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Session 2005-06
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given on

Thursday 20th July 2006

Consideration of Bill

Company Law Reform Bill [Lords]

Changed to

Companies Bill [Lords]

Contents of directors business review (No. 2)

Jon Trickett
Colin Burgon


    To move the following Clause:—

      ‘(1) Unless the company is subject to the small companies’ regime, the directors’ report must contain a business review.

      (2) The purpose of the business review is to inform members of the company, help them assess how the directors have performed their duty under section 173 (duty to promote the success of the company), and assist potential investors to decide whether to invest in the company.

      (3) The business review must contain—

        (a) a fair review of the company’s business, and

        (b) a description of the principal risks and uncertainties facing the company.

      (4) The review required is a balanced and comprehensive analysis of—

        (a) the development and performance of the company’s business during the financial year, and

        (b) the position of the company’s business at the end of that year,

      consistent with the size and complexity of the business.

      (5) The business review must, in a manner consistent with the size and complexity of the company, include—

        (a) the main trends and factors likely to affect the future development, performance and position of the company’s business, and

        (b) information about—

          (i) environmental matters (including the impact of the company’s business on the environment),

          (ii) the company’s employees,

          (iii) social and community issues, and

          (iv) persons with whom the company has contractual or other arrangements which are essential to the business of the company,

        including information about any policies of the company in relation to those matters and the effectiveness of those policies.

      If the review does not contain information of each kind mentioned in paragraph (b)(i), (ii), (iii) and (iv), it must state which of those kinds of information it does not contain.

      (6) The review must, in a manner consistent with the size and complexity of the company, include—

        (a) analysis using financial key performance indicators, and

        (b) where appropriate, analysis using other key performance indicators, including information relating to environmental matters, employee matters, supplier matters and social and community issues.

      “Key performance indicators” means factors by reference to which the development, performance or position of the company’s business can be measured effectively.

      (7) The review must, where appropriate, include references to, and additional explanations of, amounts included in the company’s annual accounts.

      (8) In relation to a group directors’ report this section has effect as if the references to the company were references to the company and its subsidiary undertakings included in the consolidation.

      (9) Nothing in this section requires the disclosure of information about impending developments or matters in the course of negotiation if the disclosure would, in the opinion of the directors, be seriously prejudicial to the interests of the company.’.

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Prepared: 21 July 2006