ACCA calls for shift away from traditional limited company model

The Association of Chartered Certified Accountants (ACCA) has questioned whether the traditional limited liability company remains appropriate for the future economy. 

A new report from the body argues that current legal forms focus too heavily on financial results.

The report, titled Building Future Business, suggests that existing models lead to damaging outcomes for communities and the environment. 

It proposes a shift toward structures that measure financial performance as part of an interconnected web of wider factors.

According to the research, business models are transitioning from a reliance on labour and goods to a digital economy. 

This shift involves capital-intensive machinery and high energy use, which may require new regulatory and legislative frameworks to maintain public trust.

The association highlighted B Corps and integrated reporting frameworks as potential alternatives to traditional structures. 

To build better business models the report suggested that 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?

Jason Piper, head of tax and business law at 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 have ended up in a place where businesses doing well can undermine the communities they are in.”