FCA: Primary Market Bulletin No. 55

On 17 April 2025, the Financial Conduct Authority (FCA) published Primary Market Bulletin No.55 (PMB 55).

PMB 55 provides feedback on (and finalises) a number of changes to the FCA’s Knowledge Base consulted on in Primary Market Bulletin 53 (PMB 53) in December 2024 (see here). Other than in respect of TN 710 (Sponsor Services: Principles for Sponsors), where the FCA notes it is considering feedback received and will respond in a future Primary Market Bulletin, the changes are being made broadly as proposed in PMB 53 but with certain minor/clarificatory amendments.

The FCA is also consulting on:

• Proposed consequential changes to four technical notes in light of the implementation of the new UK Listing Rules in July 2024.
• A small number of proposed updates/clarifications to TN 507.1 (Structured digital reporting for annual financial statements prepared in accordance with International Financial Reporting Standards) including to reflect that fact that a new ESEF taxonomy has been published.

The deadline for commenting on these proposals is 15 May 2025.

The FCA also highlights the changes made to the FCA Handbook to update Corporate Governance Code references to refer to the 2024 version.

(FCA, Primary Market Bulletin No 55, 17.04.2025)

DBT: The Companies (Directors’ Remuneration and Audit) (Amendment) Regulations 2025 – Guidance Note

On 23 April 2025, the Department for Business and Trade (DBT) published a Guidance Note to accompany The Companies (Directors’ Remuneration and Audit) (Amendment) Regulations 2025 (Regulations).

The Regulations were laid before Parliament on 3 April 2025 and are due to come into force on 11 May 2025. They will remove certain over-lapping requirements from the directors’ remuneration reporting framework and also clarify certain powers of the UK audit regulator (see further here). The purpose of the Guidance Note is to provide additional clarification on when the changes will apply in respect of directors’ remuneration reports, policies and payments from 11 May 2025, and also to clarify how one of the changes impacts on future reporting comparing boardroom and employee pay.

The Guidance Note explains the following:

Directors’ remuneration report

Changes made by the Regulations to the directors’ remuneration report will apply to the first remuneration report published for a financial year which begins on or after 11 May 2025. For remuneration reports relating to a financial year that began before 11 May 2025, the directors’ remuneration reporting requirements in place prior to 11 May 2025 will apply.

Directors’ remuneration policy

Changes made by the Regulations to the directors’ remuneration policy will apply to any new policies approved by shareholders on or after 11 May 2025. Any remuneration policies approved before 11 May 2025 under the pre-11 May requirements will continue in force after 11 May 2025 until such time that shareholders approve a new remuneration policy.

Any directors’ remuneration policy put forward for shareholder approval on or after 11 May 2025 should take account of the Regulations, which remove certain disclosure requirements within the policy. If a company has prepared a directors’ remuneration policy in accordance with the pre-11 May 2025 requirements that will be put to shareholders after 11 May 2025, it would ideally amend that policy to fit with the Regulations before the shareholder vote as otherwise the policy would cover matters no longer needed under the Regulations, but the policy should otherwise still satisfy the requirements of the directors’ remuneration reporting regime as a whole.

Payments to directors outside the approved remuneration policy

From 11 May 2025, any proposed payments to directors that fall outside the existing remuneration policy will need to be made in accordance with the revised procedure for shareholder approval of such payments set out in the Regulations, so shareholders must approve the specific proposed payment (without the need for the policy itself to be first revised and approved as consistent with the payment, as has been the case under the pre-11 May requirements).

Reporting pay of a deputy CEO that is not a director

From 11 May 2025, any deputy CEO who is not a director will no longer need to be paid in accordance with an approved directors’ remuneration policy. However, the directors’ remuneration report for a financial year that begins before 11 May 2025 will still need to include the pay of any such person for that whole financial year (this requires reporting pre-11 May remuneration paid in accordance with an approved directors’ remuneration policy and any post-11 May remuneration paid for the remainder of the financial year, whether or not in accordance with an approved remuneration policy). This is a temporary transitional measure. Directors’ remuneration reports for subsequent financial years (beginning on or after 11 May 2025) will not need to include the pay of non-director deputy CEOs.

