Silly boy

The result is a radically different approach to accounting standards. The objective is to make accounting and business responsible to all in society, which is appropriate given the enormous privilege of limited liability which most businesses enjoy, and which is granted at cost to everyone else in the communities that make it available.

If granting limited liability were a cost to everyone then we wouldn’t grant it, would we?

That limited liability makes large scale economic cooperation – which makes us richer – even possible is why we do. And that it makes us all richer is why it’s not a cost to us.

29 comments on “Silly boy

  1. The objective is to make accounting and business responsible to all in society, which is appropriate given the enormous privilege of limited liability which most businesses my limited liability company enjoys.

  2. I have read business accounts but (apart from one non-profit-making non-trading company existing to own the freehold of a house divided into flats) I’ve only prepared accounts for charities (a dozen or so) and a few sports or other clubs and scrutinised accounts of charities and non-profit-making societies.

    Candidly, changing the way I prepare accounts isn’t going to make business accountable to anyone.

  3. Dearieme

    You’ve got it – what the oaf fails to realise is that by proposing this he is opening up a can of worms. If Limited liability is ended for companies then when the wheel turns and the Corbinite left is overthrown the repeal of the 1906 Trade Disputes Act which prevents (for example) the RMT being sued by commuters follows logically from that. He truly is the anti-Bastiat. Zero understanding of second order consequences.

  4. @Sam Jones

    From the CAN website.

    “Richard Murphy can be called on 0777 552 1797”

    In case anyone’s desperate to fund him. I expect he’ll dance around the village green with his trousers round his ankles for a fiver.

  5. Seems like he’s trying to take the non-number bits (environmental statements, gender pay reports, etc) and stick them into the financial numbers bit.
    The problem with that being that the reason they aren’t in the numbers bit already is that they don’t fit or involve so many assumptions that they would mean the underlying numbers are hidden or meaningless and plenty of people (and organisations) cleverer than him have looked at it and come to that conclusion already which is why we have reports that include a range of material not just the published accounts. Not to say you can’t put numbers in just that they don’t impact the current position of the business or are so uncertain at this point they don’t mean anything, so a car manufacturer can say they expect to spend $x billion on the legally mandated switch from ICE to electric by 2050, but doesn’t have to reflect that number in their current accounts right now.

  6. It’s really a culmination of his life’s work.

    He can make bonkers suggestions he won’t have any hand in implementing,

    It appeals to the State getting more power

    it looks vaguely ‘green’, about which he knows nothing but won’t come under any significant scrutiny because who hates dolphins ?

    He gets to bash people who can afford stuff he can’t afford

    He gets to bash auditors, a job he couldn’t hack

    He gets to bash corporations, because err,

    And tax n’ stuff

    All of the above is of course conditional that he can find a sugar daddy who will pay for his shilling.

    The day when he’s drinking Brasso and shouting at the Uber drivers about the Jews like the rest of those hateful leftist cunts can’t come soon enough.

  7. A lot of people mistakenly assume that limited liability also refers to criminal acts which, of course, it does not. Rather, it limits your financial liability to the amount of your investment.

    However, this mostly applies to large listed corporations and substantially large private firms. Try getting a small business loan without putting up a personal guarantee. Banks aren’t going to lend to you if you’re going to insist on your corporate limits to liability.

    Often firms doing business with a smaller subsidiary of a larger corporation will insist on a parent company guarantee. Anyone who has ever done work for real estate developers quickly learns that each new project is in its own legal entity, often very thinly capitalized, and that you should get a parent company guarantee before signing the contract.

  8. And that [limited liability] makes us all richer is why it’s not a cost to us.

    Just looking at that sentence in isolation (without the Richie bollocks), doesn’t that go against what you usually tell us, e.g. in the manner of jobs being a cost not a benefit?

    All activities, procedures and processes come with costs. We need to know reasonably well what those are in order to work out whether they bring a bigger benefit.

    Absolving people of the responsibility of the full consequences of their actions is surely costly when we have pick up the tab.

  9. ‘The objective is to make accounting and business responsible to all in society’

    I get the feeling that when he says “society,” he means “Richard Murphy.”

    ‘accounting and business’

    Separate entities?

    You get what you pay for. Society isn’t paying for the business or accounting, so they can pound sand.

  10. Everything has costs, everything has benefits. We do those things – sensible people anyway – where he costs are greater than the benefits.

    It’s Ritchie making the error here. Sure, OK, limited liability has costs to those who get stiffed. But they’re still richer than they would be in an economy without limited liability. Even to the stiffees the benefits outweigh the costs.

  11. @Tim

    “Even to the stiffees the benefits outweigh the costs.”

    Hmmm. While I see your point – the virtues of limited liability are everywhere, even stuff like diversifying your retirement portfolio would be off limits if each investment you made was potentially toxic, and a world without it would likely struggle to get innovations out to the consumer – I don’t know if this is true for ALL stiffees. Some people get royally stiffed.

