The Wates Principles: Corporate Governance in Large Private Companies

Abstract

On 10 December 2018, the UK’s Financial Reporting Council (FRC) published the final version of the Wates Principles for Large Private Companies. This is the first shot at drafting a corporate governance code for adoption by private companies (the only published corporate governance code in the UK so far being for listed entities) and the latest in a series of steps taken recently in the UK towards increased corporate governance regulation and oversight. The Wates Principles seek to provide assistance to large companies which, following the introduction of the Companies (Miscellaneous Reporting) Regulations 2018 in June 2018, need to start reporting on their corporate governance arrangements; however, the Wates Principles have been published with the hope that they will provide a framework and guidance that can be adopted by smaller private companies as well. After a brief consideration of the UK corporate governance framework, the article will explore if and how the Wates Principles affect and interact with subsidiary governance: a significant number of private companies In the UK are subsidiaries of multinational corporations with separate and, in the absence of legal and regulatory harmonisation, potentially very different parent company governance and requirements. More specifically, the article will focus on whether UK subsidiaries of multinational corporations can benefit from increased local regulatory oversight and the Waters Principles, or whether directors will need to navigate conflicts arising from their local English law duties versus their global/parent company requirements, and how they can reconcile what may appear to be inconsistent priorities.