By 1st January 2019, large companies incorporated in England and Wales will be obliged to comply with new governance rules aimed to improve transparency and accountability across the UK.
The initiatives will apply equally to public companies and private limited companies provided they meet certain thresholds:
Engaging with employees
All companies with 250 employees or more will need to disclose the following information in their directors’ report showing how they have done the following:-
- consulted with employees about company decisions that are likely to affect them;
- sought and encouraged employee involvement in the company’s performance; and
- sought to bring economic and financial factors affecting the company’s performance to the attention of the employees.
In order to achieve the above it is recommended that the following provisions be put in place to gather employee views:-
- appointing a director to represent the workforce or designating a non-executive director; or
- appointing a formal advisory council to represent employees
Engaging with customers and suppliers
All companies who meet at least two of the following criteria will need to disclose how they deal with the company’s business relationship with suppliers and customers:
- turnover of more than £36 million;
- balance sheet of more than £18 million; or
- more than 250 employees.
- turnover of more than £36 million;
- balance sheet of more than £18 million; or
- more than 250 employees.
Promoting the company’s success
All companies who meet at least two of the following criteria will need to disclose how they comply with their duties under the Companies Act 2006:
The purpose of such reporting will be to explain how the company has identified and sought the views of key stakeholders and how this has affected the decision making by the board.
Comply with the governance code or explain
All companies who have either 2,000 or more employees globally or a turnover of more than £200 million globally and a balance sheet over £2 billion globally will need to disclose how they comply with a corporate governance code. Alternatively, companies will be required to confirm why a code is not applied and what arrangements are implemented instead.
The Wates Corporate Governance Principles are in the process of being finalised and have been drawn with large private companies in mind. These principles are not intended to displace any existing codes of practice, which may be more appropriate to the company, but merely to provide guidance.
Now is the time for businesses to review their corporate governance frameworks to establish whether any changes are required to comply with the forthcoming rules. As with other similar developments in recent years standard templates will be inserted into Annual Reports with content adjusted as appropriate.
If you require further information on anything covered in this article please contact our Company and Commercial Law team at info@ramsdens.co.uk or call 01484 821 500.