IA Guidelines On Viability Statements

On 16 November 2016, the IA published new guidelines setting out the expectations of institutional investors in relation to viability statements prepared by companies under provision C.2.2 of the UK Corporate Governance Code. The guidelines include a number of recommendations concerning the period of the viability assessment, the prospects and risks considered when assessing viability and transparency around stress testing and qualifications and assumptions.

Among other things, the guidelines indicate that:

• Longer time horizons should be considered when selecting the appropriate period for assessing a company's future viability. Three to five years seems to have become standard practice, but the IA's members expect greater differentiation between companies, and viability statements addressing longer timeframes given the long-term nature of equity capital and directors' fiduciary duties. Viability statements should state clearly why a particular assessment period