From 1 January 2019, private companies across the U.K. will be subject to new corporate governance reporting requirements.
These changes are significant and represent a major shift in the way directors and shareholders manage their businesses.
At PwC we've been working with the Financial Reporting Council and our clients to understand the implications of these rules. Suzi Woolfson and Matt Timmons talk through the new rules and what they mean for you.
Suzi: From the 1st of January 2019 private companies across the UK will be subject to new corporate governance reporting requirements. These changes are significant and represent a major shift in the way both directors and shareholders are going to manage their business. So Matt as you know we've be working together a lot over the last few months with the Financial Reporting Council (FRC) looking at the major changes, could you give us a summary of what those major changes are?
Matt: Of course Suzi, Firstly these changes come into effect for accounting years beginning on or after the 1st of January 2019. Secondly there are four new reporting regimes, for many of our clients this is gonna be the first time they have to publicly disclose in their annual accounts and on their website their corporate governance arrangements. For others that have little or no corporate governance in place so they're gonna have to introduce something now.
Suzi: Great can you tell me a little bit more about those for reporting regimes?
Matt: Definitely, for very large private businesses they're going to have to adopt a new corporate governance code. If they don't adopt the code they're going to have to explain why and also set out what their corporate governance infrastructure is. For many of our clients they're gonna have to report actively on how their directors consider and apply their statutory duties across the financial year and there are now two new reporting regimes both focused on employee and stakeholder engagement.
Suzi: Thank you and that's quite a lot of change for someone to think about have you got some practical tips and examples of what people can do?
Matt: Of course, critically for those clients that don't have active board meetings now's the time to start to do so, that's going to be an important change for them and they’re going to have to think carefully about how that impacts their business both operationally and with their shareholders. For lots of clients they're gonna have to introduce possibly director training and also review their corporate governance documents terms of reference delegation of authority articles of association. If they don't have those in place now at the time to introduce them
Suzi: Matt thank you and what would be your pearls of wisdom of what clients should be going to do next?
Matt: Well I think it's important Suzi, you think about the impact here because the FRC's powers are being reviewed. They have both a power of sanction and review. There's potential legal action against the directors for breach of the statutory duties but they're more importantly clients to think about the public perception getting this wrong could be a PR nightmare for them
Suzi: Thank you and the first of January 2019 is actually round the corner so what would be your last words of advice.
Matt: Now is the time take action take a step back think about what you do and what you report already think about what you report in the future and come and speak to us if you need to.
Suzi: Thank you Matt.