Feeds

UK's listed firms must tell markets of serious executive problems

Shareholders need to know about sickness

  • alert
  • submit to reddit

Build a business case: developing custom apps

Stock market-listed companies have a duty to inform shareholders if an executive's illness threatens to affect the firm's performance, a company law expert has said. That duty does not bind unlisted UK firms, he said.

In the wake of Apple's revelations about chief executive Steve Jobs's illness one expert has said that UK firms whose shares trade on the public markets should ensure that the markets are told about any illness or circumstance that might impair the performance of a crucial executive.

"Companies have a duty to disclose anything that might have an impact on the company's financial performance or change its prospects," said Andrew Hornigold, a corporate law expert at Pinsent Masons, the law firm behind OUT-LAW.COM.

Speculation has surrounded Jobs's health for a year, and the private Apple founder has just published the details of a treatable hormone condition that has been the cause of recent lost weight.

The issue was significant for Apple because its periods of success as a company have been closely associated with Jobs's stewardship. Industry observers believe that company shares would suffer if Jobs were suddenly not in a position to run the company.

"Directors of any company have a duty of care, skill and diligence to the company," said Hornigold. "This could extend to directors ceasing to hold office if personal issues meant that they could no longer perform their functions."

While unlisted companies would have to remove any director whose personal circumstances meant they could not fulfil their duties, they would be under no duty to inform shareholders about those circumstances.

The situation is different for listed companies because the status and historic performance of an individual could affect the value of his employers' shares," said Hornigold. "Stock markets demand that any information whose disclosure would lead to a substantial movement in shares is disclosed. This could include information about personal issues facing key directors or executives."

Hornigold said that some financial activity has obviously rested on the status of single individuals in the past. "We have seen this in the football industry, where the sale of a club has been impacted by whether a manager or player will stay or go," he said.

In more mainstream business, Hornigold said that it was most likely to be an issue in creative businesses where the ideas of an single executive can make a huge impact.

"This can really be the issue where creative people are involved. In fields such as computer game design, for example, the value of a company can be very closely tied up with individual people," he said.

Copyright © 2008, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

The Power of One Infographic

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
White? Male? You work in tech? Let us guess ... Twitter? We KNEW it!
Grim diversity numbers dumped alongside Facebook earnings
Bose says today is F*** With Dre Day: Beats sued in patent battle
Music gear giant seeks some of that sweet, sweet Apple pie
Amazon Reveals One Weird Trick: A Loss On Almost $20bn In Sales
Investors really hate it: Share price plunge as growth SLOWS in key AWS division
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.