UK: Institutional Shareholders' Committee statement on auditor liability limitation agreements

The Institutional Shareholders' Committee has published a statement concerning auditors' liability limitation agreements. The ISC notes:

• Agreements should be proportionate, and provide a limit for liability that is fair and reasonable.
  
• Companies should recognise that they are not obliged to enter into agreements if they are not suitable.
  
• Companies should justify to shareholders the benefits of concluding agreements in advance of putting them to a general meeting vote. 
  
• When audit committees discuss these agreements with auditors, they should seek to assure themselves that audit quality will be preserved and enhanced.
  
• Shareholders will not want to see their preference for proportionate liability agreed at holding company level undermined by other forms of agreement lower down the group structure.
  
• Companies should use the specimen principle terms for agreements which have been laid out by the FRC. 

For further information see:
FRC guidance on auditor liability limitation agreements | ISC | ISC statement | ISC press release |