Leading global accountancy body questions whether the traditional limited liability company is  right  for the future

ACCA (the Association of Chartered Certified Accountants) argues that it’s time for an alternative to the traditional limited liability company.

An ACCA report  argues that the legal form of the limited company leads to a damaging single focus  on financial results at the cost of the environment and communities and societies who expect businesses to  serve them.

Building future business investigates switching from current business models – which prioritise shareholders  – to models that measure financial results as part of an interconnected web of factors.

Jason Piper, head of tax and business law, ACCA, said: ‘The conflict between the financial imperative and the concrete impacts of business on society and the environment are too great to ignore. Economic activity is supposed to benefit society, but in many ways we’ve ended up with an economic model that seems to do the opposite.

‘The company form we know so well did a great job in protecting providers of capital when that was most needed. But now those financial safeguards are distorting business and economic behaviour. We do have potential answers in the form of things like B Corps and integrated reporting frameworks.’

To build better business models the report says enterprises need to answer key considerations that should shape their future. These are:

• Who are the key stakeholders?
• What is ‘value’ to them?
• What are the expected flows of ‘value’ from economic activity to each group of stakeholders?
• How do value flows align with the legal form of the business?
• What guidance and support exists in the regulatory and legislative ecosystem? Are there gaps?
• What are the ethical considerations in filling those gaps?
• What non-regulatory voices exist to guide potential legal form?
• How will record keeping, communication and reporting need to operate to fit in with the legal form?
• What are the qualitative characteristics needed to ensure trust in the reporting, form etc?
• What other safeguards are needed to protect the interests of the stakeholders?

Business models in many areas are changing from reliance on labour and goods to a digital economy, with activities focused on energy use and a relatively small number of highly specialised and capital-intensive machines.

Piper said: ‘We have ended up in a place where businesses doing well can undermine the communities they are in. Building future business looks at what’s driven this distortion of the decision-making process, and how we can try to redress the balance between business and society.’

Read Building future business.

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About ACCA

We are ACCA (the Association of Chartered Certified Accountants), the only truly global professional accountancy body. Since we were founded in 1904, we’ve been breaking down barriers to the accountancy profession. Today we proudly support a diverse community of over 257,900 members and 530,100 future members in 180 countries.

We’re redefining accountancy. Our cutting-edge qualifications, continuous learning and insights are respected and valued by employers in every sector. They equip individuals with the business and finance expertise and ethical judgment to lead and drive sustainable value in organisations and economies worldwide.

Guided by our purpose and values, we’re leading the accountancy profession for a changed world. Partnering with policymakers, standard setters, the donor community, educators and other accountancy bodies, we’re strengthening and building a profession that focuses on people, planet and prosperity to create value for all.

Find out more at: www.accaglobal.com