Disclosure of loans to directors of company accounts

Comments from ACCA to the Department of Business, Innovation and Skills (BIS), October 2009.

ACCA is pleased to comment on the current DBIS consultation on the above matter. ACCA is a professional accountancy body which represents over 130,000 qualified members in the UK and around the world. 

Our responses to the questions posed in the document are as follows: 

Q1. Do you agree that the Government should amend section 413(8) in time for the year ending 31 December 2009 annual accounts?

Given that the implications of the present, changed wording appear not to be intentional, and that this situation is likely to impose new disclosure obligations on companies, we fully agree with the proposal to make an urgent change in line with option 1 set out in the consultation document. 

Q2. What are the costs and benefits of the options for change?

The information associated with the disclosure provisions as they stand should already be available within the company in all cases. The costs will be incurred in assembling that information for individual directors and each of their individual transactions, and then presenting the list of disclosures in the notes to the accounts: in many cases, this list may prove to be extensive and its compilation could be time-consuming, with implications for costs. In private companies, in particular, directors tend to make frequent drawings from their loan accounts. In considering the benefits to users of the disclosure of all the detailed information currently required, it will be borne in mind that many of the individual transactions concerned will have been subject to shareholders' consideration and approval under the relevant provisions of the Act. 

Q3. Which option do you prefer and why?

We consider that the position that applied under Schedule 6 of the Companies Act 1985, whereby, in the case of each director, there was disclosed an opening and closing balance on their loan accounts and figures for their maximum liability during the year, worked well and provided all the information that was of significance to users. Our preference would therefore be for a revision of section 413 on the lines of option 3, with a greater alignment between the rules on the approval of transactions and the associated disclosures. 

Q4. Should the directors in receipt of loans etc be named in the disclosure?

We believe that shareholders have a legitimate interest in the disclosure of the names of the directors and connected persons who have benefited from the advances. 

Q5. If they should be names, should this be only if the transaction exceeds a certain limit?


Q6. Should additional disclosures be required only for certain types of company, such as banks, large companies or traded companies?


Q7. Should a director's connected persons be caught by these provisions?


Q8. Is it necessary to add further disclosures under section 413?

In the case of very material advances to one or more directors or connected persons, we suggest that it would be in order for a separate explanation to be given of the reason for making them.