Part

DTR Disclosure Rules and Transparency Rules

Chapter

Corporate governance

Printed on: 29/10/2024

Rulebook at: 06/12/2008

DTR 7

Corporate governance

DTR 7.1

Audit committees

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Audit committees and their functions

DTR 7.1.1

handbook-rule
An issuer must have a body which is responsible for performing the functions set out in DTR 7.1.3 R. At least one member of that body must be independent and at least one member must have competence in accounting and/or auditing.
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DTR 7.1.2

handbook-guidance
The requirements for independence and competence in accounting and/or auditing may be satisfied by the same member or by different members of the relevant body.
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DTR 7.1.3

handbook-rule
An issuer must ensure that, as a minimum, the relevant body must:
(1) monitor the financial reporting process;
(2) monitor the effectiveness of the issuer's internal control, internal audit where applicable, and risk management systems;
(3) monitor the statutory audit of the annual and consolidated accounts;
(4) review and monitor the independence of the statutory auditor, and in particular the provision of additional services to the issuer.
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DTR 7.1.4

handbook-rule
An issuer must base any proposal to appoint a statutory auditor on a recommendation made by the relevant body.
[Note: Article 41.3 of the Audit Directive]
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DTR 7.1.5

handbook-rule
The issuer must make a statement available to the public disclosing which body carries out the functions required by DTR 7.1.3 R and how it is composed.
[Note: Article 41.5 (part) of the Audit Directive]
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DTR 7.1.6

handbook-guidance
An issuer may include the statement required by DTR 7.1.5 R in any statement it is required to make under DTR 7.2 (Corporate governance statements).
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DTR 7.1.7

handbook-guidance
In the FSA's view, compliance with provisions A.1.2, C.3.1, C.3.2 and C.3.3 of the Combined Code will result in compliance with DTR 7.1.1 R to DTR 7.1.5 R.
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DTR 7.2

Corporate governance statements

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DTR 7.2.1

handbook-rule
An issuer to which this section applies must include a corporate governance statement in its directors' report. That statement must be included as a specific section of the directors' report and must contain at least the information set out in DTR 7.2.2 R to DTR 7.2.7 R and, where applicable, DTR 7.2.10 R.
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DTR 7.2.2

handbook-rule
The corporate governance statement must contain a reference to:
(1) the corporate governance code to which the issuer is subject; and/or
(2) the corporate governance code which the issuer may have voluntarily decided to apply; and/or
(3) all relevant information about the corporate governance practices applied beyond the requirements under national law.
[Note: Article 46a(1)(a) first paragraph of the Fourth Company Law Directive]
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DTR 7.2.3

handbook-rule
(1) An issuer which is complying with DTR 7.2.2 R (1) or DTR 7.2.2 R (2) must:
(a) state in its directors' report where the relevant corporate governance code is publicly available; and
(b) to the extent that it departs from that corporate governance code, explain which parts of the corporate governance code it departs from and the reasons for doing so.
(2) Where DTR 7.2.2 R (3) applies, the issuer must make its corporate governance practices publicly available and state in its directors' report where they can be found.
(3) If an issuer has decided not to apply any provisions of a corporate governance code referred to under DTR 7.2.2 R (1) and DTR 7.2.2 R (2), it must explain its reasons for that decision.
[Note: Article 46a(1)(a) second paragraph and Article 46a(1)(b) of the Fourth Company Law Directive]
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DTR 7.2.4

handbook-guidance
A listed company which complies with LR 9.8.6R (6) (the comply or explain rule in relation to the Combined Code ) will satisfy the requirements of DTR 7.2.2 R and DTR 7.2.3 R.
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DTR 7.2.5

handbook-rule
The corporate governance statement must contain a description of the main features of the issuer's internal control and risk management systems in relation to the financial reporting process.
[Note: Article 46a(1)(c) of the Fourth Company Law Directive]
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DTR 7.2.6

handbook-rule
The corporate governance statement must contain the information required by paragraph 13(2)(c), (d), (f), (h) and (i) of Schedule 7 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008/410) (information about share capital required under Directive 2004/25/EC (the Takeover Directive)) where the issuer is subject to the requirements of that paragraph.
[Note: Article 46a(1)(d) of the Fourth Company Law Directive]
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DTR 7.2.7

handbook-rule
The corporate governance statement must contain a description of the composition and operation of the issuer's administrative, management and supervisory bodies and their committees.
[Note: Article 46a(1)(f) of the Fourth Company Law Directive]
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DTR 7.2.8

handbook-guidance
In the FSA's view, the information specified in provisions A.1.1, A.1.2, A.4.6, B.2.1 and C.3.3 of the Combined Code will satisfy the requirements of DTR 7.2.7 R.
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DTR 7.2.9

handbook-rule
An issuer may elect that, instead of including its corporate governance statement in its directors' report, the information required by DTR 7.2.1 R to DTR 7.2.7 R may be set out:
(1) in a separate report published together with and in the same manner as its annual report. In the event of a separate report, the corporate governance statement must contain either the information required by DTR 7.2.6 R or a reference to the directors' report where that information is made available; or
(2) by means of a reference in its directors' report to where such document is publicly available on the issuer's website.
[Note: Article 46a(2) first and second sentence of the Fourth Company Law Directive]
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DTR 7.2.10

handbook-rule
Subject to DTR 7.2.11 R, an issuer which is required to prepare a group directors' report within the meaning of section 415(2) of the Companies Act 2006 must include in that report a description of the main features of the group's internal control and risk management systems in relation to the process for preparing consolidated accounts. In the event that the issuer presents its own annual report and its consolidated annual report as a single report, this information must be included in the corporate governance statement required by DTR 7.2.1 R.
[Note: Article 36(2)(f) of the Seventh Company Law Directive]
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DTR 7.2.11

handbook-rule
An issuer that elects to include its corporate governance statement in a separate report as permitted by DTR 7.2.9 R (1) must provide the information required by DTR 7.2.10 R in that report.
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