ARGA and PIEs: reform of UK corporate reporting/governance regimes

On 18 March 2021, the UK government published its long-awaited consultation with substantial proposed changes to the UK's audit, corporate reporting and corporate governance regimes.

Most changes will initially apply to Public Interest Entities (PIEs) (ie those entities with publicly listed securities in the UK, credit institutions or insurance undertakings). But the government is consulting on whether to extend that definition to include AIM companies with a market capitalisation above €200m and certain large private companies.

The two options proposed for large private companies are:

• Option 1: companies with more than 2,000 employees; or a turnover of more than £200m and a balance sheet of more than £2bn.

• Option 2: companies with both over 500 employees, and a turnover of more than £500m.

The government is also considering whether newly listed companies should have a temporary exemption from some of the new reporting requirements as they don't want to deter private companies from listing.

Key proposals include:

• additional directors' responsibility for corporate reporting and new powers for the regulator to take enforcement action against directors and sanction them;
• new dividend disclosures and a new directors' dividend statement;
• an annual Resilience Statement, to address business resilience over the short, medium and long-term, which would replace the going concern statement and viability statement;
• a three year rolling Audit and Assurance Policy; and
• a new regulator, the Audit Reporting and Governance Authority (ARGA), which would replace the FRC and have additional new powers.

See our insight below for more information.