Firms in receipt of such services from London Registrars as register of shareholders maintenance, registered office addresses and the preparation and submission of the annual Confirmation Statement may also be appreciative of corporate reporting guidance on the subject of going concern and material uncertainties.

Indeed, anxiety about this topic is likely to be even more pronounced amid the current unpredictability and chaos brought by the ongoing COVID-19 pandemic.

Defining ‘material uncertainties’

International Accounting Standard 1: Presentation of Financial Statements, otherwise known as IAS 1, generally requires financial statements to be prepared on a going concern basis. The exceptions to this would be if management intends to liquidate the entity or cease trading, or if it has no realistic alternative but to do so.

However, the term “material uncertainties” is not always well understood. This is especially unfortunate given the Financial Reporting Council’s (FRC) expectation that the current circumstances will probably cause more companies to disclose material uncertainties to going concern.

The term refers to certainties related to events or conditions that may cast considerable doubt on the ability of an entity to continue as a going concern. In other words, if a board foresees possible events or scenarios – aside from those that are only remotely likely to occur – that could lead to corporate failure, then the board should disclose such information.

Assessing the events that could precede corporate failure

When boards are seeking to identify such adverse events or scenarios, they may also consider what mitigating responses might realistically be open to them. Events can lead to corporate failure in part due to their timing, but also because of the scale of their adverse impact on the company and its ability to avoid liquidation.

A board assessing the potential existence of material uncertainties is advised to take account of both the uncertainty itself, and the likelihood of any realistically possible response actually succeeding in mitigating the uncertainty.

The unpredictable effects of COVID-19 have made such assessments even more difficult to make. Even at this stage of the pandemic, considerable uncertainties still exist about such factors as the extent and duration of social distancing measures, as well as how the outbreak will continue to affect both the economy and asset prices generally.

Boards will therefore need to carefully consider how these matters could impact on their company’s specific circumstances, bearing in mind their current and potential cash resources. The situation can differ greatly from one firm to the next with regard to its access to existing and new financing facilities, revolving facilities, invoice discounting and reverse factoring.

What boards must disclose

Not only should a given board appropriately disclose information on its access to and use of financing facilities like those referenced above, but it should also consider its eligibility for announced government support measures and the impact of various potential scenarios.

If the board concludes that a material uncertainty does exist, this should be disclosed in terms that are as specific to the entity as possible. Such a disclosure should be insightful on how and when the given uncertainty might crystallise, and the impact it could have on the company’s resources, operational capacity, liquidity and solvency.

Alternatively, the board may conclude that no material uncertainty exists that meets the criteria for disclosure. If, however, such a conclusion required the application of significant judgement, then this judgement should be disclosed in accordance with IAS 1, paragraph 122.

The provision of such disclosures will make it easier for financial statement users to fully understand the pressures on the company’s liquidity, viability and solvency.

For further guidance, please contact our team

Would you appreciate additional advice, assistance or clarification in relation to the above? Or are you interested in finding out more about such company secretarial services of ours as minute book maintenance, Companies House filings maintenance and register of shareholders maintenance?

If so, you are very welcome to get in touch with our experts in corporate governance, risk and compliance today, whether by phone, email or fax.

May 2020

Just one of the many aspects of your organisation’s corporate reporting that merit careful consideration during the coronavirus crisis, will be its approach to its strategic report and viability statement.

The adoption of a forward-looking outlook is, of course, crucial for a strategic report at any time, but particularly so in the exceptional circumstances that companies now find themselves in.

Furthermore, a strategic report compiled at this time should be entity-specific, in acknowledgement of the widely varying impacts of COVID-19 on individual companies.

It must be especially considered that not all companies have the same capacity and depth of resources to carry out mitigation plans in relation to the pandemic, in addition to withstanding the outbreak’s other effects.

So, what should your firm’s priorities be for this area of reporting?

In outlining its principal risks and uncertainties, your company will need to account for the specific resources, assets and relationships that the corona virus outbreak is putting at greatest risk, while considering what measures can be adopted to protect them.

