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Oppose company law amendment, peers urged. By Dan Martin

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27th Oct 2006
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The House of Lords has been called on to reject a controversial government amendment to the companies bill which could force businesses to disclose commercially sensitive information.

A last-minute addition to the proposed legislation which reaches the House of Lords next week requires firms to include in their annual business review "information about persons with whom the company has contractual or other arrangements which are essential to the business of the company".

Although the clause is designed to force firms to disclose information about their supply chain, business groups have expressed outrage that because the wording is so vague, directors could be force to reveal legally and commercially sensitive information.

In a letter to Conservative and Labour peers, the Quoted Companies Alliance (QCA) asked "Will a small quoted company have to name who provides their IT support, or the landlord from whose premises they operate? Only in highly unusual and exceptional cases can there be any benefit from such disclosure."

The QCA called on peers to oppose the clause. "It is an unnecessary, extra and costly burden on, in particular, smaller quoted companies with questionable, if any, benefits to readers of accounts," the letter continued. "If the government is serious about better regulation, this proposal should have been subject to a thorough regulatory impact assessment. It is poorly drafted and its purpose is unclear. It should be withdrawn."

The Liberal Democrat meanwhile said a solution to the problem is return to the stringent reporting standards that were in the original Operating and Financial Review, scrapped by chancellor Gordon Brown last year.

David Howarth, the party's trade and industry spokesman, who has tabled an element on the issue, said: "Accurate information on a company’s social and environmental effects, including their supply chains, is crucial to encouraging the growing market in ethical investment and consumption.

"There is already a £10 billion market in the UK for ethical investment. Consumers and investors are boycotting companies which damage the environment or use child labour.

"The government needs to accept an auditing standard which will give investors and customer the information they need, not just provide some companies with a marketing tool."

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