Changes to paragraph 19 of Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008

The Regulations remove paragraph 19 of Schedule 8, which since 2019 has required companies to report a comparison of the annual percentage change in each director’s pay with the average annual percentage change in employee pay. The Guidance Note explains that the Regulations do not reinstate the version of paragraph 19 that was in force prior to the 2019 changes (which had provided for a comparison of the CEO’s annual change in remuneration with that of the average change in employee pay) as paragraphs 19A-G of Schedule 8, which continue in force, provide equivalent and more detailed information about the relationship between CEO pay and wider employee pay (including annual disclosure and explanation of the ratio of CEO pay to the median, lower quartile and upper quartile of employee pay).

Website publication of the remuneration report and information about the shareholder vote on the remuneration policy

The Regulations remove requirements added in 2019 for the remuneration report to be available on a company’s website for ten years and for certain information about the shareholder vote on the directors’ remuneration policy to be published on the website. The Guidance Note confirms these requirements no longer apply from the coming into force of the regulations on 11 May 2025.

(DBT, The Companies (Directors’ Remuneration and Audit) (Amendment) Regulations 2025 – Guidance Note, 23.04.2025 and here)

SFO: Guidance on Corporate Co-Operation and Enforcement in relation to Corporate Criminal Offending – Corporate Guidance

On 24 April 2025, the Serious Fraud Office (SFO) published updated Corporate Guidance which provides very helpful pointers on factors the SFO will consider in offering a Deferred Prosecution Agreement (DPA) to a corporate entity, the potential benefits of self-reporting, and the SFO’s expectations in relation to self-reporting. See further our blog post on the SFO Guidance here.

Three key points on the new Guidance are as follows:

Emphasis on the potential benefits of self-reporting

The SFO Guidance states that if a company self-reports and then cooperates fully it will be invited to a DPA unless there are exceptional circumstances. This largely reflects the current position but is a helpful restatement (and a slight shift in emphasis towards a presumption of a DPA invitation). Whether or not to self-report will still remain a finely balanced decision for many corporates and the SFO recognises that some level of internal investigation will usually be needed before considering a self-report.

“Exemplary cooperation” needed in order to be invited to a DPA in the absence of a self-report

The SFO sets out at paragraph 22 examples of “exemplary cooperation”, including preserving and identifying to the SFO all relevant material (including material held by third parties, or under the company’s control but held overseas), presenting the facts on the suspected criminal conduct, engaging with the SFO in advance of any internal investigation, and presenting to the SFO a thorough analysis of the company’s compliance programme (including any deficiencies identified). Waiver of legal privilege is not required, but the SFO emphasises that this will be viewed as a marker of cooperation, including in relation to legally privileged interview notes. Importantly, the Guidance states that a company which takes all of the steps set out at paragraph 22 is likely to be viewed as having provided exemplary cooperation.

A commitment to investigate quickly

The SFO Guidance states that it will contact a self-reporting entity within 48 hours, decide within six months of a self-report whether or not to open an investigation, investigate “reasonably quickly” and conclude DPA negotiations within six months of an invitation to open such negotiations.

(SFO, Guidance on Corporate Co-Operation and Enforcement in relation to Corporate Criminal Offending – Corporate Guidance, 24.04.2015)
(SFO, Corporate Guidance, 24.04.2025)

PIRC: Shareholder Voting Guidelines 2025

PIRC has published its latest UK Shareholder Voting Guidelines. PIRC applies these to all listed companies, including overseas companies, that it covers on the UK market.