A given company’s ability to not only survive the present uncertainty, but also to rebuild its business once the worst of the pandemic has passed, could be largely dependent on how well it protects and retains key personnel, and the associated corporate memory.

All of your company’s stakeholders, including investors, will wish to be well-informed on how the workforce is being retained and supported.

However, the present systematic uncertainties may not leave boards confident in stating a reasonable expectation that their companies will be able to continue in operation and meet their liabilities as they fall over the coming assessment period.

What is the Financial Reporting Council’s advice?

In relation to the “viability statement” that is required for compliance with the UK Corporate Governance Code, the FRC stresses the need for boards to have a “reasonable expectation” of the viability of their companies over the period of assessment.

Nonetheless, the regulator acknowledges that amid the current emergency circumstances and a pace of change that many companies have never before experienced, any reasonable level of expectation will inevitably carry a much lower level of confidence.

The body has also emphasised the importance of boards being clear about the specific circumstances of their companies and the extent of uncertainty about the future.

Furthermore, the FRC has said that a board presenting its company viability statement should also highlight any qualifications or assumptions as necessary.

Boards are advised, when describing any qualifications to their statements, to describe the predictions’ limits, as well as the level of confidence with which they have been made, and the uncertain future events of potentially critical relevance to viability.

Along similar lines, boards should explain the key assumptions made and the future scenarios borne in mind. Many firms, for instance, already develop their statements with the assistance of scenario and stress testing, which companies should continue doing as far as practicable.

Finally, it is also good practice for boards to use reverse stress testing as a means of identifying future scenarios that could precede corporate failures.

Request the help of our trusted corporate governance professionals

These current circumstances, of all circumstances, necessitate fuller disclosure from companies of all sizes and sectors.

Get in touch with our experts in Companies House filing maintenance and related services today, by emailing [email protected], and we will be pleased to lend you the benefit of our specialised and hard-won know-how.

April 2020

The World Health Organization (WHO) has long declared the current widespread coronavirus outbreak – associated with the illness Covid-19 – to have reached the status of a global pandemic, and in recent days and weeks, we have begun to see the very real consequences for the economy.

Retailers, restaurant owners and other tenant businesses have had to deal with unprecedented disruption as customers have chosen to keep their distance from such crowded spaces as shopping centres, high streets and retail parks.

Indeed, many such firms, ranging from pubs, restaurants and gyms to theatres and leisure centres, have now taken the step of closing in response to Prime Minister Boris Johnson’s recent advice to them to do so, as the government seeks to minimise the spread of Covid-19.

Meanwhile, at the time of typing, other retailers were officially allowed to remain open. However, a large proportion of these businesses – including such household names as New Look, The Body Shop and HMV – have made their own decisions to temporarily close their stores.

Managing the implications of this monumental and fast-moving situation

Notwithstanding the measures already announced by government in an attempt to support vulnerable businesses, if you are a tenant of a commercial lease, the sharp decline in footfall and the associated decrease in customer numbers may be forcing you to turn to your landlord for assistance.

If this describes your predicament, there are various questions that you may have as this fast-moving situation evolves. You may be unsure, for instance, whether you are able to vacate the premises and terminate the lease, or whether your rent will be suspended.

You may also be anxious to know whether any “keep open” obligation in your lease would require you to stay open. If you are presently negotiating a new lease, meanwhile, you might be curious to know whether any particular new protective provisions should be added to it.

The answers to these questions will differ from one lease to the next. However, below, we have set out some general information broadly applicable to a standard modern commercial property lease.

Are we able to vacate the premises and terminate the lease?

A tenant attempting to successfully argue for their commercial lease to be terminated in these circumstances would need to prove that:

• there has been a significant change in their rights and obligations under the lease, and it is impossible for them to perform any or all of their obligations under the lease. This would mean that the lease is deemed “frustrated” and could be terminated; or
• this global pandemic triggers a “force majeure” boiler plate clause in the lease. This is a clause that says unforeseeable circumstances have prevented the tenant from fulfilling their obligations under the lease. It should be noted that many modern commercial leases lack a “force majeure” clause.

