Ashurst Governance & Compliance Update – Issue 62

Economic Crime and Corporate Transparency

1. Registrar of Companies publishes rules on identification verification and ACSP applications

Companies House has published rules for those needing to verify their identity in accordance with the Economic Crime and Corporate Transparency Act 2023, including directors, persons with significant control of companies, relevant officers of relevant legal entities, anyone filing documents at Companies House and those wishing to become Authorised Corporate Service Providers (ACSPs).

Verification of identity by individuals is dealt with in The Registrar's (Identity Verification by the Registrar) Rules 2025 which reflect the fact that identity verification can be undertaken by individuals directly with Companies House or via an ACSP. Part 2 of the rules sets out the information and evidence required to support a verification application. Part 3 sets out the process to be followed depending on which verification route is used.

Issues of note include:

• Individuals seeking to verify their identity will need to provide their name, including former names, date of birth, a current home address and, in certain circumstances, a previous home address. A valid email address will also need to be provided.
• There are three routes for individuals verifying their identity directly with Companies House, the type of evidence available to an applicant determining the route they can access.

The first two routes are fully digital and involve an applicant either using a GOV.UK One Login ID Check app (which involves submitting a photograph of an approved form of photographic ID such as a passport or driving licence, together with a photograph of the applicant taken with a smartphone) or using the GOV.UK One Login web service (which also involves providing an approved form of photographic ID and answering a series of security questions online).

The third route for verifying identity directly with Companies House is not fully digital and involves providing an approved form of photographic ID at a Post Office after booking a face-to-face verification appointment on the GOV.UK One Login face to face service website.

• There is also an option for individuals to verify their identity indirectly through an ACSP.  The rules relating to identity verification of individuals by ACSPs can be found here.

From 25 February 2025, third party providers can register their business to become an ACSP. The rules relating to applications for ACSP status and the evidence needed to do so can be found here. Importantly, prospective ACSPs must be able to validate cryptographic features of evidence provided to them by individuals seeking identity verification.

The rules were each made on 24 January 2025 and come into force on 25 February 2025. The requirements for identity verification are expected to become mandatory in Autumn 2025 with voluntary verification becoming possible from 25 March 2025. For more detail on current timings in relation to the implementation of ECCTA, see AGC Update, Issue 61 – Item 6.

Stewardship and Voting Guidelines

2. PLSA publishes 2025 Stewardship and Voting Guidelines

The Pensions and Lifetime Savings Association has published its Stewardship and Voting Guidelines for 2025. The Guidelines are intended to provide guidance for pension schemes when deciding how to vote during the 2025 AGM season.

Key areas highlighted in the 2025 Guidelines include:

• Recent political and economic events that have a direct impact on stewardship issues for investors.
• The impact on shareholder rights arising as a result of changes to the UK Listing Rules and developments in relation to Artificial Intelligence.
• Sustainable finance developments, including the PLSA’s efforts to increase the focus on nature-related issues.
• Developments in relation to Social Factors, including the DWP Taskforce on Social Factors.
• Workforce developments, including issues such as maternity and paternity pay and leave policies, and ethnicity and disability pay reporting.
• Issues related to Auditor tenure.

The 2025 Guidelines are available to PLSA members via the PLSA Member Area.

3. UK Stewardship Code signatories announced ahead of consultation closure

The Financial Reporting Council has announced the successful signatories to the UK Stewardship Code following the latest round of applications. There are now 297 signatories to the Code, representing £52.3 trillion assets under management. This includes 199 asset managers, 77 asset owners and 21 service providers.

By way of reminder, the FRC has been formally consulting on proposals to amend the UK Stewardship Code with a focus on streamlining reporting requirements and reducing burdens on signatories. The consultation closed on 19 February. More detail can be found in AGC Update, Issue 59 – Item 2.

Following its consultation, the FRC plans to publish an updated Stewardship Code that will come into effect in 2026. Potential signatories submitting reports this year should continue reporting against the 2020 Code, noting the 'interim changes' made to the Code pending finalisation of the FRC's consultation – see AGC Update, Issue 55 – Item 8.

Narrative and Financial Reporting

4. FRC launches market study examining SME audit and reporting challenges

The FRC has launched a market study examining how effectively the audit market serves small and medium-sized enterprises (SMEs) and exploring options for reducing their reporting burden. This study is the first phase of a wider FRC campaign to support UK SMEs in accessing audit services and securing the capital they need for growth.

In-scope companies for the market study are corporate entities that qualify as small- or medium-sized under the Companies Act 2006 definition as of 6 April 2025. By way of reminder, the qualification thresholds for such companies will be increased by virtue of The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 (SI 2024/1303) which were published and laid before Parliament in December 2024 – see AGC Update, Issue 60 – Item 7.

Key areas that the market study will explore include:

• the functioning of the audit market for SMEs, including any burdens arising from reporting and audit requirements;
• the market forces that are driving the consumption of audit services by SMEs;
• challenges that auditors face when auditing SMEs; and
• regulatory developments that should be considered as part of the study, such as the change in company size thresholds noted above and the expected consultation on changes to reporting and audit requirements, following the outcome of the government's non-financial reporting review – see AGC Update, Issue 57 – Item 5.

