New UK Corporate Governance Code Launched For Unlisted Companies
The Financial Reporting Council in the UK has published a new corporate governance code for larger private companies.
In light of recent corporate failures of private companies, the Government noted in its Green Paper that the conduct and governance of large private companies can have a substantial impact on the interests of employees, suppliers, customers and other stakeholders, and as such, there was a case to be made for strengthening the corporate governance framework applicable to such companies. The Companies (Miscellaneous Reporting) Regulations 2018 requires disclosure of the corporate governance arrangements of private companies meeting either or both of the following size criteria:
- More than 2,000 employees;
- Turnover of more than £200 million and balance sheet of more than £2 billion
Qualifying companies are required to apply and report on a corporate governance code, or else explain the reasons for not doing so and explain what arrangements for corporate governance were applied for that year.
Known collectively as the “Wates Principles”, they are more suitable to private companies than existing corporate governance codes that are aimed primarily at listed companies. The six principles are:
- Purpose and leadership
- Board composition
- Board responsibilities
- Opportunity and risk
- Stakeholder Relationships and Engagement
The requirements take effect on 1 January 2019, and so the first reports made under the legislation will not appear until 2020.