Key changes from the 2024 UK Shareholder Voting Guidelines include the following:

Section 2 – The board

• Responsibilities of the board chair: Where no relevant board committee chair or member is up for election (for example, because there is no board-level sustainability committee), PIRC will ultimately consider the board chair accountable for any governance shortcomings in the relevant area.
• Committee chairs: This is a new short section. PIRC will expect the chairs of the board committees to take full accountability for the decisions and governance of their respective committees. However, if a committee chair is not up for election and there are significant concerns, PIRC will recommend opposing the election/re-election of the most senior board member on that committee (for example the Senior Independent Director). If there is no such senior member on that committee, PIRC will recommend opposing the election/re-election of the committee member with the longest board tenure.

• Diversity: PIRC now expects at least 40% of FTSE 350 board positions to be filled by women, in line with the FTSE Women Leaders Review 2024 recommendations. PIRC will oppose the chair of a FTSE All-share nomination committee where 40% of board positions are not filled by women. PIRC also refers to the Parker Review targets on ethnic diversity and will recommend abstention on the re-election of FTSE 350 nomination committee chairs (or the board chair if there is no nomination committee chair) for lack of disclosure on progress in line with the Parker Review.

Section 3 – Report and accounts, audit and financial controls

•  Auditor rotation: PIRC considers auditor rotation after five years to be best practice, so will recommend abstention on re-election of an auditor in place for more than five years, and opposition where the auditor’s tenure exceeds 10 years.

Section 4 – Shareowner rights, capital stewardship and corporate actions

• Share issue authorities: PIRC has updated the limits on share issue authorities to reflect those now considered acceptable by other institutional investor bodies.

• Authorities to purchase own shares: PIRC has updated this section to set out its concerns about share buybacks and to set out the criteria for buyback authorisations it will support. These are those that do not exceed 10% of issued share capital, are conducted at no more than a 5% premium to the prevailing market price and expire no later than the sooner of 18 months from approval or at the next AGM. PIRC will recommend opposition to buyback authorities that do not meet these conditions and will oppose those that risk “creeping control” (buybacks which may increase a controlling shareholder’s stake and so diminish the rights of minority shareholders).
•  Maintenance of capital: In light of recent corporate collapses, PIRC may review the voting recommendation on the annual report and accounts and the auditor where it has significant concerns about the alignment of the holding company’s net assets and those in the group accounts.
• Remuneration schemes generally: PIRC has updated this section to set out its general expectations of remuneration schemes. These should serve shareholders’ best interests, involve an independent decision-making process and result in fair awards that are beneficial to the company’s long-term interests, transparent and not overly complex.
• Factors PIRC considers: PIRC sets out and comments on the range of factors it considers when assessing remuneration schemes. These include levels of disclosure, quantum and excessiveness of arrangements, metrics, discretion, clawback and performance period. It comments on these particular factors.
  Section 8 – Reporting on governance of environmental and social issues
•  Managing climate risk at major emitter: In this section PIRC sets out the approach it has developed to further align voting positions with the engagement requirements of investors. This approach also focuses on climate-related remuneration and audit matters at high-emitting companies.

Section 6 – Directors’ remuneration

•  Remuneration schemes generally: PIRC has updated this section to set out its general expectations of remuneration schemes. These should serve shareholders’ best interests, involve an independent decision-making process and result in fair awards that are beneficial to the company’s long-term interests, transparent and not overly complex.
• Factors PIRC considers: PIRC sets out and comments on the range of factors it considers when assessing remuneration schemes. These include levels of disclosure, quantum and excessiveness of arrangements, metrics, discretion, clawback and performance period. It comments on these particular factors.

Section 8 – Reporting on governance of environmental and social issues

• Managing climate risk at major emitter: In this section PIRC sets out the approach it has developed to further align voting positions with the engagement requirements of investors. This approach also focuses on climate-related remuneration and audit matters at high-emitting companies.

The updated PIRC UK Shareholder Voting Guidelines can be purchased from PIRC.