International aspects of financial reporting 183 Introduction 183 The development of an international financial reporting regime 183 European steps towards international standards 185 The new accounting legislation 188 The Regulation 189 The Modernising Directive 189 The new accounting regime 190 A two-tier accounting system 190 Priority to International Accounting Standards 190 Mandatory standards 190 Importance of committees in the endorsement process 191 Role of the IASB 194 International Financial Reporting Standards 195 Implementation 198 US standards come closer 198 Conclusion 199 8 Disclosure in securities markets regulation 201 Introduction 201 Reasons for mandatory disclosure in the securities markets 202 Disclosure requirements in the securities market in the UK 203 Mutual recognition provisions 207 Developments under the European Financial Services Action Plan 1999 207 The Prospectus Directive 210 The Market Abuse Directive 211 The Transparency Directive 211 The Directive on Markets and Financial Instruments 213 The UK authorities’ response 214 Remedies for false or misleading information 217 Conclusion 221 Part III Narrative reporting 225 9 The Operating and Financial Review 227 Introduction 227 Development of the new statutory OFR 228 Policy and theoretical basis for the OFR 230 Regulatory structure 231 Principles of the OFR 232 Contents of the OFR 232 Confidentiality 237 Impact of the OFR requirements on directors’ duties 238 Directors’ liability 241 What would the OFR have meant for the role of the auditor? 243 Users 245 Enforcement of the OFR requirements 247 Conclusion 248 10 Social and environmental reporting 250 Introduction 250 Definitions 252 What are the objectives of social and environmental reporting and accounting? 254 Regulatory approaches to social and environmental reporting 256 The UK 256 EC law 259 International standards and programmes 263 Features of environmental and social reporting 266 Features of environmental reports 266 Features of social reports 266 Features of sustainability reports 267 Poor quality of reporting 267 The voluntary framework 269 Should social and environmental reporting be linked to financial measures? 273 Role of auditors in social and environmental reporting 275 Sustainability reporting 279 Conclusion 282 11 Corporate reporting and employees 284 Introduction 284 Human capital reporting 286 What is human capital? 286 Why has human capital reporting not developed in the same way as financial reporting? 288 What are the features of human capital reporting? 291 What are the potential benefits of human capital reporting? 293 What are the potential limits of human capital reporting? 297 Other jurisdictions 300 What is the appropriate way forward? 303 Employee involvement in corporate decision-making 308 Conclusion 312 Part IV A way forward 315 12 Conclusions – rethinking the disclosure agenda 317 Introduction 317 A communicative approach 319 The process of communication 323 Organisational structure 328 Organising the stakeholders 330 Electronic communication 331 Bibliography 333 Index 347 Cover......Page 1 Half-title......Page 3 Series-title......Page 4 Title......Page 5 Copyright......Page 6 Dedication......Page 7 Contents......Page 9 Preface......Page 13 Stop press......Page 15 Table of legislation......Page 17 Table of cases......Page 21 Introduction......Page 23 Part I General issues......Page 33 Summary of the disclosure system in English Company Law......Page 35 Incorporation and limited liability......Page 38 Prevention of fraud......Page 39 Investor protection......Page 41 Accountability......Page 43 Corporate democracy......Page 45 Efficiency......Page 47 Alternative to regulatory intervention......Page 51 Disclosure and the public interest......Page 52 Criticisms of corporate information and disclosure......Page 55 Why do these problems exist with company reports?......Page 57 Conclusion......Page 58 Introduction......Page 59 Legislative requirements......Page 61 Non-statutory mandatory requirements......Page 64 Non-mandatory provisions......Page 72 Conclusion......Page 74 Introduction......Page 75 The company secretary......Page 76 Directors......Page 79 Statutory provisions relating to the role of directors in company reporting and disclosure......Page 80 Non-executive directors......Page 90 Auditors......Page 95 Making the audit effective......Page 101 Conclusion......Page 105 4 Users of corporate reports......Page 107 Different potential recipients of company information......Page 108 Equity investors......Page 109 Business contacts......Page 110 Competitors......Page 111 The public......Page 112 The predicament involved in recognising a variety of users......Page 113 Possible theoretical and legal models for the company......Page 114 Competing or companion claims to information?......Page 120 Conclusion......Page 125 The role of Companies House......Page 127 Information required by Companies House when a company is formed......Page 128 Information required to be sent to the registrar during a company’s life......Page 130 Documents to be delivered to the registrar upon the company’s liquidation or insolvency......Page 133 Information relating to oversea companies......Page 135 The importance of the companies registrar for disclosure......Page 136 Modernising the First Company Law Directive......Page 139 European and international