City Law News
Here is the latest news from City Law
14/03/2008 - Gambling addict loses final bet with bookmaker
The High Court has ruled that a man with a self-confessed gambling problem is not able to claim over £2m damages against William Hill bookmakers.
... read more 
14/03/2008 - UK Businessman wins US Extradition Appeal
The House of Lords have allowed the appeal of UK businessman Ian Norris against a judge's decision that he should be extradited to the USA to face charges of price-fixing.
... read more
11/03/2008 - Companies Act 2006 - auditors' liability limitation agreements
A significant protection for the audit profession will very soon be introduced into company law when further provisions of the Companies Act 2006 are implemented. From 6 April 2008, an auditor will be able to limit its liability by way of agreement with a company. Previously, a company could not exempt its auditors from liability for negligence, default, breach of duty or breach of trust. Calls for auditors to be permitted to limit their liability grew following the demise of Arthur Anderson in 2002 in the Enron affair.
It will be possible for an auditor to limit its liability for negligence, default or breach of duty or trust in relation to the audit of the accounts but only to the extent that is fair and reasonable in all the circumstances of the case, having regard to (i) the auditor's responsibilities, (ii) the audtior's contractual obligations; and (iii) the standards expected of the auditor. If a liability limitation agreement purports to limit the audtior's liability to an excessive degree, the agreement will nevertheless have effect as if it limited liability to an amount that the court determines is fair and reasonable. (Note that the "reasonableness" test under the Unfair Contract Terms Act 1977 (UCTA) is specifically excluded.)
A liability limitation agreement must be approved by shareholders by way of ordinary resolution (unless the company's articles require a special resolution), although shareholders in a private company can resolve to waive the need for approval. The resolution approving the principal terms of the agreement can be passed either before or after the agreement is signed. The agreement must be limited to one financial year's audit, specifying the financial year to which it applies.
A company will need to disclose the existence and principal terms of any liability limitation agreement entered into with its auditors by way of note to the company's annual accounts. The date of the resolution approving it (or waiving the need for approval) must also be disclosed.
It will be interesting to see how such agreements develop, the form the agreements take and the manner in which liability is limited. An independent working group was established by the Financial Reporting Council (FRC) in 2007 to provide guidance on the use of liability limitation agreements. The group published draft guidance for consultation in December 2007 and expects to publish final guidance in the first half of 2008. Further information can be found on the FRC's website www.frc.org.uk.
... read more