The current consensus in the legal community seems to be that tenants would not be able to prove either (a) or (b) applies to their own commercial lease. However, this may be subject to change as the situation evolves.

Can we have our rent suspended?

In the case of most modern commercial leases, damage or destruction must have occurred to the premises in order for rent to be suspended in accordance with the lease.

While there are normally several caveats and varying circumstances that will dictate whether the rent can or cannot be suspended, the Covid-19 outbreak does not meet the requirements for rent suspension under a standard commercial lease.

Are we required to stay open if there is a “keep open” obligation in our lease?

The presence of such a provision in a commercial lease could be a particular flashpoint in the current circumstances for landlord-tenant disputes. In this instance, it is advisable for tenants to follow the official guidelines laid out by the government, health authorities and WHO.

Recent years have seen fierce debate about the enforceability of “keep open” clauses, and the ongoing international health crisis is likely to return this subject to the forefront of discussion.

Nonetheless, firms should seek legal advice prior to any decision to close premises, unless the landlord and/or the relevant authorities advise otherwise.

Should we add any new provisions to a lease that is currently being negotiated?

The simple answer to this is “yes”. As a tenant, you should absolutely be looking to add provisions into any new lease that you are presently negotiating, as well as any other clauses that might now be considered topical and relevant.

Don’t hesitate to contact our team for further specialised advice and guidance

Whatever challenges the ongoing Covid-19 outbreak is likely to bring for your firm, here at London Registrars, we can provide the solutions and expertise that will help you to navigate the safest route through the disruption for you, your business and your staff.

Contact us now to learn more about our business support, legal support and company secretarial services, the latter encompassing every key service from registered office addresses to the preparation and submission of the annual Confirmation Statement and minute book maintenance.

April 2020

In one of our previous blog posts, we explored some of the effects that the #MeToo movement of recent years could have on relationships in work settings – including whether the ‘office romance’ may be set for decline.

There were certain questions that we didn’t address in that piece, however, with one of these being what would constitute a serious, long-lasting and therefore relatively ‘acceptable’ relationship in the workplace.

This is as opposed to the romantic relationships and affairs in direct reporting lines or those which create conflicts of interest, which tend to be much more frequently frowned upon. In short, is it possible for employers to effectively police what can be considered an ‘acceptable’ workplace relationship?

Employers are presented with a difficult balancing act

The management of workplace relationships can be a real dilemma for many organisations.

As an employer yourself, you may be concerned to ensure that business interests are protected, employee productivity and morale maintained, and conflicts avoided. But it is also necessary for an employer to respect an employee’s right to a private life.

This in turn raises the question of whether employer practices that interfere with the right of an employee to form relationships infringe the right to respect for private and family life under Article 8 of the European Convention on Human Rights.

What other concerns are businesses likely to have?

Another reason employers need to carefully consider issues that arise around employee relationships, is so that they are not left vulnerable to claims for unfair dismissal.

There are certain circumstances in which a relationship between employees may constitute a fair reason for dismissal, particularly where this would represent a breach of a consistently and notoriously applied company policy.

However, employers still need to follow a fair process and ensure consistency with regard to how they handle office romances, which should include first considering alternative options to dismissal.

The employer may consider whether the employee in question could be redeployed, for example, or whether reporting lines could be altered to avert a potential conflict. If such a conflict is identified, the employer should also consider whether this would give rise to a real commercial risk.

There are various means by which employee relationships may be dealt with fairly

While policies addressing workplace discrimination and sexual harassment remain imperative, an employer may also consider putting in place policies that set out acceptable standards of conduct with regard to consensual relationships between employees.

Some employers may adopt a stance, for example, of completely prohibiting employee relationships, especially in circumstances where a conflict of interest may arise – for instance, when there is a difference in seniority between the employees involved.

For other employers, however, the expectation may simply be that employees disclose any relationships with colleagues to HR.

Then, there is the situation in the United States, where firms sometimes use so-called “love contracts” or “consensual relationship agreements” to get employees to confirm that the given relationship is consensual. This particular measure is designed to give the employer a degree of protection against any future sexual harassment and discrimination claims.

