When the auditor realised the bank had uncollectable debts meaning its receivables were overvalued, the Chairman assured the auditor it would be raised at the forthcoming AGM, and so the auditor gave an unqualified report on the accounts. When the Chairman failed to deal with the matter at the AGM, the bank collapsed.  A court later found that the auditor had a duty of care to the shareholders.

The year? 1895, and the bank, was the London and General Bank.

Audit was a contentious subject in the 19th century, optional, then compulsory, then optional again; but following a number of claims, the matter was settled once and for all by the Companies Act in 1900 making audit compulsory.

I don't think its a stretch to say that the industrial revolution wouldn't have occurred as it did without the progress and development of corporate law. Starting from the Joint Stock Companies Act in 1844, the Limited Liability Act in 1855 and the Companies Act of 1900, the industrial revolution was built on the parallel industrialisation of common investment and collective endeavour. 

Jump forward to 2024 and we are on the threshold of the next major change in direction in corporate history, and pleasingly for a lawyer based in Singapore, Asia is, in part, leading the way. Society now recognises that corporate activity not only generates financial profit and loss, but it also generates impact, both positive and, (more likely), negative on our natural resources, people and the planet: whilst there are obvious sectors, like the extractive industries, mining and oil and gas, that consume significant resources and impact the environment, many others do such as in Singapore the 1.7GW of data centers (today's number) which consumed 7% of total electricity in 2020.

So, the news this week that 12 of the 21 jurisdictions that have announced the adoption of the International Sustainability Standards Board's standards is significant. These are:

• Australia
• Bangladesh
• China
• Hong Kong
• Japan
• Malaysia
• Pakistan
• the Philippines
• Singapore
• South Korea
• Sri Lanka 
• Taiwan

The first two standards, addressing Disclosure of Sustainability-related Financial Information and Climate-related Disclosures have been published and will, similar to the rigour applied to financial information disclosure regulated by the ISSB's sister organisation the IASB's International Financial Reporting Standards, provide a welcome foundation for the standardisation of disclosure by companies around the world.

Assurance, (audit), of these disclosures will be determined by each jurisdiction - Singapore will require scope 1 and scope 2 emissions assurance two years after the commencement of mandatory disclosure (2025 for listed entities and 2027 for large non-listed entities) and so the role of assurance (and the related duty of care) will develop further in the near to medium term.

This is probably the most significant reform in corporate history in my 25 year career. 1844 not only introduced the Joint Stock Companies Act, but also the first ever health and safety laws (Factories Act). I wonder how history will view the last few years' developments and the realisation that corporate activity isn't just responsible for financial performance, but also its impact on people, nature and the climate.

These reforms bring both risk and opportunity and we are advising clients on governance, disclosure standards and contractual protection across these developments and more generally with respect to climate risk. We would welcome the opportunity to discuss your perspective on non-financial reporting and its impact on your business.