Bruce Wallace Associates London
Bruce Wallace Associates London

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November 2020

12 November, 2020

Q: We are a large unquoted company in the process of planning for our 2020 Annual Report (year end 31 December 2020). What do we need to consider in relation to the new energy and carbon regulations?

A: The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 (the “2018 Regulations”) came into force on 1 April 2019 and apply to companies in scope for financial years starting on or after 1 April 2019. The aim of the 2018 Regulations is to increase awareness of energy costs within large organisations as well as provide greater transparency for investors and other stakeholders on business energy efficiency and emissions

Unquoted companies or LLPs are defined as ‘large’ if they meet at least two of the following three criteria in a reporting year:

•a turnover of £36 million or more;

•a balance sheet of £18 million or more; or

•250 employees or more.

Requirements have existed for quoted companies to report on Greenhouse Gas emissions since 2013. These have been updated by the new regulations but are not considered here.

The new disclosures will need to be included in the Directors Report. If the information is considered to be of strategic importance to the company, it can be included in the Strategic Report, with a note explaining this in the Directors Report.

The following information will need to be disclosed:

Total UK energy use.

Greenhouse gas emissions due to UK energy use.

An ‘intensity ratio’ – being a relevant ratio of emissions against a factor associated with the company’s activities. Intensity ratios compare emissions data with an appropriate business metric or financial indicator, such as sales revenue or square metres of floor space.

Comparative figures on energy use and emissions for previous years (these can be excluded for the first year of disclosure).

Energy efficiency action taken in the reporting period, for example a company had installed smart meters across all sites and increased video conferencing technology for meetings to reduce the need for travel between sites.

A statement of the methodologies used in the calculation of these disclosures.

Organisations which use 40,000 kilowatt-hours (kWh) or less a year are exempt under de minimis rules but will need to include a statement confirming they are a low energy user. Public-sector organisations are exempt from the 2018 Regulations.

With investors increasingly expecting information to be disclosed on climate-related issues it is worth noting that the FRC announced in November 2020 that their future work may include undertaking a review of reporting under these new regulations during 2021.

If you need any help with your year-end reporting planning or with any of your compliance or governance policies generally, please contact us. All our contact details are on our website www.brucewallace.co.uk.

October 2020

12 October, 2020

Q: We have a new director joining our PLC board in January, what sort of information should I make available to her?

A: The UK Corporate Governance Code expects all directors of companies with a premium listing to have a "full, formal and tailored induction" and 2018 FRC Guidance proposes "a comprehensive, formal and tailored induction that should extend beyond the boardroom”.

ICSA guidance note Induction of directors (May 2015) contains a lot of practical advice on induction and suggests that the process should aim to build an understanding of the nature of the company, its business and markets, establish a link with the company's people and an understanding of the company's main relationships and ensure an understanding of the role of a director and the framework within which the board operates.

Induction will involve the provision of information, ensuring the new directors is introduced to key stakeholders and company advisers and may include site visits. Key aspects to cover include:

  • Explaining the director’s role and the legal framework and structure of the Group and providing a copy of the constitution documents and other key corporate documents.
  • Brief biographical and contact details of all directors, the company secretary and key executives.
  • Board meetings details and procedural information. Including copies of past board/committee meeting packs and minutes.
  • Supplying copies of Group governance policy documents (e.g. relevant internal rules and procedures of the company and the board, terms of reference, share dealing policy etc).
  • Presentations where senior management teams can brief the newly appointed director on the company's business, significant/emerging risks and key performance indicators.
  • Information on investors to aid understanding of the make-up of the company's shareholder base.

If you need any help with company secretarial or governance matters, please contact us. All our contact details are on our website www.brucewallace.co.uk

September 2020

1 September, 2020

Q: The Directors would like to undertake a board evaluation; how can we do this?

A: At the outset, the Board should consider the purpose for conducting a board evaluation. It may be the Board has been through several changes which its needs to evaluate, or is looking to agree priorities for the future, or comply with its governance code. Whatever the reasons, identifying the purpose of the evaluation will help to focus its structure and ensure there is agreement on the aim of the evaluation.

Whilst the UK Corporate Governance Code specifies evaluation on an annual basis and the Quoted Companies Alliance Corporate Governance Code states that the Board should ‘regularly review’ its effectiveness, there is no set format of how an evaluation needs to be conducted. To date, questionnaires and interviews have formed the basis for an evaluation, but if a Board would prefer an alternative method of evaluation this can be agreed. The Chartered Governance Institute has consulted on ways to improve the quality and effectiveness of board evaluations, so there is some potential for change on this.

