Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of this website, please enable cookies in your browser

We'll assume we have your consent to use cookies, for example so you won't need to log in each time you visit our site.
Learn more

AUDITORS 'GIVE WRONG ADVICE'

  • Comment
Audit Commission advice on local authority companies is wrong, a solicitor has told environment minister Sir Paul B...
Audit Commission advice on local authority companies is wrong, a solicitor has told environment minister Sir Paul Beresford.

Alan Magnus, a partner with City firm DJ Freeman, believes technical releases sent to auditors by the commission attempt to 'change the intention' of the Local Authorities (Companies) Order 1995 by effectively barring the formation of 50:50 'deadlock' companies.

In a letter to Sir Paul, Mr Magnus refers to TR11A/96 which states: 'Minority interest is any interest in a company which is not a controlling one, eg less than 50% of voting rights.'

Mr Magnus tells the minister: 'This is not correct. One that is less than a controlling interest is '50% or less' for voting rights, not 'less than 50%'.'

The solicitor is currently advising a local authority on a joint venture with a private sector firm in which the formation of a deadlock company is the preferred option.

The importance of rules governing local authority companies centres on capital restrictions.

If a company is deemed to be council controlled, its borrowing counts against the authority's own borrowing restrictions. This has forced the West Midlands authorities running Birmingham airport to sell off 51% to allow for the financing of the airport's expansion.

But Mr Magnus told LGC: 'My view is that deadlock firms do not fall within the Local Authorities Companies Order. This a deliberate policy of the Audit Commission. It always takes the strictest, narrowest view. This is beyond what Parliament intended.'

  • Comment

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions.

Links may be included in your comments but HTML is not permitted.