Feature


Corporate Law


The changing world of corporate governance


By Emma Grant, Professional Development Lawyer, and Sam Sharp, Solicitor, at Browne Jacobson


Over the coming months many Government departments will be busy making provision for the UK’s exit from the EU – and, while Brexit developments grab the majority of the headlines, separately there is a huge amount of work going on to implement changes to the UK’s corporate governance regime. We only need to recall the media coverage of recent high profile corporate failures, such as Carillion and BHS, to understand why the topic of good governance is high on the political agenda. The reforms are being


introduced through a combination of new statutory reporting requirements and changes to the UK Corporate Governance Code (Code) and cover the broad themes of: Executive pay; Strengthening the employee, customer and stakeholder voice; Improving corporate governance in large privately-held businesses. These entities are not currently


subject to the same level of reporting and accountability requirements as publicly-listed companies - but, if they fail, the negative impact on wider society can be just as significant. The changes primarily impact


larger private companies and listed companies – but understanding their general nature is of interest to all companies regardless of size, given the “cascade” effect we often witness when additional requirements are placed on the largest organisations.


58 CHAMBERLINK September 2018


The new reporting requirements The recently-published draft Companies (Miscellaneous Reporting) Regulations 2018 (Regulations) introduce a variety of new statutory reporting requirements, such as:


New reporting requirements on executive pay – UK incorporated quoted companies with more than 250 UK employees will be required to report annually on pay ratio information comparing the remuneration of the CEO with the 25th, 50th and 75th percentile of the full-time equivalent remuneration of their UK employees. For UK incorporated quoted


companies, there is also a requirement to include an illustration in the directors’ report of the effect of future share price increases on executive pay.


Corporate governance arrangements – certain companies will be required to provide a statement of corporate governance arrangements in the directors’ report and also publish this on their website - setting out which corporate governance code has been applied and how. Companies can choose the most


appropriate governance code for them – and new corporate governance principles for large private companies have recently been published (details are included below).


This will apply to companies


which in a financial year have either more than 2,000 global employees or a turnover of more than £200m globally and a balance sheet total of more than £2bn globally.


How directors are having regard to the matters in section 172 of the Companies Act 2006 (CA 2006) – there will be a new requirement to include a statement in the strategic report on how the directors have had regard to the matters set out in section 172(1)(a) to (f) CA 2006 when performing their duties. The statement should be meaningful, informative and reflect the complexity and size of the company’s business. This will apply to companies currently required to produce a strategic report (except


those qualifying as medium sized).


Engagement with employees – for companies with more than 250 UK employees there is a requirement to include information in the directors’ report on the company’s engagement with its employees.


Engagement with stakeholders – a statement must be included in the directors’ report summarising how directors have engaged with suppliers, customers and others in a business relationship with the company. This will apply to companies currently required to produce a strategic report - except those qualifying as medium sized. These Regulations are expected to come into effect from 1 January 2019.


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68  |  Page 69  |  Page 70  |  Page 71  |  Page 72  |  Page 73  |  Page 74  |  Page 75  |  Page 76  |  Page 77  |  Page 78  |  Page 79  |  Page 80