developments on the role of the Companies Registrar......Page 141 Conclusion......Page 142 Part II Financial reporting......Page 145 Duty to keep accounting records......Page 147 Duty to prepare accounts......Page 149 Laying and delivering of accounts and reports......Page 150 Form and content of the accounts......Page 153 The directors’ report......Page 155 The auditors’ report......Page 157 Recognition of the needs of small companies......Page 158 Professional standards......Page 159 The ASB’s Statement of Principles for Financial Reporting......Page 160 Creating accounting standards......Page 162 Legal status of accounting standards......Page 163 The relevance of the true and fair view override......Page 164 Characteristics of annual financial reports......Page 166 What explains the apparent failure of financial reports to meet their users’ needs?......Page 170 What makes financial information useful?......Page 174 What are the main features of each of the qualities of usefulness?......Page 176 Conclusion......Page 180 The development of an international financial reporting regime......Page 183 European steps towards international standards......Page 185 The new accounting legislation......Page 188 The Modernising Directive......Page 189 Mandatory standards......Page 190 Importance of committees in the endorsement process......Page 191 Role of the IASB......Page 194 International Financial Reporting Standards......Page 195 US standards come closer......Page 198 Conclusion......Page 199 Introduction......Page 201 Reasons for mandatory disclosure in the securities markets......Page 202 Disclosure requirements in the securities market in the UK......Page 203 Developments under the European Financial Services Action Plan 1999......Page 207 The Prospectus Directive......Page 210 The Transparency Directive......Page 211 The Directive on Markets and Financial Instruments......Page 213 The UK authorities’ response......Page 214 Remedies for false or misleading information......Page 217 Conclusion......Page 221 Part III Narrative reporting......Page 225 Introduction......Page 227 Development of the new statutory OFR......Page 228 Policy and theoretical basis for the OFR......Page 230 Regulatory structure......Page 231 Contents of the OFR......Page 232 Confidentiality......Page 237 Impact of the OFR requirements on directors’ duties......Page 238 Directors’ liability......Page 241 What would the OFR have meant for the role of the auditor?......Page 243 Users......Page 245 Enforcement of the OFR requirements......Page 247 Conclusion......Page 248 Introduction......Page 250 Definitions......Page 252 What are the objectives of social and environmental reporting and accounting?......Page 254 The UK......Page 256 EC law......Page 259 International standards and programmes......Page 263 Features of social reports......Page 266 Poor quality of reporting......Page 267 The voluntary framework......Page 269 Should social and environmental reporting be linked to financial measures?......Page 273 Role of auditors in social and environmental reporting......Page 275 Sustainability reporting......Page 279 Conclusion......Page 282 Introduction......Page 284 What is human capital?......Page 286 Why has human capital reporting not developed in the same way as financial reporting?......Page 288 What are the features of human capital reporting?......Page 291 What are the potential benefits of human capital reporting?......Page 293 What are the potential limits of human capital reporting?......Page 297 Other jurisdictions......Page 300 What is the appropriate way forward?......Page 303 Employee involvement in corporate decision-making......Page 308 Conclusion......Page 312 Part IV A way forward......Page 315 Introduction......Page 317 A communicative approach......Page 319 The process of communication......Page 323 Organisational structure......Page 328 Organising the stakeholders......Page 330 Electronic communication......Page 331 Bibliography......Page 333 Index......Page 347 The importance of disclosure as a regulatory device in company law is widely recognized. This 2006 book explores the disclosure requirements of companies in their reporting activities, and seeks to bring together the main features of the reporting system. The book considers the theoretical basis of the corporate reporting system and describes the regulatory framework for that system. It explores financial reporting and 'narrative' reporting, highlighting the fact that financial reporting requirements are more substantially developed than narrative reporting requirements - a consequence of the shareholder-centred vision that persists in company law. The roles of those responsible for providing corporate reports and those entitled to receive such information are examined. The book concludes with some broad suggestions for future development, with particular focus on the need to recognize the relevance of the communicative role of corporate reporting. The use of new technology also presents both challenges and opportunities for improving the regime This book explores the main disclosure requirements of companies in their reporting activities, and seeks to bring together the main features of the reporting system. The book considers the theoretical basis of the corporate reporting system and describes the regulatory framework for that system