Narrative Reporting Tackling the Regulatory Requirements Investor Relations Society Workshop Chris S

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Narrative Reporting -Tackling the Regulatory
RequirementsInvestor Relations Society
WorkshopChris Stamp Prism Cosec
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Companies Act 2006 Report Content
A Brief History
s417
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Companies Act 2006 Report Content

• Companies Act 2006 builds on the 1985 Companies
  Act
• Business Review must include
• a description of the principle risks and
  uncertainties facing the company
• an analysis of the development and performance of
  the business during the year and the position at
  the end of the year and
• an analysis using financial key performance
  indicators and (where appropriate) other key
  performance indicators including information
  relating to environmental and employee matters

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Companies Act 2006 Reporting

• Companies Act 2006 requires an Enhanced Business
  Review for plcs
• Enhanced Business Review also requires
• information necessary for an understanding of the
  development, performance or position of the
  companys business
• the main trends and factors likely to affect the
  future development, performance and position of
  the companys business
• information about environmental matters, the
  companys employees, social and community issues,
  including information about any policies and
• information about persons with whom the company
  has contractual or other arrangements which are
  essential to the business of the company

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So what has changed?
Companies Act 2006 Report Content
Section 417 To purpose of the Business Review is
to inform the members of the company and help
them assess how the directors have performed
their duty under section 172 (the duty to promote
the success of the company).
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Companies Act 2006 Report Content

• Directors Duties
• Codified Directors Duties introduced for the
  first time in 2006 Act
• These include a duty to promote the success of
  the Company (s172)
• Known as the Enlightened Shareholder Value duty
• Directors need to have regard to
• likely long term consequences of their actions
• interests of employees
• need to foster business relationships with
  suppliers, customers and others
• impact on environment
• desirability of maintaining a reputation for high
  standards of business conduct
• need to act fairly between members

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Companies Act 2006 Report Content
ASB Reporting Standards
Policies Implementation
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Companies Act 2006 Report Content

• Companies Act 2006 also establishes
• New Derivative Action rules
• Available to any member
• Regardless of whether they were a member at the
  time the act took place
• No minimum thresholds (shares or members)
• In respect of negligence, default, breach of duty
  or breach of trust by director
• Actual or proposed act or omission
• Director liable to compensate the company for any
  loss suffered as a result of an untrue or
  misleading statement or omission in a report
  however
• Safe Harbour Directors not otherwise liable to
  company and not liable to any third party for the
  report

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Beware of the Minefield
Companies Act 2006 Report Content
Legislation Companies Act 2006
Accounting Standards ASB Guidelines
Shareholders Derivative Actions
Financial Reporting Review Panel Directors Reports
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Companies Act 2006 Report Content

• Companies are adopting the new requirements

Source PriceWaterhouseCoopers Business Review
Has it made a difference?
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Companies Act 2006 Report Content
It is not just numbers
it is about reporting on risks, strategy and
board processes
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Companies Act 2006 Report Format

• E-Communications
• Creates the possibility of electronic
  communications as the default
• Email or Website can be used
• Shareholders Approval
• Individual Shareholder consent (deemed (for
  website) or actual) needed
• Sounds great but
• Is it cost effective?
• Is it manageable?
• Will it help shareholder participation?

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Companies Act 2006 Report Recipients

• Indirect Investors New Information Rights
• Listed companies only (not AIM)
• Right of member to nominate underlying investor
• Hard copy if nominated person requests
• E-communications provisions apply
• Logistical considerations require careful
  planning

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Transparency Directive Report Frequency

• New Reporting Deadlines
• Annual Report
• Technically no Preliminary Announcement required
• Announcement within 120 days
• AGM within 6 months
• Interim Report
• Within 60 Days
• Interim Management Statements
• Between weeks 10 and 21

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Any Questions?