New Corporate Governance Legislation Now Impacts Large Private Companies
New Corporate Governance Legislation
One of the most significant changes to the way privately owned businesses across the UK must report on how they organise themselves takes effect from.
One of the most significant changes to the way privately owned businesses across the UK must report on how they organise themselves takes effect from this month.
New corporate governance legislation will now start to impact the financial reports of around 1700 large private companies estimates KPMG, as they are now required by the government to include a statement of corporate governance arrangements in their Directors’ Report.
The Companies (Miscellaneous Reporting) Regulations 2018 came into force on 1 January 2019, applying to company reporting for financial years starting on or after this date, meaning the first reports under the new governance landscape will be published this month; a year on.
This change to reporting has been introduced by the government to promote governance best practice in the privately held part of the UK economy, drawing to some extent on the way it has been accepted for many years that publicly owned companies must publish their governance arrangements.
Companies within the scope of the new regulations must outline which corporate governance code they are following, and how they are doing so; or what their corporate governance arrangements are if no corporate code has been applied. Most businesses are expected to adhere to the Wates Principles; a corporate governance framework developed in 2018 by a coalition of private business leaders and representative bodies, led by James Wates CBE (chair of construction firm, Wates).
This is a set of six principles against which companies should report on their approach. They are designed to be flexible enough to allow for adherence despite the great diversity of ownership and management structures within the pool of private companies.
Companies impacted by the new reporting requirements are those with either or both;
- More than 2,000 employees
- Turnover of more than £200m with balance sheet of more than £2bn
Chris Hearld, KPMG’s Head of Regions, commented:
“This legislation represents the next step on the route to encourage private businesses to robustly assess and report on matters that continue to grow in profile as the business environment evolves. It provides a useful framework for achieving this, putting purpose and a broader view of stakeholders at its core. This won’t be new to many private businesses, which are closely engaged with their stakeholder groups but even so they may find it a new challenge communicating how they do so.”
KPMG’s report on the Wates Principles can be found here:
Notes to Editors:
The Wates Principles
Principle one: Purpose
An effective board promotes the purpose of a company and ensures that its values, strategy and culture align with that purpose.
Principle two: Composition
Effective board composition requires an effective chair and a balance of skills, backgrounds, experience and knowledge, with individual directors having sufficient capacity to make a valuable contribution. The size of a board should be guided by the scale and complexity of the company.
Principle three: Responsibilities
A board should have a clear understanding of its accountability and terms of reference. Its policies and procedures should support effective decision-making and independent challenge.
Principle four: Opportunity and risk
A board should promote the long-term success of the company by identifying opportunities to create and preserve value and establishing oversight for the identification and mitigation of risks.
Principle five: Remuneration
A board should promote executive remuneration structures aligned to the sustainable long-term success of a company, taking into account pay and conditions elsewhere in the company.
Principle six: Stakeholders
The board has a responsibility to foster good stakeholder relationships based on the company’s purpose. A board has a responsibility to oversee meaningful engagement with material stakeholders, including the workforce, and have regard to that discussion when taking decisions.
For further media information please contact:
Alison Anderson, KPMG Corporate Communications
T: +44 (0)113 254 2980 / +44 (0)7733 453 065
Follow us on Twitter: @kpmguk @chris_hearld
About KPMG in the UK
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