Litigation prompts KMPG to consider company status

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BRITAIN'S second-largest accountancy firm, KPMG Peat Marwick, is considering abandoning its partnership status in favour of incorporating as a company.

The move, largely prompted by a desire to protect the organisation from rising litigation from audit and other clients, will be discussed at a meeting on Friday of the small group of 'general partners' who run KPMG.

A KPMG spokesman said no final decision was likely to result because several other bodies would have to be consulted.

If the idea was still felt to be feasible, it was almost certain to be debated at the annual conference of all 594 of the firm's partners in October.

Incorporation has been an option for professionals under the law and ethical guidelines for some time. But so far only a handful of accountants have taken this route, and KPMG would be the first leading firm to do so - though most of its rivals in the US and Britain are understood to be investigating it.

KPMG'S public acknowledgment of its plans comes as the campaigns being waged by the Institute of Chartered Accountants and the leading firms to reform the law on liability for negligence in audit and other cases appear to be losing momentum.

With the situation in Britain said to be moving towards that in the US, where claims are reported to total nearly dollars 40bn and handling them takes up about a tenth of accounting revenues, incorporation is seen as a more certain form of protection.

Partners have unlimited liability when sued - with the result that they can lose their homes and personal possessions as well as the firm's assets, unlike directors of limited liability companies.

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