Greensill Capital-style funding faces new rules

Companies will be forced to disclose whether they rely on the type of financing used by lender Greensill Capital. 

The International Accounting Standards Board is drawing up the new reporting rules and will publish a draft by the year end. 

The move is aimed at giving shareholders more transparency over companies’ finances and how they affect their debt and cash piles, following a string of high-profile corporate collapses. 

Greensill came unstuck after one of its biggest customers defaulted on some of its debts

The downfall of Greensill, which provided supply chain finance, put the spotlight on this controversial type of funding earlier this year. 

Greensill came unstuck after one of its biggest customers – the troubled steel company GFG Alliance, which owns Liberty Steel – defaulted on some of its debts. Greensill, where former Prime Minister David Cameron was an adviser, fell into administration in March. 

Supply chain finance is where a company agrees to pay its suppliers early using a middleman, although at a slight discount. The company then pays the full amount to the middleman later. 

This type of finance was also used by Carillion, the outsourcing giant that collapsed in 2018 in one of Britain’s biggest ever corporate failures.

Investors argue that firms do not always record their use of supply chain finance in the accounts, making it hard for them to know how much cash and debt are on the books.