What are the new rules?
The UK Government is seeking to restore trust in big business by requiring all large companies, whether listed or not, to show that they operate responsibly. To this end, it has published new legislation which will require large UK private companies to:
- report on their corporate governance arrangements, and
- explain how their directors comply with their statutory duty to have regard to stakeholder interests
To help private companies apply and report against a suitable corporate governance framework, new voluntary Principles have been developed.
The new rules are part of a wider package of Government corporate governance reforms. The reporting obligations began to apply from the beginning of 2019.
Which companies must report?
UK-incorporated companies (but not LLPs) will need to check whether they fall under the relevant tests. Overall, the provisions are designed to catch only large companies, but, confusingly, different tests apply to the different parts of the reporting requirements. For a quick summary, see the box below:
|Which companies are caught?
|Corporate governance arrangements
All non-listed UK companies meeting either of two thresholds:
|How directors when promoting the success of the
company took stakeholders into account
(required by S.172 CA 2006) - two separate reports
All UK companies unless they qualify as medium-sized and meet 2 out of these 3 tests:
|All UK companies with at least 250 UK group employees
Private company governance
Do you know if the new corporate governance requirements for large unlisted UK companies may apply to your business? And how the Wates Principles fit in?
Watch our short, animated guide for an overview of the key points and what to think about next.
Hear Counsel Lucy Reeve explain more on the changes affecting large private companies.
Lucy Reeve Speaks