Managers may also benefit from training in relation to how to deal with disclosures about consensual relationships and reports of sexual harassment, which could help to address any possible issues before they arise.

Ask us how we could assist you with the preparation of suitable policies

Whatever decisions you ultimately make as an employer to tackle issues like these, you will stand the best chance of avoiding workplace conflicts in the context of employee relationships if you have clear policies in place from the outset of the employment relationship, outlining acceptable standards of conduct. Such policies should also be consistently applied in case of any issues.

Our team here at London Registrars is well-equipped to help organisations to devise the most appropriate policies for dealing with employee relationships.

To learn more about our wide-ranging company secretarial and other business and legal support services – also encompassing company secretarial practice for PLCs – please do not hesitate to call us on 07415 107 436, or to email us your query.

April 2020

There is never a greater need for clear leadership, strong governance and informed decision-making than in times of trouble, as firms seeking company secretarial subscriptions – one of London Registrars’ core services – have had reason to appreciate in recent weeks.

Widespread disruption to working practices, as well as frequently changing resource demands, necessitate new forms of management and control. This is all the more reason for your organisation to carefully consider the various elements of its corporate governance during such testing times.

Management information

The present circumstances may have disrupted your company’s usual flow of management information.

Boards planning their route through the current emergency with a view to reactivating their full business activities will therefore need to consider how they can maintain and/or complement such missing information, as can also be crucial for the preparation of financial statements.

Risk management and internal control systems

The movement of staff and some business locations being rendered inaccessible may lead to the relaxation of existing risk management processes and internal controls.

Such changes may be unavoidable or regarded as necessary to preserve some level of operations in the short term. However, we would advise boards to carefully monitor these changes while implementing any alternative mitigation controls needed to ensure an effective control environment.

Dividends and capital maintenance

While many firms have already sought to support their balance sheets and maximise financial flexibility by adjusting their approach to dividends and shorter-term dividend policies, other companies may have proposed, but not yet made, a dividend.

If the latter is the case for your organisation, it is crucial for directors to consider the company’s position – not only at the time of the dividend being proposed, but also when it is made. If the company is no longer able to pay a dividend, any such plans should be halted by the directors, with this being appropriately communicated to the market.

Corporate reporting

Investors’ key information requirements are those related to companies’ liquidity, viability and solvency. However, it is also difficult for boards to easily predict how long or damaging the COVID-19 pandemic will be, including its impact on the global economy.

Nonetheless, investors can still reasonably expect companies to be able to articulate what they expect the potential impacts to be on their particular business in a range of scenarios.

The Strategic Report

While it is always crucial for the Strategic Report to be forward-looking, this importance heightens in crises like the present one. An entity-specific approach should also be taken, given that while all businesses and individuals will be affected by COVID-19, there will likely be significant differences in the critical implications from one company to the next.

This, in turn, means different organisations will need to set out different plans for mitigating the effects of the Corona virus. Firms will also vary in their capacity to follow such plans and the level of resources they have to withstand the ongoing effects of the pandemic.

Would you like to take advantage of the first-hand know-how in these aspects of corporate governance that the London Registrars team can lend you? If so, please note that we remain available to serve your firm’s wealth of requirements, including through company secretarial subscriptions, when you contact our professional and friendly team.

April 2020

Considerable disruption to companies’ usual management and governance processes has taken place as a result of the unprecedented uncertainty brought about by the COVID-19 outbreak.

So, when boards are looking to maintain strong corporate governance in such a time of crisis, what should some of their key focus areas be with regard to the preparation of their annual report and other corporate reporting?

The main steps that boards should take

There are various measures that we would advise boards to adopt during this time to ensure the highest possible standards of corporate governance are maintained within their companies.

Such steps should include the development and implementation of mitigating actions and processes to ensure the continuation of an effective control environment. You are urged to look afresh, for example, at key reporting and other controls that you may have historically depended on, but which may not be effective in the current drastically changed circumstances.

