Navigating the scoping requirements of the reform package

None of the elements of the reform package will apply directly to entities in this category.

The only potential implication could be in relation to any entities which voluntarily apply the UK Corporate Governance Code as there will need to be consideration of the new Code requirement for a board statement on the effectiveness of internal controls plus any other new aspects of the Code which are introduced as part of this revision.

These entities are classified as Large PIEs so the following aspects of the reform package apply to them:

• The directors’ enforcement regime (this applies to all PIE directors so by definition applies to all Large PIE directors)
• The Resilience Statement
• The Audit & Assurance Policy
• Statement on activities to prevent and detect fraud
• Statements on distributable reserves, legality of dividends and distribution policy

The same consideration as above applies to any entities which voluntarily apply the UK Corporate Governance Code.

Important to note that the Government does not intend to apply existing PIE requirements to have an audit committee, to retender the audit every 10 years and to rotate auditor every 20 years to entities that become PIEs under this new size-based threshold.

These entities are Small PIEs so many elements of the reform package do not apply. The only element which will apply to these entities is the directors’ enforcement regime.

The same consideration as above applies to any entities which voluntarily apply the UK Corporate Governance Code.

These entities are classified as Large PIEs so the following aspects of the reform package apply to them:

• The directors’ enforcement regime (this applies to all PIE directors so by definition applies to all Large PIE directors)
• The Resilience Statement
• The Audit & Assurance Policy
• Statement on activities to prevent and detect fraud
• Statements on distributable reserves, legality of dividends and distribution policy

The same consideration as above applies to any entities which voluntarily apply the UK Corporate Governance Code.

These entities are Small PIEs so many elements of the reform package do not apply. The only elements which will apply to these entities are the directors’ enforcement regime plus any revisions to the UK Corporate Governance Code (e.g. the new board statement on the effectiveness of internal controls and enhanced disclosure around malus and clawback arrangements).

These entities are classified as Large PIEs so the following aspects of the reform package apply to them:

• The directors’ enforcement regime (this applies to all PIE directors so by definition applies to all Large PIE directors)
• The Resilience Statement
• The Audit & Assurance Policy
• Statement on activities to prevent and detect fraud
• Statements on distributable reserves, legality of dividends and distribution policy
• Revisions to the UK Corporate Governance Code (e.g. the new board statement on the effectiveness of internal controls and enhanced disclosure around malus and clawback arrangements)

These entities are Small PIEs so many elements of the reform package do not apply. The only elements which will apply to these entities are the directors’ enforcement regime plus any revisions to the UK Corporate Governance Code (e.g. the new board statement on the effectiveness of internal controls and enhanced disclosure around malus and clawback arrangements).

FTSE 350 companies will also be within scope for the new Standard for Audit Committees in relation to appointment and oversight of the statutory auditor and the Managed Shared Audit requirement (timing on this currently uncertain but cannot happen until ARGA is established).

These entities are classified as Large PIEs so the following aspects of the reform package apply to them:

• The directors’ enforcement regime (this applies to all PIE directors so by definition applies to all Large PIE directors)
• The Resilience Statement
• The Audit & Assurance Policy
• Statement on activities to prevent and detect fraud
• Statements on distributable reserves, legality of dividends and distribution policy
• Revisions to the UK Corporate Governance Code (e.g. the new board statement on the effectiveness of internal controls and enhanced disclosure around malus and clawback arrangements)
• The new Standard for Audit Committees in relation to appointment and oversight of the statutory auditor
• Managed Shared Audit (timing on this currently uncertain but cannot happen until ARGA is established)

It is important to recognise that there are a significant number of non-UK incorporated premium listed companies. As much of the reform package is to be introduced through UK legislation, many of the requirements will not apply to any non-UK premium listed companies as they are not subject to UK company law. It is possible that the FRC will introduce new provisions within the revised the UK Corporate Governance Code (in addition to any change in relation to a board statement on internal controls) which effectively call on non-UK premium listed companies to adopt some or all of the legislative measures which make up the reform package. These would, as for all provisions of the Code, be on a ‘comply or explain’ basis.