  12. We do those things – sensible people anyway – where he costs are greater than the benefits.

    You’ve become a Democrat?

  13. “Sure, OK, limited liability has costs to those who get stiffed. But they’re still richer than they would be in an economy without limited liability.”

    Tell that to the small creditor who has just been stiffed by Mr swish BMW driving business owner whose company has just gone up the swannee for hundreds of K, while his big house, car and fat bank account are in the wife’s name. And then starts up 5 minutes later with a new company as if nothing had happened……..IMO limited liability entities should only be allowed to trade with other limited liability entities, if you want to employ sole traders in your business you should be personally on the hook for all the debts you run up. Hiding behind a limited liability company is the mark of a cunt.

  14. Well, Jim, I guess we could go back to pre-industrial times. But I don’t think you’ll be happy.

  15. It limits your financial liability, it doesn’t remove your liability to be prosecuted for fraud and having your swish house liquidated to pay your creditors; and it doesn’t remove your liability to having your ability to be limitedly liable again in the future removed.

    Remember cheque guarrantee cards? You could write as many cheques as you liked regardless of how much money you have, and your payees would be guaranteed to get that money – until your abuse of that “limited liability” resulted in the removal of your abilty to use it.

  16. @Jim
    Limited liability doesn’t protect directors who’ve been naughty (e.g. trading while insolvent).

  17. “Limited liability doesn’t protect directors who’ve been naughty”

    Yes because who bothers digging into the financial affairs of small town company directors? Maybe if you crash a plc Plod might get involved, or manage to kill someone because your financial shenanigans results in an operational failure, but the average company failure results in zero action against the directors. You’d have to be terminally naive to not realise there’s an entire army of serial company fraudulent businesses out there – start up with company A, take as much cash out as possible, run up as much debt as possible, crash and burn, start again with company B. And they get away with it time after time, and the law allows it. Its legalised fraud on the creditors basically. People who run companies like that need kneecapping.

  18. In the early noughties I was working for a small consultancy (<10 employees) that went titsup, largely due to the bust in IT (and particularly training) after 2000. The amounts involved were small, less than 6 figures, but the receivers still investigated and the directors got a ban.

  19. “but the receivers still investigated and the directors got a ban.”

    And were they found personally liable for any of the company’s debts? If not a slap on the wrists of not being able to be a company director for a few years is hardly the salt mines is it? And still being able to walk away from all their debts with all their assets intact.

  20. Jim. When dealing with individuals or small corporations you should have a contract with terms that the corporate officer signing also personally guarantees that you will be paid. I did that for decades running an engineering firm. Large corporations or government entities won’t let you get away with that, but most smaller ones will, especially if you insist on it. I have sued and successfully collected on such contracts. Sometimes it took a while, but once I won the judgment I slapped a lien on their house, which got paid off eventually with interest.

    Probably any business will have to write off some amount of bad debt, but a small business that enters into an agreement with another small corporation for a volume of business that could bust it if it all goes south, and who does not investigate the financial circumstances of that business before hand, is being a bit negligent themselves.

  21. @Jim
    were they found personally liable for any of the company’s debts?
    No, but they could have been if they’d done something sufficiently wrong. You seem to be claiming that this is never looked for – in my experience it is.

    Now, it may well be that wide boys can steer close to the wind and get away with stuff that they really shouldn’t. The solution to this is better regulation and investigation, not abandonment of limited liability.

  22. Jim, the corporation/anonymous society is one of the West’s greatest inventions. Your attacks are simply BIZARRE.

  23. Limited liability was on of Tim Hartford’s 50 things that made the modern economy series. One of those rare things, a good listen from the BBC and out on podcast. There’s a second series which is just as good.

    Anyway, limited liability is about shareholder’s investments not Directors. The grey area Jim highlights is Director/Shareholders where they abuse the the privilege and I agree, they should be strung up, not least because it could cause a backlash which would be bad for the economy.

  24. @Jim July 13, 2019 at 8:30 am

    +1

    It’s not new, back in 1982ish John Brown Wheels went bankrupt and took down some suppliers too.

    RoPs have a similar game plan: trade undercutting others a bit, collect VAT, PAYE, NI, supplier credit etc – vanish.

    Any doubts – Factor your invoices.

  25. “The grey area Jim highlights is Director/Shareholders where they abuse the the privilege and I agree, they should be strung up, not least because it could cause a backlash which would be bad for the economy.”

    The trouble is that the State writes all these laws onto the statute books, then fails to enforce them. If running a limited liability company in a shady manner was the fast way to life in irons, then guess what, limited liability companies would be run with cast iron probity. But the laws aren’t enforced and the unscrupulous abuse the privilege limited liability gives them. And yes, that does mean that many people regard limited liability as a bad thing, because of its ease of abuse.

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