Comments and evidence should be submitted by 25 April 2025. The study is expected to conclude before the end of 2025.

Payment Practices Reporting

5. Final Payment Practices and Performance (Amendment) Regulations 2025 published

The final Reporting on Payment Practices and Performance (Amendment) Regulations 2025 (SI 2025/75) have been published together with an Explanatory Memorandum. No changes have been made to the revised draft regulations that were published on 7 October 2024 – see AGC Update, Issue 57 – Item 5.

By way of reminder, the Regulations amend both the Reporting on Payment Practices and Performance Regulations 2017 (SI 2017/395) and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017(SI 2017/425) to require qualifying companies and LLPs to publish information about their payment practices and policies in relation to retention clauses in any construction contracts that they have with suppliers.

The regulations were made on 23 January 2025 and come into force on 1 March 2025. The new requirements apply in relation to financial years beginning on or after 1 April 2025.

Public Offers Regime

6. FCA publishes consultation on further changes to the public offers regime and the UK Listing Rules

The FCA has published CP 25/2 - Consultation on further changes to the public offers and admissions to trading regime and the UK Listing Rules in which it sets out further proposals to support the new Public Offers and Admissions to Trading Regulations (POATR) regime – see AGC Update, Issue 58 – Item 9 for our most recent update.

By way of reminder, POATR will create a new public offers regime, replacing the UK version of the EU Prospectus Regulation.

In CP 25/2, the FCA seeks views on:

• Disclosure requirements for low denomination bonds.
• Inefficiencies in the listing application process for further issuances and a proposal to abolish the process for further issues of existing listed securities and streamline the process for new applicants.
• The requirement to publish Listing Particulars when seeking admission of certain securities to a regulated market (such as the London Stock Exchange's Main Market) or listed MTF market (such as AIM).
• Consequential changes to the FCA Handbook, including transitional provisions, providing for, and improving on, rules proposed in CP 24/12.

Together, the proposed changes seek to promote efficient and effective capital raising by companies across debt and equity capital markets in the UK and to enable investors to have access to a wider range of investments.

Responses to the consultation should be submitted by 14 March 2025.

Alongside CP 25/2, the FCA has also published CP 25/3 - Consultation on further proposals for firms operating public offer platforms in which it consults on further consequential changes and transitional arrangements for the new regulated activity of operating a public offer platform (POP), as part of the wider POATR reforms.

As previously signalled, the FCA aims to publish final rules for the POATR framework as a whole, including rules for firms operating a POP, this summer. After the publication of its final rules, and subject to agreement with the Treasury, the FCA anticipates bringing the new regime for POPs into force in January 2026 alongside the broader POATR framework.

For more detail on the POATR framework, see AGC Update, Issue 48 – Item 7.

Equity Capital Markets

7. Accelerated Settlement Task Force publishes its implementation plan for the UK’s transition from T+2 to T+1 securities settlement

The Technical Group of the UK Accelerated Settlement Taskforce (AST) has published its implementation plan on the UK's transition from T+2 to T+1 securities settlement.

The AST was set up in December 2022 to examine the case for the securities settlement cycle to be shortened from its current standard of T+2 to T+1. Financial markets globally are moving increasingly to a T+1 settlement cycle.

The implementation plan is the third and final deliverable from the AST in its current form. It follows the AST's initial report (published in March 2024), which recommended that the UK should move to a T+1 settlement cycle no later than the end of 2027, and its draft recommendations report and consultation (published in September 2024).

The implementation plan recommends 12 ‘critical’ and 27 ‘highly recommended’ actions to facilitate a successful transition to T+1 and that the UK move to T+1 on 11 October 2027. This is in line with ESMA's proposed optimal date for the transition to T+1 in the EU, as set out in its November 2024 report on the shortening of the settlement cycle in the EU.

Subsequently, the government has published its response to the AST report in which it accepts all recommendations made and confirms that it will bring forward legislation to implement the transition to T+1, making it mandatory from 11 October 2027. The FCA has also welcomed the recommendations, alongside Bank of England, and calls on industry to engage and start planning as soon as possible.

Cyber Security / Cyber Governance

8. AI Cyber security Code of Practice published

The government has published a Code of Practice which is intended to give businesses and public services the confidence they need to harness AI’s transformative potential safely. This supports the government’s Plan for Change and builds on the work of the AI Opportunities Action Plan.

The voluntary Code of Practice sets out how organisations using AI can protect themselves from a range of cyber threats such as AI attacks and system failures. This includes steps such as implementing cyber security training programmes which are focused on AI vulnerabilities, developing recovery plans following potential cyber incidents, and carrying out robust risk assessments.

Relatedly, our latest Data Bytes (Issue 54) has just been published, providing a round-up of the latest data-related developments including the announcement by the Information Commissioner's Office of its review of cookie usage in the top 1000 websites and the launch of a government consultation on ransomware payments, potentially banning payments by certain organisations and creating a broad notifications regime. 

