Plans to ramp up the UK’s corporate governance and audit rules have been partially scaled back, it was reported on Tuesday.
Officials are currently drawing up a package of reforms to rules that govern corporate governance and audits following series of high-profile corporate failures and scandals, including the collapse of retailer BHS and outsourcer Carillion.
Officials are understood to be close to finalising the reforms.
However, the Financial Times reported on Tuesday that there had been a “fierce backlash” and officials were now expected to “rein in” some of the more controversial proposals. Executives have reportedly warned that the higher costs involved in some of the reforms would make it difficult to attract businesses to the UK, and to retain them.
In particular, a proposal to use legislation to require directors to sign off on companies’ internal controls over financial reporting – similar to the US Sarbanes-Oxley Act – is set to the dropped, the FT said.
A similar provision is instead expected to be included in the UK corporate governance code, which only applies to firms with a premium listing and so would not cover privately-owned firms or those that trade on Aim, the London Stock Exchange’s junior market.
The narrowest definition of which companies should fall within the expanded remit of a new regulator – the Audit, Reporting and Governance Authority – is also likely to be adopted. The ARGA is set to replace the Financial Reporting Council.
Business secretary Kwasi Kwarteng will need to sign off the reforms, however, and further changes could happen before then, the FT noted.
