Auditors can now limit their liability to their audit clients, thanks to a change in the law which came into effect on 6 April this year. This requires the agreement of both the company and its shareholders and some have questioned why companies should agree to a limitation. In-house lawyers will invariably be consulted about this, but what advice might they give and will it really be any different to the advice they commonly give about exclusion clauses for other suppliers or service providers?
Consider a hypothetical example. You are general counsel to a well-known corporate. Your finance director has asked for your advice on two distinct, but related, contractual issues. The first is a significant contract for the provision of IT systems support with a well-known IT supplier; the second is a contract with the company’s auditors. In both cases, the finance director has asked you whether the company should agree to a limitation of liability clause in the contract. One of his concerns is whether he could be in breach of his duties as a director if he agrees to a limitation of liability clause in either contract.
