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

The language we use in business

We find it fascinating, once again, just having skimmed through the Microsoft (MSFT) Earnings Release FY17 Q4 results released on 20 July 2017, how generally in businesses ‘natural’ language is used differently in different sectors.

In general within Commerce & Industry we tend to refer to ‘strategic partnerships’ and ‘supply-chains / arrangements’, etc.  Language crafted from legal and contractual relations.


Source: http://leadics.com/wp-content/uploads/2014/02/slide-14.png

The irony is that it is generally only the Technology sector, possibly as a more recent / younger sector, that crafts its language from the natural world.  In technology companies you don’t have supply-chains, but rather ‘ecosystems’, ‘cloud-platforms’, ‘waterfall project’ deployment, etc., etc.


Source: http://staroneit.com/theme/BACK_END/file_manager/upload/image/4.jpg

It is both fascinating and ironic that these metaphors for relationships in the technology sector borrow heavily from ‘natural language’ or nature based language; which in turn promotes sustainable business practices (we hope and trust) and sustainability more generally.


Source: https://www.opslogix.com/wp-content/uploads/2014/07/071414_2150_Whymonitory8.png

Do you find this to be a positive / true reflection of the use of business language? Your comments are very welcome. […and will no doubt be added to our ‘word-cloud’]

©2017 theMarketSoul

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

End to End (Life-cycle) design for Business Process Outsourcing – Part 2


In part 1 we introduced the basic techniques of Process Mapping and Cost and Benefit Analysis as part of the tool-sets to utilise in considering outsourcing and designing the Outsourced Business Processes future state.


The next step in the process of defining and designing the appropriate Business Processes to outsource or at the very least re-engineer and run more cost-effectively and efficiently is to draw together the relevant cost information from your existing in-house data sources.  Both accounting records and other ‘data-islands’ might have to be investigated, hence the fact that any Business Process redesign effort with entail outreach activity to stakeholders in and around the function, process, team or organisations being considered for this process.

English: Business Process Reengineering Cycle

English: Business Process Reengineering Cycle (Photo credit: Wikipedia)

English: Business Rule Mining: Business Proces...

English: Business Rule Mining: Business Process Mapping to Application Objects (Photo credit: Wikipedia)

A tool to utilise in this process is something like a Stakeholder Map.


English: A graph showing the steps that can be...

English: A graph showing the steps that can be taken to ensure commitment in stakeholder management (Photo credit: Wikipedia)

The image above shows some of the engagement steps and processes in gauging stakeholder engagement.

In part 3 we will continue to explore further tools sets and Force Field Analysis in order to document the Business Process Outsourcing road map, prior to influencing decision makers on the merits and demerits of a successful Business Process Outsourcing project.

©2015 – 3resource


End to End (Life-cycle) design for Business Process Outsourcing – Part 1

Thinking about the potential of outsourcing one of your critical Business Processes?

 English: Business Process Reengineering Cycle

Business Process Re-engineering Cycle (Photo credit: Wikipedia)


Some of the key considerations must the the opportunity to redesign and re-engineer processes via process mapping and thorough cost and benefit analysis techniques.


Non of these techniques are new or too difficult to manage, however, having the right mind-set and tools available for the task at hand is essential.  If you cannot manage the process on you own, seek help and advice from seasoned professionals.


Even very small organisations engage and master the art of outsourcing.  As an example a sole trader or small incorporated business owner will outsource functions like book-keeping, accounting and tax compliance to a professional advisor or support business.


If you need help and resources, consider the International Association of Outsourcing Professionals as a resource and knowledge centre



3resource LLP can also assist you on this journey of discovery and value added supply value chain management.


We aim to add value by re-sizing your off-shoring and outsourcing requirements.



Outsourcing-offshoring-resized (Photo credit: Wikipedia)


In part 2 of this article we will focus on some basic outsourcing design elements to consider in evaluating your readiness to outsource.

3resource ©2015


The conceptual notion of a ‘Business Model’ in Financial Reporting

Harmonisation of International Financial Reporting standards is a route or journey, where the road map is not yet very clearly defined. However, it is getting there.
In a recent article we drafted on IFRS, we argued that the eventual outcome of harmonisation should be the deepening of global capital markets and the spreading of risk on a wider scale. This would lead to potentially fewer liquidity crunches, like the last one we experienced in 2008 onwards.

However, this is not the only objective, but would be a welcome outcome, if the route is traversed successfully. In 2010 we drafted another article on the concerns in the US for IFRS conversion versus convergence. By stealth, however, should a group entity be listed in an IFRS regulated environment, with a US subsidiary, then by default the group financial statements would have the US GAAP output ‘automatically’ converted to IFRS compliant financial accounts.

This sets the scene for further developments and improvements in international financial reporting. A concept that is currently under review and debate is that of the ‘Business Model‘ and how this concept, together with risk management reporting is incorporated into national and international corporate reporting.
business model
(from Businessmodelgeneration/com)
EFRAG outlined in a research paper that the term ‘Business Model’ is not universally defined or applied as a consistent notion in the business world. It is distinct from Management Intent in that the two notions differ in that a business model is generally more stable focusing on the larger picture and is usually more observable and easier to verify.
However, the paper also outlines an interesting notion. A Business Model is more widely understood and stands up to better scrutiny versus Management Intent. They go on to state:
The term has ‘no universal view on relationship/distinction with strategy, business purpose, management intent, management actions‘.
We agree generally with this statement.

In conclusion, we understand a business model to be the ‘How you make money?’ question, versus the strategic dimension which includes the preceding question, which should be: ‘Where do we want to be’.

English: A model that describes the competitiv...

English: A model that describes the competitive environment of a company’s business model. (Photo credit: Wikipedia)

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