There is a growing expectation for UK companies to have a robust governance and compliance framework in place, to reassure and demonstrate that the business is well run.
When it comes to the degree of difficulty for companies to adhere to local business regulations and associated issues, the UK is considered neither overtly complex nor especially simple.
Ranked 48th of 84 jurisdictions globally in TMF Group's Compliance Complexity Index 2018, the UK's position was determined by taking into account details such as the time taken to set up companies and level of difficulty in meeting reporting requirements. The UAE came in at number 1 for complexity in the report, while Ireland is the simplest jurisdiction at 84th.
"In respect of a UK legal entity, compliance is in fact not that complicated and should be seen as robust and transparent. However complexity does exist around electronic filing processes and understanding what needs to be filed, especially for overseas companies operating here" explained Head of Board Support at TMF UK, Julie Pharaoh.
"The PSC Register, disclosing Persons of Significant Control, is now fully embedded in UK reporting requirements, including annual updating alongside the annual confirmation statement and each time where there is a change. Governance and compliance continues to be important, linked into director responsibilities and board oversight."
Alongside rapid growth in the number of international regulations that companies must comply with, there are three key developments on the horizon that will influence the UK's corporate compliance complexity ranking in the future. "Companies are still awaiting the implementation of the ban on corporate directors, after the requirement for at least one natural director was implemented a few years ago" said TMF UK & Ireland Managing Director Kevin Butler.
"' Making Tax Digital for Business' will be implemented in 2019, initially to meet VAT obligations for businesses with a turnover above the VAT threshold, and to continue the UK governments' ambitions to become one of the most digitally-advanced nations in the world."
"However" Mr Butler added, "top of the agenda is the issue of the UK Corporate Governance Code (the 'Code'), published in July 2018 and the Wates Corporate Governance Principles for Large Private Companies" (the 'Wates Principles').
The former focuses on the application of the corporate governance principles (the 'Principles'). The Listing Rules require companies to make a statement of how they have applied the Principles, in a manner that would enable shareholders to evaluate how the Principles have been applied. The Code is applicable to all companies with a premium listing, whether incorporated in the UK or elsewhere. The new Code applies to accounting periods beginning on or after 1 January 2019.
The latter, Wates Principles' consultation period ended on 7 September 2018 and a final version is due out at the end of the year, which will apply to large private companies, including UK subsidiaries of overseas companies, family-owned enterprises and those owned by PE firms, will be required to make a statement on their corporate governance arrangements for financial years beginning on or after 1 January 2019. It is expected to capture 1,700 companies.
"Now more than ever," explained Mr Butler, "there is a much higher expectation on companies to evidence that there is a robust governance and compliance framework in place to reassure and demonstrate that the business is well run."
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Catch up with our experts in London on 16 November 2018, at the ICSA Subsidiary Governance Conference.
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