Both individual director as well as whole board performance should be reviewed, and keeping the content tailored to the company’s circumstances and relevant to the recent period will ensure better engagement. Any findings from previous evaluations should be considered to ascertain if these have been fully addressed, as well as appropriate questioning on recent challenges, such as crisis management over the past year, and whether there is sufficient stakeholder engagement.

A successful board evaluation can help to improve dynamics as well as ensure there has been appropriate reflection on issues dealt with by the Board. It can also serve to identify whether there is agreement on the Board’s future priorities. Any actions identified as part of the evaluation should have clear ownership and be regularly reviewed over the next year.

If you need any help with your board evaluation, please contact us. All our contact details are on our website www.brucewallace.co.uk.

August 2020

1 August, 2020

Q. The filing deadline date for our subsidiary companies’ accounts is fast approaching and we are struggling to get these finalised, do we need to apply for an extension of time?

A. The Companies etc (Filing Requirements) (Temporary Modifications) Regulations 2020 (2020 Regulations) came into force on 27 June 2020. With effect from this date, filing deadlines are extended if the filing date deadline falls any time from 27 June 2020 to 5 April 2021 (including these dates). Regulation 11 of the 2020 Regulations amends CA 2006, s 442 relating to companies and Regulation 12 amends CA 2006, s 442 relating to LLPs.

The 2020 Regulations extend the filing deadline by three months, to 12 months for private companies and nine months for public companies. The extension granted by the 2020 Regulations applies to the original filing deadline. It will not be added to a filing extension already granted by Companies House.

These are temporary measures and filing deadlines falling after 6 April 2021 or later will not be automatically extended.

The 2020 Regulations also temporarily extend filing periods for confirmation statements, event-driven filing obligations and mortgage charges. Guidance can be found on the Companies House website https://www.gov.uk/government/publications/the-com....

You can find the 2020 Regulations at https://www.legislation.gov.uk/uksi/2020/645/conte....

If you need any help filing your accounts or with any company secretarial matters generally, please contact us. All our contact details are on our website www.brucewallace.co.uk.

July 2020

1 July, 2020

The Wates Principles

Q. We are a large private company and we understand we are required to report against the Wates Principles in our next set of accounts. Can you summarise when these governance principles were introduced and the main issues we need to address?

A. The Wates Principles were published on 10 December 2018, as part of a wider package of Government corporate governance reforms.

The legal requirements, as set out in The Companies (Miscellaneous Reporting) Regulations 2018 (SI 2018/860) (the ‘CMRR 2018’), state that large private companies are required to report on their corporate governance arrangements in the annual report and on their website and to outline which, if any, formal corporate governance codes the company has applied and how it has been applied.

The reporting requirement, that came into effect for accounting periods commencing on or after 1 January 2019, applies to all private companies that satisfy either or both of the following conditions:

  • those companies with more than 2,000 employees; and
  • a turnover of more than £200 million and a balance sheet of more than £2 billion.

The Wates Principles introduce an approach to good corporate governance that provides flexibility and assistance for the large, private, unlisted companies which are subject to the thresholds set out under CMRR 2018 and aim to suit private companies better than the codes used by listed companies, such as the UK Corporate Governance Code or the QCA Corporate Governance Code.

The Wates Principles is a voluntary framework that adopts the ‘apply and explain’ approach. If a company chooses to apply these, they should describe and explain how they have addressed each of the six high level principles in the company’s governance practices. This is in effect to allow for increased transparency for stakeholders and links to how the directors have discharged their section 172 duty.

The principles include:

  • Purpose and Leadership
  • Board Composition
  • Director Responsibilities
  • Opportunity and Risk
  • Remuneration
  • Stakeholder Relationships
  • Engagement

If you need any help with your governance statement or with any of your governance policies generally, please contact us. All our contact details are on our website www.brucewallace.co.uk.

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Martha Bruce

martha@brucewallace.co.uk

Susan Wallace

susan@brucewallace.co.uk

Chloe Higgins

chloe@brucewallace.co.uk

Adrienne Graham

Adrienne@brucewallace.co.uk

Anne-Marie Palmer

anne-marie@brucewallace.co.uk

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