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Business Reviews

Volume 448: debated on Tuesday 4 July 2006

To ask the Secretary of State for Trade and Industry what measures will be put in place to ensure that the business reviews proposed in the Company Law Reform Bill [Lords] will be comparable (a) over successive years and (b) between companies. (80373)

[holding answer 26 June 2006]: As clause 399 subsection (2) of the Company Law Reform Bill sets out, the purpose of the Business Review is to inform members of the company and help them assess how the directors have performed their duty under section 158, which requires a director, in performing his duty to promote the success of the company, to have regard (among other matters) to: (a) the likely consequences of any decision in the long term, (b) the interests of the company’s employees, (c) the need to foster the company’s business relationships with suppliers, customers and others, (d) the impact of the company’s operations on the community and the environment, (e) the desirability of the company maintaining a reputation for high standards of business conduct, and (f) the need to act fairly as between members of the company. Subsection (4) of clause 399 requires that the Review 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. The statutory provisions therefore set out the framework of the Business Review, but it is for directors of each company to determine its content according to the circumstances of the particular company. As subsection (6) requires, to the extent necessary for an understanding of the development, performance and position of the company’s business, the review must include analysis using key performance indicators. Such indicators will make it easier for members to assess the development, performance and position of the company from year to year.