Directors will have to disclose risk

The Panel says it will continue to review accounts from companies in these industries in 2009-10 and, in view of the deteriorating economy, will extend its selection to include other entities which derive significant revenue from the provision of services such as advertising, media, recruitment and technology.

The Panel's work continues to cover the business review, where the Companies Act 2006 has introduced two important changes. The purpose of the review now includes helping shareholders assess how the directors have performed their statutory duty to promote the company's success. In addition, the business reviews of quoted companies are now required to refer to the main trends and factors likely to affect the future development and performance of the company.

All business reviews must contain a description of the principal risks and uncertainties facing the company.

The Panel will consider the adequacy of these disclosures in terms of what a reasonable board might be expected to conclude on the basis of information available when the accounts are approved, and will expect to see, where appropriate, an account of how the directors are managing the risks which the company faces.

Accounts selected for review will be drawn from across the full range of companies within the Panel's remit, which includes large private companies.

The Panel will shortly be updating its website to reflect the new business review requirements.

Bill Knight, Chairman of the Panel said: ‘In this difficult economy it is more important than ever that directors try, so far as they can, to offer a clear account of their company's achievements and the risks that the company faces. The Panel will encourage clarity and frankness in compliance with the law.'