It is also important to think about how you will continue to secure reliable and relevant information for your management of the future operations, including the flow of financial information across major subsidiary, joint venture and associate entities.

Capital maintenance also ought to be a significant priority for boards at this time of crisis. You must ensure, for instance, that sufficient reserves are available at the time of the payment of the dividend, rather than merely when it is proposed. Furthermore, there have to be sufficient remaining resources to meet the company’s needs.

What about your firm’s corporate reporting during this time?

It is especially difficult right now to make forward-looking assessments and estimates for the purposes of financial statements and other corporate reporting.

We would therefore advise boards to focus most on those areas of reporting that are of particular interest to investors, as well as to provide clarity around their use of key forward-looking judgements.

It is especially crucial in the present moment, for instance, for narrative reporting to provide forward-looking information that is specific to the entity, and which is insightful in relation to the board’s assessment of business viability and the methods and assumptions that underpin this assessment.

There are also going concern and associated material uncertainties to consider, and certain matters to think about when confirming the preparation of the financial statements on a going concern basis.

Also heightened during this time of crisis, is the importance of providing information on the significant judgements applied when financial statements are being prepared, in addition to sources of estimation uncertainty and other assumptions made.

Finally, companies will also need to determine the appropriate reporting response to events after the reporting date, and the extent to which it may be appropriate to make qualitative or quantitative disclosures.

Don’t hesitate to seek out London Registrars’ company guidance and services

Here at London Registrars, we are pleased to be continuing to provide organisations with the benefit of a comprehensive range of company secretarial services during this time of uncertainty.

Contact our professional, capable and friendly team today to discuss your requirements in relation to such services as the maintenance of statutory registers, ensuring timely filings at Companies House, and forwarding any mail received from Companies House, HMRC and the Courts Service.

April  2020

It has been just over two years since the widespread allegations of sexual abuse against film producer Harvey Weinstein effectively launched a whole new era, summed up by the hashtag #MeToo.

The movement has largely focused on non-consensual actions such as discriminatory treatment, sexual harassment and assault. However, recent developments have shown that there could be reason for concern even in instances where relationships between colleagues are consensual.

The case of McDonald’s and Steve Easterbrook

Late last year, US fast food giant McDonald’s fired the British businessman, Steve Easterbrook, who had served as its president and chief executive since 2015, after he had a relationship with an employee. While the corporation said the relationship was consensual, it added that he had “violated company policy” and shown “poor judgement”.

Mr Easterbrook delivered considerable success for the company over his four-year spell at the helm, with the corporation’s share price reportedly doubling during this time.

Details about the relationship were not disclosed. However, it appears that McDonald’s has a standard policy prohibiting dating or sexual relationships between employees who have a direct or indirect reporting relationship, and that it has decided to take a zero-tolerance approach.

What it could all mean for firms – including your own

Office romances are hardly a recent phenomenon, of course, and nor will Mr Easterbrook be the last employee to be involved in one. Indeed, it has been said that between a quarter and a third of all long-term relationships begin in the workplace.

In the #MeToo era, however, such relationships raise difficult questions, including whether they are ethical or should be characterised as misconduct, or even gross misconduct. In association with this, many have asked whether dismissals for behaviour like Mr Easterbrook’s will become more frequent.

#MeToo has undoubtedly served to heighten awareness of these issues, which may lead to the adoption of more hard-line approaches by employers. Furthermore, with many relationships today now starting online, one might ask whether the office romance will become less common, thereby encouraging employers to be less tolerant when issues with workplace relationships do occur.

There’s no question that relationships between workers are often problematic for employers. They can cause disruption and discomfort among co-workers, while also undermining team hierarchy and impacting on retention. Conflicts of interests can also arise, and if a workplace relationship ends badly, there can be a heightened risk of dispute and litigation.

Turn to London Registrars for the most informed assistance and advice  

Is this an area of concern for your own organisation, and are you presently considering the best ways for your firm to respond to the challenges that employee relationships can pose?

If so, you may wish to talk to the London Registrars team about how we can provide the business support services to help – including by assisting in the preparation of appropriate policies. Call 020 7608 0011 or email [email protected] today, to learn more about our specialist expertise.

