The Companies (Directors' Remuneration and Audit) (Amendment) Regulations 2025

On 3 April 2025, The Companies (Directors' Remuneration and Audit) (Amendment) Regulations 2025 and accompanying Explanatory Memorandum were laid before Parliament and they come into force on 11 May 2025.

These Regulations were published in draft in March 2025 and have now been through the Parliamentary sifting process.

They have two purposes:

• They repeal most of the requirements relating to the reporting of directors’ remuneration by quoted companies that were added in 2019 to implement part of the revised Shareholder Rights Directive as those requirements overlap considerably with directors’ remuneration reporting requirements that the UK introduced before 2019 and which remain, in force.

• Changes are being made to the existing audit regulatory framework to address some gaps or inconsistencies which arose during the process of assimilating relevant EU audit legislation within the UK’s legislative framework, following the UK’s withdrawal from the EU.

The Explanatory Memorandum notes that these changes form part of wider action being taken by the Government to streamline the UK’s non-financial reporting framework, as part of a Review of Non-Financial Reporting launched in May 20234. Other reform measures are being implemented in The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 that were laid on 10 December 2024 and come into force on 6 April 2025.

Changes to directors’ remuneration reporting requirements

Key changes include the following:

• Amendments to Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008: Information about matters such as the following will no longer be required: comparison of each director’s annual pay change with average employee pay change (para 19); the requirement to disclose each director’s total fixed pay and total variable pay (para 5); information on any changes to exercise price or date for any share options awarded to directors (para 14); information about any vesting or holding periods for share-based awards:(para 26 (ba)); information on any deferral periods related to the award of directors’ performance pay (para 26(b)); protection of sensitive personal data, including ethnic origin and political opinions (para 2(2A); information on the duration of directors’ service contracts (para 30A); and information about the remuneration policy decision-making process (para 24(1A)).These amendments apply in relation to accounts and reports for a financial year of a company beginning on or after 11 May 2025.

• Amendments to Part 10 Companies Act 2006 (CA 2006): These relate to payments to directors outside a company’s remuneration policy: The legislation reverts to the prior (pre-2019) provision that payments not consistent with a remuneration policy must first be approved by shareholders (rather than the company being required to amend the remuneration policy and get that amendment authorised by shareholders) by amending sections 226A, B, C, D and E CA 2006. It was felt that the requirement that the remuneration policy be changed to accommodate any one-off payment, was unduly bureaucratic.

• Amendments to Part 15 CA 2006: These remove the requirements for a company to put certain additional information about a shareholder vote on the remuneration policy on its website and to make the remuneration report available on a website for 10 years. These requirements overlap with similar requirements.

• “Unquoted companies”: These are being removed from the directors’ remuneration reporting requirements contained in Schedule 8 to the 2008 Regulations and in the CA 2006. Unquoted traded companies are companies with shares trading on a regulated market but whose shares are not quoted on the Official List of the Financial Conduct Authority and there are very few of such companies.

Changes to audit regulations

The Regulations also make some changes to the Statutory Auditors and Third Country Auditors Regulations 20136 and to the Statutory Auditors and Third Country Auditors Regulations 2016, to correct some inconsistencies or gaps that have been identified by the Government and the Financial Reporting Council (FRC) relating to the FRC’s role in regulating audits of Public Interest Entities and of non-UK incorporated companies that trade securities on UK regulated markets.

(Companies (Directors' Remuneration and Audit) (Amendment) Regulations 2025, 03.04.2025 and Explanatory Memorandum)

FCA: Handbook Notice No 128 – Corporate Governance Code changes

On 28 March 2025, the Financial Conduct Authority (FCA) published Handbook Notice No 128 which, among other things, confirms changes to the UK Listing Rules (UKLRs) and Disclosure and Transparency Rules (DTRs) following a consultation in in CP24/26. These changes stem from the Corporate Governance Code (Amendment) Instrument 2025.

In CP24/26 the FCA proposed amendments to both the UKLRs and the DTRs so that they refer to the January 2024 edition of the UK Corporate Governance Code (the 2024 Code). See further here.

The FCA has made the changes as consulted on with one alteration in response to feedback to the Transitional Provisions. This alteration is to provide flexibility for issuers with an accounting period beginning on or after 1 January 2025 but before 28 March 2025, who have decided to apply the 2018 Code. This fact will need to be disclosed in the necessary statements required under the UKLR so it is clear to the market which issuers in this position are complying with the 2018 Code and which with the 2024 Code.

In relation to the UKLRs, where a listed company or a closed-ended investment fund has an accounting period:

• beginning before 1 January 2025, the reference to all relevant provisions set out in the UK Corporate Governance Code is to be read as a reference to all relevant provisions set out in the 2018 UK Corporate Governance Code (2018 Code);

• beginning on or after 1 January 2025, but before 28 March 2025, references to the Code may be read as either the 2018 Code or the 2024 Code (except for Provision 29, where Provision 29 of the 2018 Code would continue to be applicable); and

• beginning on or after 28 March 2025 but before 1 January 2026, it must apply the 2024 Code (except for Provision 29, where Provision 29 of the 2018 Code would continue to be applicable).

In relation to the DTRs, where a listed company or a closed-ended investment fund has an accounting period beginning:

• beginning before 1 January 2025, the 2018 Code applies; and

• beginning on or after 1 January 2025, but before 28 March 2025, references to the Code may be read as either the 2018 Code or the 2024 Code.

The final rules came into force on 28 March 2025.

(FCA, Handbook Notice No 128, 28.03.2025)

FRC: Wates Principles insights – Roundtable invitations

On 2 April 2025, as part of its work in overseeing the Wates Principles, the Financial Reporting Council (FRC) announced that it wants to gather insight from private companies on their decision-making processes when choosing which governance framework to adopt.

The FRC wants to understand:

• what companies find most helpful about the Wates Principles, and which areas are easy to report on;

• what companies find most difficult to report on when applying the Wates Principles, and;

• what support private companies might find useful to improve reporting

As a result, the FRC provides details of two roundtables it is to host in April 2025 to gather views from stakeholders to inform its thinking. It is predominantly looking to hear from company secretaries and preparers of annual reports at private companies and a registration link is provided.

(FRC, Wates Principles insights – Roundtables, 02.04.2025)