Within the UK’s Financial sector there are laws, regulations and legal guidance that Finance professionals need to be aware of and stay up-to-date with. To succeed within a Finance career, you will need to apply these compliancy regulations to your daily work and follow all legal guidance.
This article covers a few examples of legal changes that Finance professionals need to be aware of.
Purpose of a Finance department and financial compliance
A Finance department manages a company’s money and is often split into two main functions, accounting and reporting, and strategic financial management.
Within a large organisation a Finance department can be made up of many levels of management with teams working underneath their supervisions. In a smaller organisation the Finance department can be just one person, who will most likely have a broader role and take on full financial responsibility for the company.
The Accounting and Reporting team is considered the foundation of the Finance department, as they are responsible for the good financial health of the organisation. The team’s functions include payroll, accounts payable and receivable, balance sheets, cash-flow reports, financial statements, internal audits, taxation, and the day-to-day record keeping required to ensure the company complies with the relevant financial regulations.
The Strategic Finance Management team needs a complete picture of an organisation’s financial health to make informed decisions around short and long-term company goals. The team’s functions include growth predictions, future trends, mitigating risk, financial forecasting, increasing capital, financing options, budget management and investor communications.
Financial compliance in the UK is monitored by the Financial Conduct Authority (FCA) who dictate the rules a Finance department must adhere to. Their function is to ensure that a company’s finances are transparent and fair, and that they are following tax and sanctions compliance, money laundering, anti-bribery, anti-corruption, client onboarding and data privacy regulations, and more.
New legal guidance is regularly introduced, and regulatory complexity is on the rise. Finance teams must stay up-to-date with these changes to ensure the company is always financially compliant and not subjected to any non-compliance fines.
You will typically find these roles in a Finance department:
- Chief Financial Officer (CFO)
- Finance Manager
- Financial Accountant
- Financial Controller
- Financial Analyst
- Finance Administrator
New laws to resolve commercial rent debts
The UK government recently introduced new laws and a code of practice to resolve the remaining commercial rent debts accrued because of the COVID-19 pandemic.
In 2021 many businesses had to close due to the obligatory lockdowns, so the government provided commercial tenants with some breathing space for paying rent on their commercial premises and protecting them from eviction until March 2022.
The new laws will provide a legally binding process to resolve any commercial rent disputes and the new code of practice sets out a clear route for the negotiations of rent repayments between commercial property landlords and their tenants.
These changes to the Commercial Rent (Coronavirus) Bill are intended to bring around a swift resolution to the estimated 20% of unresolved commercial rent arrears disputes.
Changes to the government Recovery Loan Scheme
The UK government’s Recovery Loan Scheme was introduced in April 2021 to provide financial support of up to £10 million per business of any size to aid recovery and growth after the devastating effects of the compulsory COVID-19 lockdowns.
There are several changes to this scheme that came into effect on 1 January 2022.The recovery loan will now only be open to small and medium sized enterprises with a turnover of less than £45 million and the maximum amount available to borrow will be £2 million per business.
Originally the guaranteed coverage that the government provided to lenders was 80%, from January this is reduced to 70%. The 100% liability of the debt continues to remain with the borrower.
National Security and Investment Act: guidance on notifiable acquisitions
Finance teams who are responsible for facilitating business acquisitions and reporting on these transactions need to be aware of the National Security and Investment Act that came into force on 4 January 2022.
This new Act is intended to detect any harm to UK’s national security by allowing the government to scrutinise and intervene in certain business or investor acquisitions.
From this date it is a legal requirement for any business acquisitions of certain entities in sensitive areas of the economy to be reported to the government. In total there are 17 ‘notifiable acquisition’ areas, these include advanced robotics, quantum technologies, synthetic biology, and data infrastructure. Click here for the full list.
As the number of Merger and Acquisitions (M&A) deals in the UK is predicted to significantly rise over the next year, this new mandatory notification regime will affect many Finance departments across the country.
This list of resource websites will help you stay up-to-date with new and current laws and regulations that affect compliance in the Finance sector:
- Sherman & Stirling are a global law firm who provide updates on financial regulations on their website.
- CUBE Reg Assure are a global provider of regulatory intelligence who offer a paid for platform to assist financial organisations with their compliance.
- Deloitte is a global professional service firm who offer a Financial Services and Regulation Monthly, a summary of key regulatory developments.
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