01 June 2021
Why company Directors and the UK markets should be bothered
On 18 March, 2020, the government published a consultation document called, Restoring trust in audit and corporate governance: proposals on reforms with the aim of strengthening the UK’s framework for major companies and the way they are audited.
Lauded in the press as “welcome”, and “long-awaited”, the headline message about these proposed reforms is that they will prevent high-profile corporate failures like Carillion, BHS, and Patisserie Valerie, and will introduce more competition to the auditor market, which is all to the good.
You may think that the rest of the proposals are the subject of naval-gazing debate about the mechanics of the audit industry, of interest only to the accountancy profession (and, perhaps, the lawyers who may want to sue them) – wrong!
There are some compelling reasons why company management teams and their advisors should take an active interest in these proposed reforms, not least because:
Entrepreneurial businesses frequently only have the bare bones of an internal compliance infrastructure because all of their focus is on growth. Introducing a new control regime along proposed lines will cut into entrepreneurs’ time and focus on developing their businesses, and/or force them to recruit staff to deal with compliance at additional cost, which could impact growth.
Bye, bye Britain?
The UK’s capital markets should also sit-up and take notice of these proposals to ensure that the scoping does not act to discourage companies to list in the UK.
The aim of improving trust and corporate governance in the UK markets is laudable and one we can all agree with. However, the Government must ensure that these reforms do not fire the starting pistol for an exodus to alternative markets and foreign jurisdictions as companies attempt to side-step the UK specific PIE requirements.
The Aquis Growth Market Exchange may also benefit from many smaller company flotations switching from the AIM market in order to avoid a future PIE definition, and given the fact the regulations would only apply to UK Companies, many may think about re-domiciling to avoid them.
Have your say
It’s clear that there is more to these proposed reforms than just a shake-up of the audit market. The impact on professional advisers, companies and the markets as a whole, will be significant and is not widely understood.
The deadline for submissions to the consultation process is on 8 July, which means there is still time to raise concerns and constructive recommendations to government.
Want to have your voice heard on this topic? As part of the PKF Littlejohn submission to government in response to the consultation, we’d like to reflect your views, too. Please click here to link to our questionnaire.
We all want a strong UK market underpinned by a robust compliance framework that enables companies to grow while protecting the interests of investors. By giving us your opinion, we can collectively help to ensure that the proposed reforms will enhance and not hinder its future success.