UK corporate governance and narrative reporting: Key developments checklist

Key developments

A key development in the period covered by this checklist is the inclusion of a draft Audit and Corporate Governance Bill in the recent King’s Speech. This legislation, which will establish the Audit, Reporting and Governance Authority (or ARGA) in place of the Financial Reporting Council, and include more large private companies within the ambit of reporting requirements for public interest entities, has been long awaited. However, it remains to be seen when the draft legislation will be available to review.

As more large private companies are likely to become public interest entities, it is intended to reduce the corporate reporting burden on medium-sized companies. However, this will depend on the outcome of the consultation on simpler corporate reporting (part of the non-financial reporting review) that closed in June.

Directors may be interested in the outcome of the consultation launched by the Institute of Directors in June on a Code of Conduct aimed specifically at directors. However, that consultation does not close until mid-August, so the outcome may not be known for some time.

Annual reporting

FCA: Primary Market Bulletin 49: On 21 May 2024 the Financial Conduct Authority (FCA) published Primary Market Bulletin 49 (PMB 49) covering a range of topics, including a reminder to issuers of their disclosure and filing requirements for annual financial reports, including structured annual financial reporting obligations.  Further details are here.

FRC: Plan and Budget 2024-25: On 25 March 2024, the Financial Reporting Council (FRC) published its Plan and Budget for 2024-25, which, according to the FRC, aims for a year of consolidation and prioritisation. With no new statutory powers expected in 2024-25, despite the UK Government's continued commitment to the FRC transforming to the proposed Auditing, Reporting and Governance Authority (ARGA), the FRC will focus on its core purpose of promoting trust and confidence in audit, corporate reporting and governance. Further details are here.

Audit

King’s Speech 2024: Draft Audit and Corporate Governance Bill included: The King’s Speech was delivered on 17 July 2024 and it includes reference to a draft Audit Reform and Corporate Governance Bill  being brought forward to “strengthen audit and corporate governance”. Further details are here.

FRC: Report on barriers to competition in UK audit market: On 2 February 2024, the FRC published a report which sets out a summary of key findings and potential actions from research it commissioned into barriers to entry and growth faced by audit firms in the UK. Further details are here.

Climate-related reporting

TNFD: Increased TNFD adoption and new sector guidance: On 28 June 2024, the Taskforce on Nature-related Financial Disclosures (TNFD) announced a 30% increase in adopters of their corporate reporting recommendations since January 2024 and released a suite of sector guidance, including recommended sector-specific disclosure metrics, additional guidance for financial institutions and guidance on value chains, to support reporting by companies and financial institutions. Further details are here.

Transition Plan Taskforce: New transition plan resources published: On 9 April 2024, the Transition Plan Taskforce (TPT) published a number of transition plan resources to help businesses unlock finance for net zero. Documents published include a Sector Summary document which provides an overview of transition plan guidance for 30 financial and real economy sectors, together with a number of sets of Sector Specific Deep Dive Guidance. Further details are here.

Corporate governance

FRC: Significant updates to the UK Stewardship Code announced: On 22 July 2024, the FRC announced revisions to the UK Stewardship Code application/reporting process and five priority areas for the next stage of its review of the Stewardship Code. This follows extensive engagement with stakeholders during early 2024. Further details are here. It follows an announcement of the review by the FRC in February 2024, further details of which are here.

HM Treasury: Dormant Assets Scheme – Participant Pack published: On 17 July 2024, the Government’s webpage on the expansion of the Dormant Assets Scheme was updated and a Participant Pack published which publicly traded companies can use as a starting point for participating in the UK Dormant Assets Scheme in respect of their securities. This enables the proceeds and distributions from dormant shares in public companies traded on a UK regulated market (such as the Main Market) or UK multilateral trading facility (such as AIM) and unclaimed proceeds from corporate actions to be put into that Scheme if these remain unclaimed after 12 years. Further details are here.

FRC: UK Stewardship Code signatories: On 21 February 2024, the FRC announced the latest signatories to the UK Stewardship Code. There are now 273 signatories to the Stewardship Code, representing £43.3 trillion assets under management, with signatories including 188 asset managers, 66 asset owners and 19 service providers. Further details are here.

Directors

IoD: Code of Conduct for Directors – Consultation paper: On 6 June 2024, the Institute of Directors (IoD) published a draft Code of Conduct for Directors (Code) for consultation. The Code has been developed as a practical tool to help directors make better decisions and to provide those that run organisations with a behavioural framework to help them build and maintain the trust of the wider public in their business activities. Further details are here.

Diversity

Parker Review: Improving the ethnic diversity of UK business – Update report: On 11 March 2024, the Parker Review Committee published its latest update report on ethnic minority representation at board level and in senior management at FTSE 350 companies and at the 50 largest private companies in the UK. Further details are here.

FTSE Women Leaders Review: Achieving Gender Balance 2024: On 27 February 2024, the FTSE Women Leaders Review, the third and successor phase to the Hampton-Alexander and Davies Reviews, published its latest report on progress for women serving on boards (Women on Boards), and for women in the two senior management layers below the board (Women in Leadership), at FTSE 350 companies and the 50 largest UK private companies. Further details are here.

Investor guidelines

PIRC:  Shareowner Voting Guidelines 2024: In late March 2024, PIRC published its 2024 Shareowner Voting Guidelines. These set out PIRC’s views of corporate governance best practice and PIRC applies them to all listed companies (including companies incorporated outside the UK) that it covers on the UK market. Further details are here.

