BIS is consulting on proposals to amend the Companies Act 2006 in relation to disclosures in the notes to company accounts of advances, credits and guarantees for the benefit of directors.
Section 413 of the 2006 Act requires companies to disclose loans to each individual director in their accounts for financial years commencing on or after 6 April 2008. Draft regulations proposed to allow banking companies and the holding companies of credit institutions to disclose one aggregate figure for loans to all directors (which was the position under the Companies Act 1985). This was because the disclosure obligation is more onerous for banks, which are much more likely to make loans to their directors. The draft regulations were then withdrawn and the exemption was removed from the final regulations in order for there to be a wider consultation on the issue. This is in line with the wider review of corporate governance in the banking sector that is taking place (such as the Walker review).
BIS is now consulting on amendments to Section 413 and has proposed three options:
- return to a position similar to that under the 1985 Act, whereby banks would be required to disclose the aggregate total amount of loans, guarantees and credits to their directors, with no individual breakdown per director;
- remove all exemptions for banks, so that they have to disclose the same level of detail as all other companies; and
- require more disclosure by all companies, for example additional details like the maximum balance during the year, and details of additional transactions such as loans to connected persons or directors of group companies.
The consultation is available here. Comments are invited by 23 October 2009.
