Walker delivers final draft of disclosure and transparency review

Sir David Walker has published the final draft of his review into disclosure and transparency in the UK private equity industry, amid criticisms that the guidelines had been diluted from the rules initially proposed in July last year.

The guidelines apply to companies acquired in a public-to-private transaction for an enterprise value of more than £300m, or a private transaction with an enterprise value in excess of £500m.

Portfolio companies falling into these brackets should publish an annual report within six months of year-end, detailing the private equity ownership structure. A business review is also required, setting out the potential risks faced by the company, including those relating to leverage. The business review would be modelled on that required for quoted companies under the provisions of Section 417 of the Companies Act 2006, from which private companies were previously exempt.

In his press conference, Walker stated that the removal of this exemption for qualifying portfolio companies should not be understated. When the Companies Act was being re-drafted, issues relating to private equity-owned companies were not even discussed, Walker remarked. Portfolio companies will also be required to publish an audited set of accounts and submit data to the BVCA for use in future industry studies. A committee headed by current BT chair Sir Michael Rake has been established by the BVCA for the purpose of monitoring compliance with the guidelines.

A private equity firm could submit an appeal to this committee if it believes compliance with the guidelines would afford a competitor a significant advantage within the sector it operates, Walker commented. While a monitoring committee is welcome, there is a danger it could come to resemble an 'appeals board' tied up with GPs presenting plausible non-compliance cases.

Responding to criticism that as voluntary measures the guidelines do not go far enough, Walker said that the review was without precedent and as such implementing primary legislation before the guidelines have been tested would be a dangerous step. He said that he was unaware of any legislation reverting to voluntary status once implemented as statutory. However, it is possible for movement in the other direction should it prove absolutely necessary, Walker said.

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