The Modern Slavery Act 2015 – Do the new reporting obligations apply to you?
Certain companies incorporated in, or doing business in, Africa will be impacted by recent legislation in the UK designed to provide law enforcement agencies with stronger tools to tackle modern slavery (defined as slavery, servitude, forced or compulsory labour and human trafficking).
The Modern Slavery Act 2015 requires commercial organisations meeting the requirements below to publish an annual slavery and human trafficking statement, setting out the steps they have taken to ensure that there is no slavery or human trafficking in any part of their business or their supply chains. The requirements, which must all apply to trigger this obligation, are:
- the organisation supplies goods or services;
- it carries on a business or a part of it business in the UK; and
- it has an annual worldwide turnover (including subsidiaries) of at least £36 million.
A company incorporated in Africa, but with operations in the UK, which meets the turnover threshold will be under the same obligations as a UK-incorporated company. The UK government has initially estimated that at least 12,260 companies will be impacted by the disclosure requirements.
Businesses with a 31 March 2016 year-end will be the first required to publish a statement covering the full financial year commencing on 1 April 2015. Indeed, many businesses have already published their statements, some in the hope of being perceived as progressive in this area.
There are no prescriptive requirements as to content and form but government guidance suggests the statement must include the business structure, supply chains, the company’s slavery and human trafficking policies, due diligence procedures, slavery risks, and measures taken to address issues. The statement must be approved and signed at a high-level; if the statement is from a company then it will typically require the approval of the board and the signature of one of the directors.
The statement must be published on the company website with a prominent link to it on the home page as soon as reasonably practicable (and at the latest within 6 months) after the end of the company’s financial year. Failure to comply may result in the Secretary of State bringing civil proceedings in the High Court for an injunction requiring the company to comply. Critically, non-compliance may lead to negative publicity for companies, reputational damage and an impact on investor relations. Increasingly, lenders, government bodies and other companies may consider compliance with the disclosure requirements as a pre-requisite for doing business. The ethical performance of businesses is increasingly being scrutinised and benchmarked by stakeholders, which will dissuade many organisations from taking a minimalist approach to reporting.
It is also worth noting that there is currently further legislation passing through Parliament (The Modern Slavery (Transparency in Supply Chains) Bill 2016-2017) which is intended to widen the scope of parties caught by the legislation to include public bodies. If enacted, it will require commercial organisations and public bodies to include a statement on slavery and human trafficking in their annual report and accounts. This means that all statements would be available in a central location and could be scrutinised alongside company accounts. Importantly, the Bill also proposes that companies or public bodies which have not provided the statement must be excluded from public procurement procedures with contracting authorities.