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Final Wates Corporate Governance Principles for Large Private Companies published

  • United Kingdom
  • Corporate



The Financial Reporting Council (“FRC”) has published the final Wates Corporate Governance Principles for Large Private Companies and supporting guidance (“Wates Principles”). This follows the consultation draft that was published in June (see our briefing here).

The final Wates Principles broadly follow the consultation draft. However, there have been some changes made in response to consultation feedback, and in particular, the accompanying guidance has been significantly revised.

The Wates Principles are intended to assist large private companies to comply with their obligations under the Companies (Miscellaneous Reporting) Regulations 2018 (“Regulations”). These Regulations come into force  on 1 January 2019, and generally apply to financial years beginning on or after that date. Large private companies will have to disclose their corporate governance arrangements in the directors’ report, and will be able to adopt the Wates Principles as an appropriate framework.

The Wates Principles consist of six Principles, plus guidance to assist companies in applying the Principles. The final Principles also include guidance for companies on how to report. A company that adopts the Wates Principles should follow them using an ‘apply and explain’ approach.

The FRC has also published a feedback statement which is useful to show how the Principles have developed since the consultation draft.

Content of the Wates Principles

  1.  Purpose and Leadership – An effective board develops and promotes the purpose of a company and ensures that its values, strategy and culture align with that purpose.

    This Principle now covers both purpose and leadership (rather than just purpose). The Guidance now makes clear that directors should act with integrity and set the tone from the top. The Guidance also includes suggestions on how to monitor culture.

  2. Board Composition – Effective board composition requires an effective chair and a balance of skills, backgrounds, experience and knowledge, with individual directors having sufficient capacity to make a valuable contribution. The size of a board should be guided by the scale and complexity of the company.

    The Guidance to Principle two now suggests that companies should consider separating the roles of the chair and chief executive. It also promotes the benefits of having independent non-executives, but does not require large private companies to engage them..

  3. Board Responsibilities – The board and individual directors should have a clear understanding of their accountability and responsibilities. The board’s policies and procedures should support effective decision-making and independent challenge.

    Principle three has been re-named (rather than just referring to responsibilities). The Principle has also been amended to ensure that individual directors are aware of their accountability..

  4. Opportunity and Risk – A board should promote the long-term sustainable success of the company by identifying opportunities to create and preserve value and establishing oversight for the identification and mitigation of risks.

    The Guidance to this Principle has been split into sections on Risk, Opportunity and Responsibilities. The revised Guidance also deals with emerging risk and principal risks as described in the FRC’s Guidance on the Strategic Report. Following feedback to the consultation, the Guidance in relation to Responsibilities has been expanded to deal with material environmental, social and governance matters..

  5. Remuneration – A board should promote executive remuneration structures aligned to the long-term sustainable success of a company, taking into account pay and conditions elsewhere in the company.

    Whilst certain respondents to the consultation wished to see greater transparency and a specific disclosure requirement in relation to remuneration, others did not, and so the Coalition Group behind the Principles has had to be mindful of striking a balance between different views in this area.  The Guidance suggests that remuneration should be linked to achieving company strategy and also discusses reputational risks that result from excessive rewards.
  6. Stakeholder Relationships and Engagement – Directors should foster effective stakeholder relationships aligned to the company’s purpose. The board is responsible for overseeing meaningful engagement with stakeholders, including the workforce, and having regard to their views when taking decisions.

    Principle six has been re-named, as it formerly just referred to stakeholders. The Guidance also now includes a sub-section on workforce engagement. The Wates Principles do not (as some consultation responses requested) propose ways of engaging with the workforce within the Guidance. Instead, the Guidance refers to the FRC’s Guidance on the Strategic Report, which includes reference to methods of engagement.  


The Coalition Group behind the Wates Principles have tried to strike a balance between reporting on corporate governance arrangements for private unlisted versus publicly listed companies to come up with a proportionate approach. A number of the Principles have similarities with the new UK Corporate Governance Code 2018, although written in such a way that they can be applied by private companies. The Coalition Group have also had to have regard to the very different management and ownership structures of large private companies. The Coalition Group intend to monitor the development of the Wates Principles and understand trends and best practice. However, it will not be until 2020 that we start to see reporting under the Regulations.

Larger private companies within scope will have to comply with a formal corporate governance regime for the first time when they become subject to reporting requirements under the Regulations for financial years beginning on or after 1 January 2019. Companies should also be aware of the GC100 Guidance on directors’ duties that was published in October 2019 (“GC100 Guidance”). The GC100 Guidance will be of interest to certain large companies which will have a duty to report under the Regulations, in a ‘Section 172 Statement’ in the strategic report, how directors have had regard to stakeholder factors set out in Section 172 of the Companies Act 2006. Good governance will be a key issue for both companies and their investors in 2019.

Useful Links

Wates Corporate Governance Principles for Large Private Companies

Feedback statement: the Wates Corporate Governance Principles for Large Private Companies

Companies (Miscellaneous Reporting) Regulations 2018

BEIS Guidance on the Companies (Miscellaneous Reporting) Regulations 2018