New disclosure regulations for extractive companies

As part of a global initiative to increase transparency in the extractive sectors (mining, oil, gas, etc.), the EU stated last year that it would introduce new accounting and disclosure rules.

Market reCap May 2014 edition 

• Taxman stops stamping on growth shares
• Amendments to the Listing Rules take effect this month
• New disclosure regulations for extractive companies
• Consultation on the UK Corporate Governance Code

 

As part of a global initiative to increase transparency in the extractive sectors (mining, oil, gas, etc.), the EU stated last year that it would introduce new accounting and disclosure rules that would make it compulsory for listed or certain other large extractive companies to disclose any payment over €100,000 (£84,800) to the governments in the countries in which they operate.  The proposed rules would aim to provide investors and other stakeholders with information about the payments made to governments of resource-rich countries for the exploitation of natural resources.  Click here for our previous coverage of this ("Show Me the Money").

On 28 March 2014, a consultation paper was published by the UK government's department for Business, Innovations and Skills (BIS) proposing UK regulations for implementing these rules made under Chapter 10 of the new the Accountancy Directive (2013/34/EU) and Article 6 of the Transparency Directive (2004/109/EC) into national law in advance of the EU deadline of 20 July 2015.

BIS's proposed new regulations (The Reports on Payments to Governments Regulations 2014) will apply to all large or listed extractive companies registered in the UK and require them to electronically submit a separate report to Companies House every year, starting on 1 January 2015, detailing the relevant amounts paid to governments and relevant amounts paid on a project-by-project basis. This report would be due two months after the deadline for publishing the annual financial statements for listed UK companies or eleven months of the end of the financial year if not listed.

There will be penalties for failing to prepare or deliver the report including making it a criminal offence for directors.  UK subsidiaries of UK parent companies will be exempt from the new rules if the parent company has complied, however, UK subsidiaries of overseas companies will not benefit from the exemption until their parent company fulfils the obligation in either the UK or another EU Member State.  The consultation paper also includes a proposed format for the report.

Responses to the consultation paper must be submitted by 16 May 2014.

Click here for the BIS consultation paper.

David Wilkinson is a Partner in the Corporate Group of Field Fisher Waterhouse LLP in London and a member of the Energy Group Team.