The collapse of BHS, which is reported to have left its pension fund in deficit by over £500 million, appeared to influence the Government’s green paper on corporate governance which was published on 29 November 2016.
One of the focus areas of the green paper was the extension of the Corporate Governance Code to large privately-held businesses. At present the strongest corporate governance and reporting standards in the UK are focused on public companies.
In response to the Government’s green paper, the Work and Pensions Committee (the “WPC”) has made the following recommendations:
the corporate governance and reporting requirements for public listed companies should be extended to private companies that have an important social impact. The WPC went on to state that this should apply to private companies that are large (as defined by the Government) or have over 5,000 defined benefit scheme members;
pension scheme trustees should be added to section 172(1) of the Companies Act 2006. Section 172 relates to a directors duty to promote the success of the company. At present the list of stakeholders that the directors must have regard to does not include defined benefit pension scheme beneficiaries or the trustees of such schemes. The WPC believes that their inclusion may help ensure that directors take into account the interests of current and future pensioners and that if they fail to do so they should be held accountable.
The proposals set out in the Governments’ green paper are open for consultation until 17 February 2017 and we will issue a further update once the outcome of the consultation is known.
For further information please contact Howard White, Associate in our Corporate and Commercial team.