International - Written by on Sunday, April 27, 2014 3:29 - 0 Comments

Bribery compliance bandwagon continues its way to Europe…

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European flags in front of the Berlaymont building, headquarters of the European commission in Brussels.Soon, all European companies with over 500 employees will have to publish an annual report regarding their anti-bribery policies.

Companies will also have to explain their due diligence procedures relating to anti-bribery and set out the material risks for the company.

On 15th April 2014 the European Parliament adopted (with amendments) the European Commission’s proposal for a Directive amending the fourth and seventh Company Law Directives (now the Accounting Directive) in respect of the disclosure of non-financial and diversity information by certain large companies and groups.

The Directive amends Directive 2013/34/EU, its objective is to increase EU companies’ transparency and performance on environmental and social matters, including anti-corruption and bribery issues.

In a press release the following day Michael Barnier, Internal Market and Services Commissioner within the European Commission, said:

“Companies, investors and society at large will benefit from this increased transparency”….

“Companies that already publish information on their financial and non-financial performances take a longer term perspective in their decision making. They often have lower financing costs, attract and retain talented employees, and ultimately are more successful”….

“Best practices should become the norm.”

Who is affected?

The new rules will apply to large public-interest companies with more than 500 employees; the associated costs to small and medium businesses outweighing the benefits. It is estimated by the European Commission that some 6,000 large companies and groups across the EU will fall into the scope, including listed companies, banks, insurance firms and other companies that are so designated by Member States because of their activities, size or number of employees.

What information is to be disclosed?

Companies within the scope of the Directive will be required to disclose in their management report relevant and material information, namely:

  • Policies, risks and results (including due diligence implemented); and
  • Relevant non-financial key performance indicators concerning:
    • environmental aspects;
    • social and employee-related matters;
    • respect for human rights;
    • diversity on the board of directors; and
    • anti-corruption and bribery issues.

On anti-corruption and bribery, the financial statement may include information on the instruments in place to combat such activity.

Where the company does not pursue a policy in relation to one or more of the above, the financial statement is required to provide a clear and reasoned explanation for not doing so.

What are the reporting requirements?

There is no prescribed form of reporting. The Directive gives companies significant flexibility to disclose relevant information in a way that they consider most appropriate; companies may use international, European or national guidelines.

A further Article has been included requiring the Commission to publish, within 24 months of entry into force of the Directive, non-binding guidelines on methodology for the reporting of non-financial information.

Next steps

In order to become law, the Commission’s proposal must be adopted jointly by the European Parliament and by the EU Member States in the Council, which votes by qualified majority. Following the adoption by the European Parliament, the Council is expected to formally adopt the proposals in the coming weeks.

Opinion

This move is another brick in the wall of the increased focus on anti-corruption measures.  Companies bidding for public contracts will naturally fall under greater scrutiny particularly when coupled with the moves to set up an EU prosecutors office charged with the task of investigating and prosecuting fraud on EU funded projects.

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