Corporate governance reform: an update for directors of private companies

Illustration depicting corporate governance reform

With new reporting rules on the way, law firm Baker McKenzie offers its guide to the upcoming changes affecting private firms and unlisted plcs

The government has published its new corporate governance reporting requirements for private companies and unlisted plcs in the UK.

Subject only to parliamentary approval now, the new rules will apply to financial years starting on or after 1 January 2019. They introduce the following requirements:

All private companies and unlisted plcs with more than 250 UK group employees must explain in the directors’ report how directors have engaged with employees and had regard to employees’ interests.

They must also state the effects of that regard, including on the principal decisions made in the financial year.

All large private companies and unlisted plcs must explain in their strategic report – and publish on a website – how the directors have had regard to the matters set out in section 172 of the Companies Act 2006 (duty to promote the success of the company for the benefit of its members as a whole).

They must also summarise in the directors’ report how the directors have had regard to fostering relationships with suppliers, customers and others, stating the effects of that regard, including on the principal decisions made in the financial year.

All very large private companies and unlisted plcs must consider whether to comply with the forthcoming voluntary Wates corporate governance principles for large private companies.

They must disclose their governance arrangements in their directors’ report – and on a website – including whether they follow any formal governance code (not necessarily the Wates principles); how they have applied any such code; and their reasons for departing from any part of that code, if applicable.

It should be noted that there are no exemptions for subsidiaries.

Important definitions

A “large” company is one that satisfies at least two of the following criteria:

1. An annual turnover exceeding £36m.

2. A balance sheet total exceeding £18m.

3. More than 250 employees.

A “very large” company is one that is not already subject to a corporate governance disclosure requirement and satisfies at least one of the following criteria:

1. An annual turnover exceeding £200m and a balance sheet total of more than £2bn.

2. More than 2,000 employees.


11 June 2018

The Companies (Miscellaneous Reporting) Regulations 2018 are laid before Parliament.

13 June

The Wates corporate governance principles and guidance for large private companies are published for consultation.

7 September

The Wates consultation ends.

End of December

The final Wates principles and guidance are published.

1 January 2019

The new reporting obligations apply for financial years starting on or after this date.


The first compliant reports are published.


For further information and guidance on the forthcoming changes, contact:
Beatriz Araujo, partner
+44 20 7919 1789

Emily Carlisle, partner
+44 20 7919 1319

Jo Hewitt, partner
+44 20 7919 1597

Click here to read insights from a roundtable on the topic of corporate governance reform

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