Pre-Emption Group: Annual Monitoring Report 2022-2023: On 5 March 2024, the Pre-Emption Group published a report monitoring the use of its November 2022 Statement of Principles on the disapplication of pre-emption rights for UK listed companies. In line with the recommendations set out in the UK Secondary Capital Raising Review, these increased the level of disapplication authority that companies can request routinely to 20%. Further details are here.

Investment Association: Letter to Remuneration Committee Chairs re the IA’s Principles of Remuneration: On 23 February 2024, the Investment Association (IA) sent a letter to FTSE 350 Remuneration Committee Chairs with an update on the IA's Principles of Remuneration, which were last published in November 2022. The IA is conducting a fundamental review of the Principles of Remuneration and an updated version will be published later in 2024. The purpose of the letter is to let recipients know about the issues the IA will be considering during the review and main themes for 2024. Further details are here.

PLSA: Stewardship and Voting Guidelines 2024: On 15 February 2024, the Pensions and Lifetime Savings Association (PLSA) published their updated Stewardship and Voting Guidelines (2024 Guidelines), together with a shorter Summary document which summarises the different voting recommendations in the 2024 Guidelines. Further details are here.

ISS: UK Benchmark Proxy Voting Guidelines for 2024: Following the announcement on 19 December 2023 that ISS had updated its benchmark proxy voting policies for company meetings in the UK and Ireland, those updated policies were published in January 2024. They will be applied for shareholder meetings taking place on or after 1 February 2024. The updates follow consultation in November 2023, and they relate to board diversity, board independence, and authority to issue equity shares where pre-emption rights have been disapplied. Further details are here.

Narrative reporting

DBT: Sustainability Disclosure Requirements – Implementation Update 2024: On 16 May 2024, the Department for Business and Trade (DBT), with HM Treasury and other Government departments, published a policy paper summarising how the UK Government’s Sustainability Disclosure Requirements (SDR) fit together across the financial services sector and wider economy, and when engagement with the proposals is needed. The policy paper follows a commitment to provide an SDR implementation update to reflect the development of international standards in the 2023 Green Finance Strategy published in March 2023.  Further details are here.

DBT: Framework and Terms of Reference for the development of UK Sustainability Reporting Standards: On 16 May 2024, DBT published a policy paper concerning the framework that is to be established to assess and decide whether to endorse IFRS Sustainability Disclosure Standards for use within a UK context. The International Sustainability Standards Board (ISSB) issued its first standards on 26 June 2023: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. Further details are here.

DBT: Non-financial reporting review – simpler corporate reporting consultation: On 16 May 2024, DBT published a consultation on two proposals aimed at reducing the burden of corporate reporting on medium-sized companies.  This follows publication by DBT in March 2024 of a summary of the responses it had received to the Call for Evidence it launched in May 2023 as part of its review of the non-financial reporting requirements UK companies need to comply with to produce their annual report. At that time, it was announced that the Government intends to make legislative changes in summer 2024 that should directly benefit small and medium-sized companies. Among other things, it said that the Government intended to consult later in 2024 on amending the definition of a medium-sized company for company reporting purposes by raising the employee threshold and consulting on exempting medium-sized companies from having to produce a Strategic Report. Further details are here.

DBT: Non-Financial reporting Review – Summary of responses to Call for Evidence: On 19 March 2024, the Department for Business & Trade (DBT) published a summary of the responses it has received to the Call for Evidence it launched in May 2023 as part of its review of the non-financial reporting requirements UK companies need to comply with to produce their annual report. As part of the review, the current company size thresholds (micro, small, medium and large) that determine certain non-financial reporting requirements, and the preparation and filing of accounts with Companies House, are also being considered to determine if they remain fit for purpose. Further details are here.

Parliament: Call for evidence launched into the impact of the Modern Slavery Act 2015: On 28 February 2024, the House of Lords Select Committee on the Modern Slavery Act published a call for written evidence for its inquiry into the impact and effectiveness of the Modern Slavery Act 2015. The House of Lords Select Committee on the Modern Slavery Act was appointed on 24 January 2024 and will report by 30 November 2024.  It will consider the impact of the Modern Slavery Act, and its effectiveness in achieving its aims. It will also consider how its provisions have been implemented, how it has been impacted by recent political developments, and whether it requires improvement. Further details are here.

Payment practices reporting

Parliament: Draft regulations – The Reporting on Payment Practices and Performance (Amendment) (No 2) Regulations 2024: The draft Reporting on Payment Practices and Performance (Amendment) (No 2) Regulations 2024 were published on 21 May 2024, together with a draft Explanatory Memorandum. These draft Regulations amend the Reporting on Payment Practices and Performance Regulations 2017 and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017, which impose a requirement on large companies and qualifying limited liability partnerships (LLPs) to publish certain information twice per financial year about their practices, policies and performance in relation to paying suppliers. These draft Regulations introduce requirements for qualifying companies and LLPs to publish certain information on practices, policies and performance with respect to retention clauses in any qualifying construction contracts with suppliers. Further details are here.

Parliament: The Reporting on Payment Practices and Performance (Amendment) Regulations 2024 published: The Reporting on Payment Practices and Performance (Amendment) Regulations 2024 (2024 Regulations) were made on 25 March 2024, published on 25 March 2024 and came into force on 5 April 2024. The 2024 Regulations amend the Reporting on Payment Practices and Performance Regulations 2017 and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017  and follow a consultation launched in January 2023. Further details are here