SOX: different effects on German and UK companies 1728

  • Hi guys.
    I’m doing some SOX research, especially about the different effects on british and german companies but in the moment I pretty stuck on getting to the point what the main difference is.
    Generally I understand that UK and German companies listed on an American exchange must be compliant otherwise they have to delist or deregistrate which is not simple.
    Are there any main differences in going private between German and UK companies? Is it more simple for the british companies?
    I googled for a while but did not find any significant differences regarding effects on british and german companies.
    Please help me. Good links are appreciated.
    Thanks for any insight.

  • Take a look at the local governance laws for UK and Germany, and compare them.
    That will tell you how much extra work is needed, and the difference between what’s needed.

  • Thanks IrquiM for your reply. I will check this out.

  • UKand German companies are only subject to sox if they are floated on the US stock exchange and therefore file reports to the SEC.
    After this, the level and date that compliance is due will depend on whether or not they are accelerated filers and they company’s size.
    UK and German companies that file to the SEC, are all known as Foreign Private Issuers. For Sox purposes, whether they are located in UK or Germany will make no difference.
    Hope this helps.

  • That said, I imagine that German companies would find SOX more of a challenge than a UK company - principally because the corporate governance model is quite different.
    Much of SOX replicates principles that were already in place in UK Corporate Governance for many years - albeit SOX applies greater rigour and stronger enforcement. German Corporate Governance places stronger emphasis on things like having two boards (management and supervisory) plus strong input from employee groups such as the works council.
    In Germany there are usually two reasons they give you why they can’t do what you want either, 1) it requires approval from the works council or 2) it is not allowed by German tax law 😉

  • i would agree with Deins, that you must consider Company Laws which do indeed differ between UK and Germany. This is only of importance, however when designing the controls that need to be put in place and documenting processes.
    I currently manage processes in Ireland ( law almost identical to UK) and Germany, and SOX compliance requirements are all based on what type of registration and filing you have with the US.

  • Totally agree. My point was principally that although the SOX requirements for companies in both countries is the same UK companies will probably find it easier as the principles involved are anglo-american.
    Foreign filer requirements are absolutely the same regardless of the country of origin.

  • I also agree.
    Another example: Spain
    According to SOX, the audit committee is directly responsible for the appointment, compensation, retention and oversight of the company’s auditors
    According to the Spanish law, auditors are appointed by the company’s shareholders at their general meeting. Committees of the board of directors do not have any power under the company’s articles of incorporation to make such appointments, nor do they have power to independently take any action. They are in effect limited to making recommendations to the Board of Directors, which may then take appropriate action.
    Under the Spanish financial law, audit committees are required to submit to the Board of Directors proposals for the appointment of the external auditors of the company, which shall in turn be submitted to the general shareholders’ meeting.
    Another interesting issue: The full participation of controlling shareholders in the audit committees

  • Thx Emm, Denis, Lekatis. Your help is really appreciated. 🙂
    I agree with you Denis, that SOX is a bigger challenge for German firms than for UK. I think the crux is the very different corporate governance model in both countries.
    I will keep on studying both corporate government codes to identify the differences, and will come back if there are any insoluble questions.
    kind rgds,

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