Walker may widen the net

The threshold for inclusion in the UK’s voluntary disclosure guidelines could be revamped to include smaller portfolio companies.

The Walker Guidelines, the voluntary disclosure rules for the UK’s largest private equity firms, looks likely to be extended to a larger number of businesses.

The Guidelines Monitoring Group is currently considering dropping the threshold for qualifying companies. To date, the rules are applied to portfolio companies valued at £500 million (€559 million; $813 million) or more, but the group is mulling a reduction of the threshold to £250 million.

The shift is being considered to “ensure the guidelines evolve to meet changing market conditions and circumstances”, Sir David Walker, the group’s chairman and author of the guidelines, said in a statement.

“We will announce our recommendations early in the New Year following the completion of the consultation,” he said.

The British Private Equity & Venture Capital Association (BVCA) described the proposed move as “a highly desirable but incremental step”.

The guidelines, which were established in 2007, recommend best practice for the disclosure of private equity firms’ annual review, regular provision of investment approach and company information, investment valuation methods, reporting to limited partners and portfolio company information.

The guidelines are implemented on a “comply or explain” basis. If firms are not found to be adequately compliant – and do not have a good reason – they can potentially be expelled from the BVCA.

In the latest report published this month, the monitoring group described a “very encouraging” commitment from the private equity industry to increase levels of transparency and disclosure.

Developments will be observed by policy-makers in Brussels, who are currently deciding how to shape new Europe-wide regulation for the private equity industry. In its latest draft form, the Alternative Investment Fund Managers Directive would require all private equity firms in the EU – regardless of size – to fulfil a number of disclosure and operational requirements.