The Private Equity Reporting Group ("PERG") has
refreshed its good practice reporting guidance for the larger
private equity portfolio companies with revised examples of good
practice to assist with compliance. This reinforces the strong
message arising out of PERG's 2016 annual report that the
private equity industry needs to up its game in terms of keeping
pace with the disclosure standards of the FTSE 350 companies
against which private equity is benchmarked. Particular emphasis
has been placed on sufficient disclosures regarding human rights,
gender diversity and demonstrating how directors have appropriately
discharged their duty to promote the success of the
Areas for attention:
A number areas were identified in PERG's December 2016
annual review, most of which have also been highlighted in the
updated March 2017 guidelines. These include improved disclosure
Duty to promote the success
of the company: PERG notes that improved disclosure
regarding how directors have performed this duty (and in particular
how they have taken into consideration the interests of
stakeholders) is crucial in order to improve trust in the private
currently a hot topic in the industry, greater prominence must be
given to gender diversity matters together with a stronger
narrative and a breakdown of the numbers of men and women at
employee, senior manager and director level
Analysis of performance
measured against strategic objectives: the description of
the company's past year performance needs to link financial
performance to strategic priorities and compare it with the wider
Trends and factors affecting
future development and performance: the narrative should
take into account the wider market conditions that impact the
business, and how they shape current and future strategy and
Human rights: in
light of the increasing regulatory emphasis (such as the Modern
Slavery Act 2015) commentary should be included on how the company
is complying with human rights legislation and best practices
What does this mean for me?
This updated guidance offers private equity houses and their
portfolio companies practical guidance of the depth and breadth of
disclosure that will be required in order for them to be considered
as meeting best practices and being compliant with the Walker
Guidelines. This is of particular importance given the fall in the
number of companies complying with the required standards (partly
driven by an improvement in the standards set by the FTSE 350) and
PERG's statement that with effect from this year it will
publicly "name and shame" those portfolio companies which
fail to meet the disclosure standards.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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