Modernising Company Investigations

Author:Mr Andrew Lidbetter
Profession:Herbert Smith

The DTI are currently reviewing powers of inspection with a view to modernising the present Companies Act powers to respond to changing business practices and technological advances, and to address the weaknesses of the system. These proposals considerably widen the scope for investigations and inspections and justify doing so on the basis that the cost of investigations should be borne by companies as the price of the benefits of limited liability. However, DTI investigations can already be lengthy and costly; for example, the Mirror Group Newspaper affair took nearly nine years to complete at a cost of almost ten million pounds.

The stated objective of the review is the provision of an up-to-date framework that promotes enterprise and competitiveness with minimal regulatory burdens, but which gives inspectors rapid access to all relevant information and witnesses.

Proposals centre around a new, wide-ranging set of general powers of investigation and inspection, bringing the scope for confidential, unpublicised investigations into line with those powers for publicly announced inspections. Investigation powers would be graduated, allowing for controlled use of each further grade where necessary and proportionate for a particular investigation; investigators would be able to extend the investigation to the nature, conduct or state of business affairs of individuals connected to the company itself and associated companies (regardless of past or present connection and without any suggestion of wrongdoing) and to compel assistance from persons unconnected with the company. Document-based powers of investigators would be replaced by a less restricted approach based on "all relevant information" reasonably required by the investigator. Requirements for assistance would extend to that which a person was...

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