11 March 2020

If you find yourself involved in a small claims dispute in the civil courts, you may be interested in a free service known as the Small Claims Mediation Service.

Introducing the Small Claims Mediation Service

As its name suggests, the Small Claims Mediation Service exists to help parties to attempt to resolve a small claims dispute without it going to court. For these purposes, a small claim is defined as a money claim for below £10,000.

It is important to appreciate, first of all, that a mediator is not a judge. They are not responsible, in other words, for deciding who is right or wrong, and they do not take sides.

They may not be very knowledgeable about the claim, and are often not trained in law or possess any particular legal expertise. Instead, mediators are known for their negotiating skills, which enable them to assist the parties in disputes to reach settlement terms.

The mediator will seek to break down barriers between the parties and encourage them to outline what it is that each of them is seeking. This will then allow the mediator to explore whether any middle ground exists that could create scope for a deal to be struck.

Mediation is a route with a proven track record of helping parties involved in small claims disputes to resolve their disagreement and reach terms of settlement, as an alternative to going all the way to trial. While it is by no means guaranteed that any given claim will settle at mediation, many claims do.

When should you consider using this service?

 It is best for mediation to take place at the earliest opportunity, for the benefit of everyone concerned. The settlement of a case after a defence has been filed will mean there is no need for witness statements and documents to be prepared, as well as – of course – the trial itself.

Successful mediation will therefore save time and expense for not only the two parties, but also the court service.

While judges cannot force parties in a small claims case to use the service, they can encourage the parties to take advantage of this alternative dispute resolution procedure.

As a general rule, it is recommended that the parties involved in a small claims dispute try this court-provided mediation service, not least given that it is – after all – free.

Ask us for further guidance and support in relation to the running of your business

 Our team of business support professionals and company incorporation agents here at London Registrars can play an integral role in helping you to get more out of your company’s operations.

Don’t hesitate, then, to enquire today about our company secretarial, business formation and other support services that could make a significant difference to your efforts to power your firm to success in 2020 and beyond.

4 March 2020

The Financial Reporting Council (FRC) has published its annual review of the UK Corporate Governance Code. In doing so, it urged firms to enhance their governance practices and reporting in order to demonstrate their positive impact on the economy and wider society.

What have firms been told to do?

The independent regulator said that while the bar had been raised ‘considerably’ by alterations to the 2018 UK Corporate Governance Code leading to some high-quality reporting, there was a need for more emphasis to be placed on longer-term sustainability.

Such a sustainability focus, the body said, needed to encompass such matters as stakeholder engagement, diversity and the importance of corporate culture, and that it expected these changes to ‘take time to bed in’.

The UK Corporate Governance Code was updated to aid in building trust in business by forging strong relationships with key stakeholders. It urged firms to align purpose, strategy and culture in addition to promoting integrity and valuing diversity as part of a focus on long-term sustainability.

The FRC’s annual review looked into reporting against the 2016 Corporate Governance Code and assessed FTSE 100 ‘early adopters’ of the modified 2018 Code. This revised Code came into force in 2019, with all premium listed companies set to report against it in 2020.

Some eye-catching highlights in the FRC’s analysis  

The regulator said it had found some good examples of reporting by firms that were increasingly using incentives relating to non-financial matters and embracing a longer-term strategic perspective.

Many companies, however, were evidently grappling with defining purpose, and what an effective culture means, the body criticising some firms for ‘substituting slogans or marketing lines for a clear purpose’.

The FRC added that the companies it examined were still insufficiently considering the importance of culture and strategy and the views of stakeholders. It said that in the wake of the regulator’s 2016 report on culture, organisations should be commenting on culture, in addition to outlining how they are monitoring and assessing it.

A lack of reporting on diversity also disappointed the regulator, which nonetheless said that “those companies that did report well had clear plans to meet targets – beyond just gender – and understood the long-term value of diversity”.

