IFRS17 – Insurance Contracts

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©2019 Rohan Badenhorst

Further questions for UK Boards:

Following on from our brief article published on 12 September 2017, on “Questions for UK Boards”, we have the some further questions for UK Boards:


If the FRC maintain or assert that you have to act with Entrepreneurial Leadership, (see this Guidance-on-Risk-Management-Internal-Control-and-Related-Reporting document for the background or our first article) how do you reconcile this with your ‘General Duties of Directors’ as required under section 172 of the Companies Act 2006:

The Act states:

Section 172: Duty to promote the success of the company

 (1) A director of a company must act in the way he considers, in good faith, would

be most likely to promote the success of the company for the benefit of its

members as a whole, and in doing so have regard (amongst other matters) to—

(a) the likely consequences of any decision in the long term, [our emphasis]

(b) the interests of the company’s employees,

(c) the need to foster the company’s business relationships with suppliers,

customers and others,

(d) the impact of the company’s operations on the community and the


(e) the desirability of the company maintaining a reputation for high

standards of business conduct, and

(f) the need to act fairly as between members of the company.

Focusing specifically on sectiom 172(1))(a) (as highlighted above):

  • What factors or methodolgy do you consider as part of the ‘likely consequencesconsideration that you as Board member must apply in the decision-making process?
  • Do you apply or depaly some form of risk-based   assessment methodology?dice-tax

This is not a check box exercise, however, you need to reconcile the general duties with being entrepreneurial, within the context of the Companies Act and Corporate Governance principles, right?


Do you have a tool, methodology, process or mental model to apply in order to assess potential scenarios and outcomes?

In the next article in this series, we will draw on inspirartion from the Value-Based Management school of thought on applying a bit more science and rigour to decsion-making and balancing ‘duties of care’ with exploring your inner Entrepreneurial spirit.


©2017 Rohan Badenhorst

Questions for UK Boards

Subject area: “Guidance on Risk Management, Internal Control and Related Financial and Business Reporting”


In the very eloquently and succinctly FRC (Financial Reporting Council) titled guidance paper called “Guidance on Risk Management, Internal Control and Related Financial and Business Reporting” (FRC, September 2014), setting out the background to the paper and guidance, we came across this interesting turn of phrase: “…to provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed” [our highlighted words].


Therefore, according to the FRC they expect Boards of all companies, subject to this code, to be ‘entrepreneurial’?  Just stop and think for a moment whether every single Board meeting you attend as a director of a public or private limited liability company has an element of entrepreneurial spirit in its proceedings or on the agenda.  If not, why not?  This very seemingly austere, formal (and formulaic) governance process should be married and reconciled with being entrepreneurial…?

How do we foster and encourage this ‘status quo’ challenging or disruption creation spirit in formal settings like board meetings; or is it only in the execution or the executive director’s duties that they display this ethos?  And what about the Non-executive directors? What is their role in fostering the ‘entrepreneurial leadership’?


The background paragraphs go on to state that “Good stewardship by the board should not inhibit sensible risk taking that is critical to growth.”

Therefore, the counter balance to enthusiastic entrepreneurialism is therefore a measured risk-based approach in underpinning that growth target strategy?

Do you have a framework or measured risk-based approach or methodology in place to serve as the bedrock of your strategic management processes?  If not, where do you start?

©2017 – Rohan Badenhorst 

Here is the ultimate game plan for UK Corporation Tax

The Summer Budget 2015 contained quite a few surprise tax increases.

And the following post is our brief analysis of the ultimate game plan, as we currently see the landscape:


One of the interesting increases is the Dividend Tax Credit abolition and the introduction of a new flat rate £5,000 dividend exemption, then the graduated 7.5% (20% Tax Band), 32.5% (40% Tax Band) and 38.1% (Higher Rate Tax Band) from April 2016.
 Here is our take on the matter: (Health warning: This is our opinion and conjecture only)
This is part of a journey to hopefully redress the imbalance in corporate and personal finance towards debt, rather than risk capital (equity / share-based) finance.
At the moment interest on debt financing deployed in a business or to finance property and therefore rental income is fully deductible as it passes the Income Tax (Trading and Other Income) Act 2005 section 34 ‘Wholly and exclusively…’ rule.
This tax-break for interest, distorts financing activity in favour of debt (or leveraged) finance at the expense of risk capital (share capital) financing.
Getting Over Debt Overcome Financial Problem Crisis
In addition to this, dividends are viewed as passive income, however, to ensure there is no double taxation, a dividend tax credit (see this article) was  introduced back in 1973 as part of what is called an ‘imputation system’.  In summary what this meant was that the ‘pass-through’ of income already taxed in the company should not be double taxed in the investor’s hands.
We belief that the current UK government is aggressively pursuing a favourable Corporate Tax Environment (Tax Haven in common parlance) strategy and with this new mechanism in place, the reduction in corporation tax can be offset with the additional dividend income tax they will collect.  Once this system is embedded, the government will have the opportunity to reduce the tax shield (currently 20%) on interest expense deductibility, thereby giving it the opportunity to increase the dividend income exemption threshold to £10,000; £15,000; £20,000 or some other limit) and even further reduce the corporation tax threshold.  
This is called a ‘Tax Neutral’ effect, as it encourages a specific desired behavioural outcome, without increasing or foregoing the net tax collected from that specific area.
Therefore, our conclusion is to watch this space (as this is a longer-term strategy) and we will only be able to review this in a few years from now.
In the meantime, ensure that any tax planning you undertake is grounded in sound commercial reality and not purely as a tax mitigation exercise.
Definition of Tax Neutrality:

Tax that does not cause individuals or firms to shift their economic choices, such as to choose among different goods, inputs, locations, etc.

Read more: http://www.businessdictionary.com/definition/neutral-tax.html#ixzz3fyXCvicm

Filing CIC (Community Interest Company) Annual Accounts

If you have not yet filed Annual Accounts for a CIC (Community Interest Company), then please be aware that the process and procedures for filing the Annual Accounts at Companies House is different from normal electronic filings.


 Firstly you cannot file electronic Annual Accounts.

Guidance is published here at the Companies House web site.

In order to file the Annual Accounts you will need to prepare a form CIC 34 which can be downloaded from the link.

The completed and signed (by a director or company secretary) CIC 34 form, together with a printed copy of the Annual Accounts and a £15 filing fee must be sent to Companies House well in advance of the filing deadline.  This is to avoid any late filing penalties, should Companies House reject the initial filing and you need to make any amendments that might be necessary in order to re-file the Annual Accounts.

Companies House officials were not yet able (during April 2015) to provide us with information as to when the electronic filing of CIC Annual Accounts will be possible.


Hence, just like filing Limited Liability Partnership Annual Accounts, the traditional hard copy and postage paid (preferably recorded delivery) or handing in the documents at a Companies House official Contact Centre office location, is still the only way to get the Annual Accounts filing compliance check done, for the time being.

©3resource – 2015