A new code could come in to effect as of October putting the onus on board Directors to tell investors how viable they believe their business is.
This new code is proposed by the Financial Report Council (FRC) whose role it is to oversee accounting and corporate behaviour. They have been working on a revamp of the ‘going concern’ test for the last three years and they believe this proposal may be a viable solution.
We work with many distressed or private equity backed businesses and support them with senior level interim executives across all functions, but always at board level. It will be interesting to see the impact of this code if indeed it is pushed through.
The private equity community are already quite concerned about this change. Indeed, the proposal has been opposed by individuals such as Jon Moulton of Better Capital who has said “No company will be able to come up with the right answer.”
However, the aim of the code is to get businesses to provide clearer, more concise information about their strategic focus, business model and the risks they are facing – surely that can only be a good thing?