It was noted, too, that many firms described the use of engagement surveys as an effective means of gaining insight into employee engagement and culture. However, while the FRC said such surveys can be useful, it warned against the use of them in isolation, explaining that “companies must be able to demonstrate that the engagement methods used are effective in identifying issues that can be elevated to the board, and how this affects company decisions.”

Companies urged not to pay mere ‘lip service’ to the Code 

Chief executive of the FRC, Sir Jon Thompson, said of the review’s findings: “While there are examples of high quality governance reporting from ‘early adopters’, looking ahead, we expect to see much greater insight into governance practices and outcomes reporting on a range of key issues from diversity to climate change.”

“Concentrating on achieving box-ticking compliance, at the expense of effective governance and reporting, is paying lip service to the spirit of the Code and does a disservice to the interests of shareholders and wider stakeholders, including the public.”

Are all aspects of your own organisation’s governance and reporting well aligned with the principles of the latest UK Corporate Governance Code, or would you possibly benefit considerably from the know-how in this area of our own experienced professionals here at London Registrars?

Either way, we would be delighted to talk to you about our wealth of company compliance services, to help to ensure that the most specific and demanding aspects of corporate governance are not a cause of headache to you and other stakeholders in your organisation in 2020. Simply email [email protected] or call 020 7608011 for further information.  

23 January 2020

On 12 September 2019, the Quoted Company Alliance (QCA) released a new and updated version of its Audit Committee Guide. This updated version of the guide, which is designed to help audit committee members, and especially the audit committee chair, to be more effective in their roles, succeeds the version dated November 2014.

The Guide outlines what the QCA regards to be best practice and is intended to accompany the organisation’s Corporate Governance Code.

How does the Guide differ from the 2014 version?

There are various respects in which the newly published Guide has been altered compared to its predecessor – including on such subjects as audit committee effectiveness, roles and responsibilities, risk management and internal control.

The new Guide, for instance, states that audit committees are most effective when they consist of a minimum of two independent non-executive directors. It underlines the importance of an adequate balance of skills, as well as the need for ongoing improvement.

Meanwhile, the updated Guide has also expanded the roles of the audit committee, its chair, the finance director and the company secretary. In this section, which will be of interest to those considering or drawing upon London Registrars’company secretarial expertise, the document states that the company secretary is not normally, and should not be, a committee member. Nor, unless this is impractical, should the company secretary be the finance director.

The parts of the document dedicated to risk management and internal control has also undergone significant expansion. It recognises, among other things, the dynamic and evolving risk landscape and the requirement for companies to think about risks in their extended business.

Building on this subject, it is advised in the Guide that the audit committee obtains a clear understanding of threats and opportunities, their potential impact and monitoring. Every committee meeting should also consider any new risks and any changes to the impact of risks.

The 2019 version lacks the anti-bribery and anti-corruption section that was contained in its 2014 counterpart, and the whistle-blowing section has also been reduced.

But those are not the only notable changes 

Looking elsewhere in the Guide, a new section has been introduced on the subject of the audit committee’s relationship with external auditors, largely incorporating guidance from other sections of the 2014 version. New provisions are outlined here on tendering.

The annual cycle is also addressed in the latest document, this section’s guidance largely resembling that of the previous version. Further guidance does appear, however, in relation to new accounting policies, the payment of dividends and the audit opinion.

There is also a section on the audit committee report, covering additional features of the report. These features are with regard to auditor rotation, appointment, tendering, the risk and control framework and processes, and the internal assurance or audit function.

Finally, changes can also be found in the appendices: Appendix A (Work programme for the audit committee), which includes additional agenda items for the sixth month of the financial year in relation to approving audit fees and non-audit service provision policy, and Appendix B (Induction framework information pack). The information in Appendix B was previously included in the body of the Guide.

Contact London Registrars for further related guidance and know-how

There is much in the Guide that is of relevance to non-listed companies and we would advise you to consult London Registrars who can also give you the benefit of more comprehensive assistance and advice in respect of any of the points contained in the document.

Call our experienced professionals today on 020 7608 0011, to discuss the far-reaching company secretarial support that we can provide to free you up to focus more closely on your core business.

13 January 2020