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Directors must take full responsibility for their company’s future
The UK Shareholders’ Association continues to fight for better corporate governance and the better accounting that goes with it. One matter of concern has been, what should be meant by the term “going concern”?
For many years company directors have been required to ensure and believe that their accounts are drawn up on a “going concern “basis. In practice this has always been the case, as to use any other basis could only mean that the liquidator was at the door.
However, in 2011, a panel under the chairmanship of Lord Sharman suggested that consideration of going concern should be expanded to embrace what it called a “stewardship” basis. The idea was to require directors to consider a longer period, consider matters more broadly and make an overtly positive statement. The Financial Reporting Council (FRC) is now struggling, against director opposition, to have this incorporated in a revision of its Corporate Governance Code.
To overcome the resistance, the FRC has come up with a compromise, but the coalition of pension funds and other major investors with which UKSA has now been working for some time feel this is not good enough, so we have sent our joint thoughts to the FRC and a copy of that paper is attached.