What Is Section 172 Statement

2. Identify all group companies subject to the requirements: The requirement to provide a report under Section 172 applies to any “large private company” based in the United Kingdom that meets two or more of the following criteria: In our July 2018 and October 2018 trade periphery articles, we highlighted a new requirement to prepare a report under Section 172. as well as the guidance of the Financial Reporting Council (FRC) and the Department for Business, Energy and Industrial Strategy (BEIS), which contained information on the expected content of this statement. 4. Add more than just a declaration of conformity: a simple declaration of conformity is probably not enough. The guidelines state that the section 172 return should include details on: These section 172(1) returns for eligible entities within the Bupa Group are available below: For fiscal years beginning on or after January 1, 2019, all large private corporations must include in their annual report and financial statements a statement explaining: how the directors have taken into account the issues set out in section 172 of the Companies Act 2006 in the performance of their duties. It is not easy to establish the scope of the requirements of the new declaration. Therefore, it is important to be well prepared for implementation. 7. Publish in the correct place: The statement under section 172 must be a statement that can be identified separately in the strategic report of the annual report and the corporation`s financial statements.

The statement must be published on the company`s website, either as a stand-alone statement or by publishing the entire strategy report or annual report. 6. Use an appropriate level of detail: Companies may, in their sole discretion, assess the appropriate level of detail given the size and complexity of the company (provided that the statement is meaningful and informative to shareholders). Avoid the temptation to include a lot of information on a matter mentioned in Article 172 if it is of limited relevance to the particular decision under discussion. Section 172 is not a new amendment to the Companies Act 2006, and directors are accustomed to taking the factors contained therein for granted in their decision-making. However, the introduction of a specific requirement to report exactly on how directors have taken these factors into account is new and requires careful review and preparation by entities covered by the reporting regime. This blog contains 10 practical tips that businesses can consider when preparing a section 172 return. 10. Review any other applicable reporting requirements: Determine if any additional reporting requirements apply – for example, UK public companies with more than 250 employees in the UK must include a statement in the directors` report in the annual report summarizing how directors interacted with employees and considered their interests. 3. Start early: Identify and record key board decisions throughout the year that are of sufficient strategic importance to the company to justify their inclusion in the section 172 statement – this will be easier than compiling the information at the end of the year.

When preparing Council documents, consider taking notes to discuss the interests and relevant factors of stakeholders under Section 172 – this will help guide the Council`s discussion and provide evidence of compliance. Consider implementing training, policies and processes to support the company`s strategy with respect to the section 172 obligation. The new legal reporting requirements mean that certain companies in the Bupa group (public and private companies in the United Kingdom, including subsidiaries considered `large companies` under the Companies Act 2006) must include a statement in the strategy report in their annual report to help shareholders better understand and explain how directors have taken into account the issues referred to in Article 172( 1). We have published guidance to prepare the statement in section 172 that explores this requirement in more detail and establishes a framework that can be used to create a high-quality statement. c. reflect on how important decisions have been taken in the light of such a commitment and the relevant factors that have been taken into account under Article 172 and how conflicts have been resolved (including difficulties and positive aspects); and the requirement applies to all such large private companies, including subsidiaries (so there may be several companies within a group that are required to prepare their own individual financial statements in accordance with section 172). As a reminder, for periods beginning on or after January 1, 2019, all large companies (including large subsidiaries) must include in their strategy report a separate statement explaining how their directors have considered the broader needs of stakeholders in the performance of their duties under section 172 of the Companies Act, 2006. The introduction of this new disclosure obligation did not change the purpose of the strategic report or the underlying legal obligations of a board member, which are listed below: this means that a simple declaration of compliance or a general description of governance processes is unlikely to be considered sufficient to meet the legal requirement. The third point highlights in particular the fact that the declaration should be updated annually and should focus on issues to which particular attention has been paid during the year. 5. Avoid checking boxes: Avoid an approach that is purely consistent with the checklist of factors referred to in section 172. The instruction should: 8.

Make it user-friendly: There is no established format or structure for a section 172 statement, but it should be as concise and user-friendly as possible and consistent with the rest of the annual report. One. the issues, factors and interveners that the Directors consider relevant to comply with the factors referred to in section 172 and the manner in which they have formed such opinions; d. address the impact of feedback from stakeholder engagement and describe any future actions planned accordingly. Since that article, the FRC has also published the following useful documents: 1. Read the guidelines: BEIS, ICSA and the FRC have produced various detailed guides that provide a useful starting point for understanding the expectations of regulators and investors. 9. Use cross-references: It may be useful to include references to details elsewhere in the annual report to avoid unnecessary repetition. A subsidiary may also refer to a parent company`s explanation of the group`s policies and procedures, provided that this is included in an accessible report and that the subsidiary explains how its directors have applied or reflected the policies or decisions taken at group level.

02 November 2020. Posted by Emily McGregor, Senior Partner It`s likely that a company will have many stakeholders and boards will have made many decisions over the course of a year. It is important that the section 172 statement focus on matters of strategic importance in order to remain meaningful and informative to shareholders. Therefore, it is important to identify the most important decisions that will eventually be disclosed. It is important that the statement § 172 meets its legal requirements, but also that it remains as concise and relevant as possible for the user. Therefore, writing the report can be as difficult as identifying the decisions it should cover. a. identify the main decisions taken during the year;. Sign up to receive the latest news and perspectives from BDO Section 172 of the Corporations Act, 2006 sets out a number of general obligations that directors owe to a corporation. This includes a general obligation that requires directors to act in good faith and promotes the success of the corporation for the benefit of shareholders as a whole. A CEO of a company must act as he is most likely to do in good faith to promote the success of the company for the benefit of all its members, taking into account (among others) the following: On this point, it should be noted that the GC100 has published some useful guidelines. These include practical steps that directors can take to comply with their legal obligations under section 172 of the Companies Act, 2006.

However, this does not meet the new disclosure requirement in section 172. This new disclosure is likely to be subject to further review, particularly in the first year, which is why in this article we will build on the guidelines and provide some practical tips on how to approach the development of your first section 172 statement. b. the methods used to engage with stakeholders and understand the issues that directors need to consider; and b. explain meaningfully how key stakeholders affected by such decisions have been identified and involved; While the three points above provide a structure that will help draft a Section 172 statement for the first time, an additional process may be useful to focus Directors` reflections on the most important issues to report: The BEIS and FRC guidelines suggest that the Section 172 statement should include information on: c. . . .