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The Government has today released its response to the BEIS “Restoring trust in audit and corporate governance” consultation. The consultation - which ran for four months last year - aimed to improve governance and reporting standards but contained some proposals which significantly concerned small and mid-cap directors and the wider ecosystem as the reforms would mean vastly increased regulatory and administrative burdens.
In the Quoted Companies Alliance's (QCA's) response, we argued that small and mid-sized quoted companies should be excluded from the potentially damaging reforms, and that they should be targeted towards companies who genuinely impact the wider public (Public Interest Entities or PIEs).
It is encouraging to see that the Government has taken our concerns on board. Having weighed the views of consultation respondents, the Government has reconsidered its expansion of the PIE regime from the €200 million threshold for AIM-quoted companies originally proposed. The test of 750+ employees and £750+ million in turnover has been taken forward and ensures that additional burdens will focus on companies that would impact a significant number of employees, suppliers, customers and potentially have a knock-on effect on the wider economy, rather than simply considering a company of public interest if their shares are traded on public markets.
The work of our Expert Groups and wider QCA membership, through inputting into our consultation response, responding to our survey, or engaging with the Government and regulator, has not gone unheard. For many small and mid-caps, the dilution of many of the proposals will come as welcome relief. For others, and in particular those on the Main Market, there will still be concerns around whether the new regulator will act proportionately when enforcing requirements.
Tim Ward, Chief Executive, the Quoted Companies Alliance said: “This consultation caused significant and wide-ranging concerns in our community and represented possibly the biggest threat to our markets in recent times. However, the Government has listened, and the measures have been, for the most part, targeted at the largest companies rather than placing additional and disproportionate burdens upon small and mid-cap companies that already find it difficult to focus on growing their business while tackling increasing regulatory requirements.
The expansion of the PIE definition has been limited and proposals on internal controls have been watered down. Nevertheless, it is essential to ensure that the new regulator, with its increased powers, acts proportionately to ensure that the main list doesn’t become unattractive for growth companies and the idea of public interest is rooted in real impact rather than status or listing location.”
Read the QCA's original response to the BEIS Consultation on Audit and Corporate Governance Reform (2021) here.
Read the outcome of the consultation, published by BEIS here.
