News & Analysis

AVCAL lays out best practice principles

Members of Australia’s private equity trade group will need to comply with seven principles of good governance as a way of assuring regulators the asset class is a viable investment strategy.

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This week the Australian Private Equity and Venture Capital Association (AVCAL) released seven principles which comprise its governance code for the private equity industry.

The trade body said it published the code to in part assure regulators, government and the financial press that GPs are “responsible stewards of their investors’ capital”.

Australia’s private equity industry is currently locking horning with tax authorities who argue firms use offshore holdings as a tax avoidance strategy.

101010.gif(10)Similar to their listed counterparts, AVCAL firms will need to adopt all aspects of the code or explain why certain provisions were not implemented131313.gif(13)

 

Similar to their listed counterparts, AVCAL firms will need to adopt all aspects of the code or explain why certain provisions were not implemented.

The seven principles, which AVCAL calls guidelines and not prescriptive rules, include calls for GPs to recognise the diverse and sometimes conflicting interests of their LP base, disclose their environmental, social and governance (ESG) policies and practices and provide portfolio companies effective and competent directors, among other things. 

LPs should insist GPs adopt the governance code and firms should subsequently publicise (for example on their websites) the approach they have adopted in implementing the code, said AVCAL.

Private equity firms in Australia manage around $25 billion in capital, according to AVCAL estimates.