In November 2016, the UK government published a green paper on corporate governance reform focussing on the varied stakeholder voices and corporate governance in large privately-held businesses. The green paper recognised the BVCA’s efforts in improving transparency within the industry through the Walker Guidelines. The BVCA response highlighted the strong corporate governance practices found in private equity-backed business, arguing that any reform should be balanced and not disproportionately impact the competitiveness of the UK.
The government’s response to the green paper in August 2017 laid out two measures applicable to privately held businesses. In June 2018, the government introduced secondary legislation requiring large private companies to report on how their directors comply with section 172 (Companies Act 2006) duties to have due regard tocertain matters, including employees, suppliers and customers, as well as reporting on their corporate governance arrangements.
To aid companies apply and report against a suitable corporate governance framework, the government established a coalition that includes the BVCA, FRC, TUC, CBI and others to develop a new set of corporate governance principles for large private companies. A public consultation on the draft Wates principles (named after the chair of the coalition, James Wates CBE) was published in June 2018. The BVCA response can be found here.
The BVCA has published a technical briefing that summarises the latest narrative reporting requirements for large portfolio companies, including reporting on how directors’ have complied with their section 172 duties and reporting on corporate governance arrangements. This can be found here.
The government also proposed measures to improve corporate governance in firms that are in or approaching insolvency. The BVCA’s response explained why existing law in relation to the limited liability of companies and the duties of a director of an insolvent, or near-insolvent company, is fit for purpose and should not be changed. The response noted the UK is an attractive forum for business restructurings and the proposals could deter investment in UK businesses, particularly private equity turnaround situations.
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