Note from company law committee

A note on what information it is appropriate for solicitors to disclose as legal advisers to companies, and revised contractual terms introduced by Companies House

The Journal, November 2001, page 9

An article dealing with, amongst other things, requests for information from auditors, appeared in the “Risk Management” section of the Journal in July 2000 (“Reminder of routine risk issues”, JLSS Volume 45 No 7 Page 41). The Society’s Company Law Committee would reiterate the advice contained in that article regarding the importance of keeping accurate records, and of ensuring that Directors of the client company are kept informed of all requests from auditors for information.

However, the Committee would, in addition, like to stress that some requests for information may go beyond those to which it is appropriate for the company’s legal advisor to reply. Information which has traditionally been requested of solicitors as legal advisors to companies has included information as to titles, outstanding fees and any consultation with the solicitor with regard to litigation involving the company. It is appropriate to respond to these types of question. It must be stressed, however, that requests for information falling outwith these areas such as whether the solicitor is aware of any matter where the company may have failed to comply with the law or regulatory standards, or whether the solicitor is aware of any contingent liability other than litigation matters which he or she has been consulted on, should always be referred to the company’s directors and no response should be made other than on the specific instructions of directors. Failure to do so could potentially open a company’s legal advisor to risk.

Provision of an auditor’s letter or certificate is an important step in the audit process which has to be handled with care, takes time and carries significant risk for the solicitor giving it. For all these reasons, he or she is entitled to make an appropriate charge.

Companies House Direct

Companies House Direct has recently introduced revised contractual terms and conditions. Clause 11.1 of the revised terms and

conditions purports to restrict the liability of Companies House Direct to the extent of the outlay for the information and clause 11.4 purports to exclude liability for inaccurate information, including errors which are not the result of inaccurate information supplied to Companies House. For this reason, the Committee would recommend that solicitors treat information emanating from Companies House Direct with caution as its accuracy cannot be guaranteed and any remedy may be of limited value.

It should also be noted that under Condition 21 contracts with Companies House Direct are governed by English law and parties submit to the jurisdiction of the English Court.