Had it merely enshrined the conclusions of the Company Law Review, which began its work way back in 1998, the business world would be relatively sanguine. Yet the Bill that is now going into its committee stage, according to its critics, goes in some areas much further than had been intended and in others not far enough. The result is a piece of legislation which will not succeed in its objectives of simplifying company law, increasing the accountability of investors and ensuring Britain is an attractive place in which to do business.

Take the issue of audit. After the accounting scandals that rocked the United States, there was an understable desire to toughen up the demands on auditors and to enshrine them in law. But while negligent auditors are undeserving of sympathy, the Bill is seen as potentially classifying them as crooks. The Bill introduces a new criminal offence for those guilty of signing off misleading accounts.

Worried number crunchers have been assured that this will only apply in the case of fraud but they are unconvinced. Fraud is covered by existing legislation, they argue, fearful that gross negligence might soon result in a criminal record.

If that were the case, warn the auditors, then the better accountants would be highly wary of taking on audit work.

Similar fears about putting themselves at risk of prosecution are making directors view the Bill with trepidation. The newly codified responsibilities for directors look intimidatingly onerous. In bigger companies, it would be impossible for main board directors to vouch personally for all that would be required of them. Another reason, say those now pushing for some redrafting, why sensible people might shy away from big company boards.

Drafting a Bill that covers such complicated issues and runs to 500 pages is a daunting task but the result fails to meet all the objectives. Those worried auditors are bemused by the fact that the agreement they thought they had secured on limiting their liability does not seem to be achieved in the draft legislation.

With the Big Five firms now reduced to the Big Four, the issue of a legal action, which could wipe out another of the players is a serious one. That was the reason, rather than any desire to protect the personal fortunes of accountants, that the Department of Trade and Industry acknowledged the need for auditors to be able to limit their liability. Given their deep pockets, the firms are inevitably a more attractive target for disgruntled investors than the directors. That was why Ernst & Young found itself fighting a massive claim over the Equitable Life scandal. Losing could have broken E&Y but it stuck its ground and, eventually, won a complete climbdown from its tormentors.

Much discussion has gone on as to how the limit to liability should be assessed and the conclusion was that it should be proportionate to culpability. Yet according to the experts, and their legal counsel, the Bill rules out that solution.

The Conservatives are rightly going into battle for a Bill which improves the state of company law rather better than this effort.

Pause for thought over HMV

WITH a chief executive who has announced that he has had enough of the job and a chairman making his debut in that role today, HMV probably looked invitingly vulnerable to Permira.

News of the private equity house’s interest in the company perked the shares up by almost 17 per cent to 192p. Little more than a year ago the price hit 282p but not even the most optimistic investor will be expecting the take-out price to come near that level. All that they can hope for is that Permira’s interest will spark the attention of a rival and stimulate an auction for the business.

Yet after the miserable Christmas trading statement from HMV, there may not be too much enthusiasm for the books and music retailer. These are products that are easily and successfully sold on the internet and still, to some extent, customers help themselves to the music without paying.

But while conventional wisdom may cast HMV as a dying business, that need not be the case. It is itself an e-tailer and could be more so. And if trade continues to desert the high street, HMV does at least have brand names that should survive longer than most in the bricks and mortar world.

Permira may take the view that managing a long, slow decline can be highly profitable. No doubt Tim Waterstone will be pondering whether he could reclaim his eponymous bookstore brand and, since there is little synergy between the two businesses, Permira would no doubt consider it. The book trade would certainly prefer that to the planned merger with Ottaker’s.

Nuclear fallout

GOVERNMENTS should not be in the business of building power stations. But they should handle public sector assets to the best advantage of the taxpayers who effectively, if not constitutionally, own them.

In the House of Lords yesterday, Lord Davies of Oldham conceded for the Government that selling Westinghouse Electric to Toshiba just as the previously moribund market for nuclear reactors is taking off may be to miss out on “additional rewards to the taxpayer”. Having bought the business in 1999, it defies logic to sell it just when China has announced plans for 30 new reactors over the next 15 years, when America has begun ordering again and when the UK is rethinking fast.

The risks of doing business and conflict of interest are quoted as reasons for a swift sale. In reality, Gordon Brown is like a hard-up spendthrift who has found something shiny in the attic that he can sell on e-Bay.

Profit problem

IT IS a problem most companies would welcome: Exxon is suffering an embarrassing level of profits. Yesterday the group reported the highest ever quarterly earnings by a US-quoted company. The oil price rather than its achievements was to blame, since its production was down over the quarter. But, fearful of consumer reaction, Exxon was keen to underplay its results. Its return on sales was nowhere near that of other companies, it pointed out. Coca-Cola’s liquid produces more than twice the return on each dollar of sales.

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