Companies are reminded that they have to comply with additional obligations if their corporate governance statement is in a separate report rather than part of the directors’ report.
UK companies with transferable securities admitted to trading on a regulated market are required to publish a corporate governance statement for financial years commencing on or after 29 June 2008 (DTR 7.2). The corporate governance statement must include a description of the board and its committees, the main features of the internal control and risk management systems in relation to the financial reporting process and certain details on share capital.
The corporate governance statement can be either in the directors’ report or in a separate report published at the same time or in the same manner as the annual report. Alternatively, the directors’ report can indicate where such statement is publicly available on the issuer’s website.
Where the company produces a separate corporate governance statement which is not part of the directors' report:
- it must be approved by the board and signed by a director or the company secretary (Section 419A CA 2006);
- a copy, stating the name of the person who has signed it on behalf of the board, must be filed with the registrar of companies (Section 447(1) and (3C) CA 2006); and
- the company’s auditor must give an opinion in its report on the annual accounts as to whether certain information required to be shown in the corporate governance statement (as to internal control and risk management systems in relation to the financial reporting process and share capital structures) is consistent with the annual accounts for the year in question (Section 497A CA 2006).
It may be simpler for companies to make the corporate governance statement part of the directors' report, for example by incorporating it by reference, to avoid these additional requirements for separate corporate governance statements.
Guidance on the responsibilities of auditors in relation to corporate governance statements can be found in Auditing Practices Board Bulletin 2009/4, available here.
