Guidance on limited liability agreements
A summary of the Financial Reporting Council guidance on LLAs and the legal opinion we have obtained, with links to the original guidance.
Financial Reporting Council (FRC) guidance
- Summarises what the law permits and requires of LLAs
- Explains what an LLA should cover
- Provides specimen clauses for various types of LLA
- Gives the views of a number of institutional shareholders who say they would probably oppose types of LLA other than proportionality
- Explains the process to be followed for obtaining shareholder approval, including specimen wording for resolutions and the notice of the general meeting
- Setting out some of the factors that will be relevant when assessing the case for an LLA.
- Suggests that if directors give shareholders all the information they need to make an informed decision they will not be in breach of their duty to act in shareholders' interests.
- Discusses things directors would be expected to consider. This includes the fairness of the LLA, the availability of other terms elsewhere, and the undesirability of changing auditors too often.
- Highlights that there is no problem with 'going first'.