The response date for the Government’s consultation on “restoring trust in corporate governance” closed on 8 July 2021. There is a widespread concern at the sweeping nature of the reforms and potential consequences, both intended and unintended. The Government proposals risk layering additional regulation upon companies which are already struggling to adapt to the volume of change in this area.
There are many technical aspects of these latest proposals that will take time to finalise and parliamentary time to implement, and there will likely be a phasing in of the requirements during a transitional period. That gives time to take advice on the detail. However, what can companies and their owners and managers do in the meantime to prepare?
The proposals are aimed at companies deemed to be of ‘public interest’, which the Government propose should extend to include larger private companies as well as publicly traded companies. The proposals have come out of a desire to react to the few but very high profile recent corporate failures. Whether or not the proposed changes would have prevented such failures can be debated, but it is clear that companies need to both do, but almost as importantly be seen to be doing, the ‘right thing’.
Charles Russell Speechlys and IQ-EQ jointly published a white paper in April looking at ESG, which highlighted that good governance and environmental and societal goals can lead to commercial success, and that both institutional and private investors in companies are increasingly focussed on ESG factors when making investment decisions.
A continued focus on ESG factors relevant to your business, incorporating them into your business plan and spending time considering how to clearly demonstrate that focus to your stakeholders will therefore likely pay dividends notwithstanding the outcomes of this consultation. Reports, the processes that underpin them and internal governance structures should be sufficiently clear and robust; and we are of course here to help and support you in ensuring that is the case.
A copy of the consultation can be found here and a copy of the response to the consultation from the City of London Law Society and Law Society’s Company Law Committees (which each include a partner from this Firm) can be found here.