Where was the damage?

Peter Cresswell has asked “What David Parker is alleged to have done looks pretty bloody trivial, doesn’t it? Where was the damage, and to whom?”

This is a good question and one I shall answer. In fact this issue has been entirely missing in the media.

There are various sorts of companies. Some are sole owned. Some are family owned and some have multiple owners outside the family. One of the requirements of the Companies Act is for accounts to be audited unless *every* single shareholder agrees not to. Audits are a very important protection for minority shareholders to ensure their interests are looked after. The “harm” is the failure to have the accounts audited as required by law. This is not as minor an issue as some make out – this denied legal rights to minority shareholders and the rights of shareholders form the basis of company law.

If you are sole owner of a company, then I suspect indeed you don’t often sit down by yourself and formally convene a shareholder meeting to resolve not to have an auditor. This situation is what one would call a technical breach of the law.

If your company is solely family owned, then again it is likely that you may not have had the formal shareholder meeting required by law to resolve not to have an auditor and it may have been a conversation over dinner. However you better make sure that every member of the family listed as a shareholder does agree

Now in the third scenario you have a minority shareholder who not only is not a family member but in fact is very very aggrieved with you and you management of the company. What on earth are you thinking when you go ahead and claim he has consented to no auditing of the accounts? Hell if anything is certain, it is that this disgruntled shareholder wants the accounts audited. And by falsely claiming he has agreed you have undermined his rights as a shareholder.

So let us have an end to the writing off of what David Parker did as a purely technical error which harmed no-one. He broke the law by not having the accounts audited and he broke the law by claiming permission of a shareholder he did not have. And it is entirely possible he did it on purpose because common sense would tell you that he knew the aggrieved shareholder would not have agreed.

UPDATE: I should point out I am not accusing David Parker of having done a heinous crime. What I am trying to dispel is that he did nothing at all really wrong and he is some sort of hero for resigning. He did the correct thing in resigning but that doesn’t mean what he did wasn’t trivial. It wasn’t.