New PIE size thresholds and their implications

1) PIE size thresholds for large private companies

• the PIE definition will be extended to large companies with both 750 or more employees globally and an annual turnover of £750 million or more (the size threshold).

2) PIE size thresholds for AIM and similar companies

• the PIE size threshold will apply to companies on Multilateral Trading Facilities (MTFs) including AIM companies, that meet the size threshold above, replacing the White Paper proposal for a definition based on a market capitalisation figure which would have embraced more AIM companies

3) Application of PIE size thresholds in group situations

• where a UK parent company prepares consolidated accounts for a group, and that group when aggregated meets the size threshold, then the parent company of that group will become a PIE
• where an entity that is a PIE by virtue of the new size threshold is a subsidiary of a UK-incorporated parent, the parent will also qualify as a PIE. This proposal will mean that where a subsidiary has a parent company in the UK but the consolidated accounts are prepared at a higher level in another country the UK parent as well as its subsidiary will be a PIE

4) Exemptions for PIEs qualifying by virtue of the size thresholds 

• requirements to have an audit committee, to retender the audit every 10 years and to rotate auditor every 20 years will not apply to entities that are PIEs because they satisfy the new size-based thresholds

5) New reporting requirements for PIEs

PIEs meeting the size thresholds will need to publish:

• a Resilience Statement
• Audit and Assurance Policy
• Directors’ statement on fraud measures
• new disclosures on dividends and distributable reserves 

6) Transitional requirements for companies becoming or ceasing to be PIEs

• an adequate period will be allowed between an entity exceeding the new size threshold and being subject to any new requirements. This will be set out in legislation, but it will be a full annual reporting period as a minimum
• a smoothing mechanism will be introduced such that entities will have to continue meeting requirements for a set period after they qualify as a PIE, even if they drop below the size threshold

7) Review of existing PIE definition and requirements

• The Government will review the existing regulatory framework for PIEs to identify further deregulatory opportunities. The Government intends to legislate so that Ministers can disapply PIE requirements from particular entities or categories of entities in secondary legislation

8) Amendment of size thresholds to be by secondary legislation

• Ministers will be able to amend the size threshold by secondary legislation in future, as well as including or excluding groups with specific characteristics such as sector or company type

9) When LLPs, third sector and private entities will qualify as PIEs

• Lloyd’s syndicates will not be classified as PIEs and are not included in the scope of the new size threshold
• LLPs will be included if they meet the size thresholds
• third sector entities will only be included if they meet the new size threshold
• local authorities other than those that are already PIEs, eg because they have listed debt, will not be included. Other public sector bodies will also not be PIEs 

10) Possible reduction in FRC scrutiny for AIM companies not meeting size thresholds

• the Government will undertake further work with the FCA, FRC and the London Stock Exchange to explore whether there is good justification for ARGA to continue certain aspects of FRC scrutiny of all or some companies traded on MTFs even though they will not become PIEs and, if so, on what basis

11) Temporary exemption proposal for newly listed companies withdrawn 

• temporary exemption from PIE requirements will not, as was previously proposed, be granted to PIEs