Guidance on limited liability agreements

A summary of the Financial Reporting Council guidance on LLAs and the legal opinion we have obtained, with links to the original guidance.

Financial Reporting Council (FRC) guidance

Summarises what the law permits and requires of LLAs
Explains what an LLA should cover
Provides specimen clauses for various types of LLA
Gives the views of a number of institutional shareholders who say they would probably oppose types of LLA other than proportionality
Explains the process to be followed for obtaining shareholder approval, including specimen wording for resolutions and the notice of the general meeting
Setting out some of the factors that will be relevant when assessing the case for an LLA.

Suggests that if directors give shareholders all the information they need to make an informed decision they will not be in breach of their duty to act in shareholders' interests.
Discusses things directors would be expected to consider. This includes the fairness of the LLA, the availability of other terms elsewhere, and the undesirability of changing auditors too often.
Highlights that there is no problem with 'going first'.