Sustainability

9. EU plans Omnibus Package to simplify sustainability reporting obligations

The European Commission has adopted the European Competitiveness Compass, which amongst other initiatives confirmed that the Commission intends to launch the first of a series of Simplification Omnibus Packages in February 2025.

The first Omnibus Package will aim to simplify the fields of sustainable finance reporting, sustainability due diligence and taxonomy, which means it is likely to amend the Corporate Sustainability Due Diligence Directive (CSD3) and the EU Taxonomy Regulation to deliver a 25% reduction in the administrative burdens placed by this legislation on in-scope companies (35% for small to medium sized enterprises). It is widely anticipated that amendments will also be made to the Corporate Sustainability Reporting Directive.

By way of reminder, 'Omnibus' legislation describes legislation that covers a number of initiatives in one legislative act and therefore a single vote. The significance of using this procedure is to allow for amendments to be made relatively quickly without having to introduce separate legislation for each Directive or Regulation that the Commission seeks to amend.

There has been significant speculation as to what changes the Omnibus Package will introduce since Ursula von der Leyen first mentioned it on 8 November 2024 when the EU Heads of State met in Budapest to discuss the Draghi report on the future of European competitiveness. Commentators have speculated that the changes could involve: (i) postponement of certain obligations; (ii) exemptions from certain obligations for organisations based on their size; and/or (iii) scrapping certain obligations such as those in the CS3D relating to civil liability provisions and the production of mandatory transition plans. The Competitiveness Compass states that it will "address the trickle-down effect to prevent smaller companies along the supply chains from being subjected in practice to excessive reporting requests that were never intended by the legislators".

The Omnibus Package has been welcomed by some businesses that are concerned about regulatory burdens, while others have expressed concerns that the simplification exercise will lead to major interventions, undermine the core objectives of the legislation and cause uncertainty. 170 civil society groups have written to the Commission to expresses concerns about the Omnibus Package and, in particular, the adequacy of the process to develop it, which they say should comply with the 12 week mandatory public consultation for initiatives that must be accompanied by an impact assessment required by the EU's Better Regulation Guidelines (see Legal Letter: Concerns about the inadequate consultation process on the Omnibus Simplification Package | ClientEarth). If the Commission heeds these concerns, the Omnibus Package may not be published in February.

We are closely following developments and will issue further updates in due course.

10. FRC publishes final report on assurance of sustainability reporting

The Financial Reporting Council has published the final report from its study on the market for assurance of sustainability reporting. The FRC's study found that, despite being relatively immature, the market for assurance of sustainability is functioning well. Nevertheless, concerns as to the quality and consistency of assurance were highlighted, while many companies express concerns over their ability to identify suitably qualified providers and assess the quality of the assurance delivered by them.

By way of reminder, the report builds on the FRC's initial feedback on its study of the sustainability assurance market that was published in October 2024 - see AGC Update, Issue 57 – Item 8).

The report identifies the following key market trends:

• Demand for sustainability assurance amongst FTSE 350 companies has grown by 18% since 2019 and stakeholders believe demand for sustainability assurance will continue to grow as UK multinationals aim to meet incoming assurance requirements in other jurisdictions.
• "Limited assurance" is the predominant level of assurance in the FTSE 350 across all assurance standards, with 83% of assurance engagements for FTSE 350 companies in 2023 at that level.
• In 2023, the Big 4 audit firms had a combined market share of 40% of the FTSE 350 sustainability assurance market, up from 33% in 2019.
• Many stakeholders reported that audit firms tended to be the most expensive providers, sometimes costing significantly more than non-audit firms.

The FRC has recommended three key actions to help develop the sustainability assurance market:

• Establish a clear UK policy framework for sustainability assurance that aligns with international frameworks where appropriate. Consideration should be given to the timing and phasing-in of any policy framework or regulations to minimise unintended consequences and potential cost burdens on businesses.
• Create a unified regulatory regime that consolidates standard setting, oversight, enforcement, and market monitoring.
• Improve the calibre of available information on the quality of sustainability assurance.

11. EU Platform on Sustainable Finance publishes recommendations on core elements for assessing climate transition plans

The EU Platform on Sustainable Finance (PSF), which is an expert advisory body established under Article 20 of the Taxonomy Regulation ((EU) 2019/2088), has published a summary report: Building trust in transition: core elements for assessing corporate transition plans.

The report identifies core elements for evaluating transition plans (TPs), which the PSF recognises are a key tool in raising and granting the transition finance needed by businesses to align their business models with climate and other environmental targets. The report also makes recommendations to financial market participants (FMPs) on assessing the credibility of TPs and to the EU Commission on enhancing the effectiveness of its policy framework and supporting the market to provide and access transition finance.

Key findings of the report include:

• FMPs can assess TPs on four core elements: (i) science-based and time-bound targets; (ii) levers and actions to achieve these targets; (iii) financial planning - i.e. investments and funding supporting the TP; and (iv) governance and oversight of the plan and its implementation. These core elements are based on the elements of a TP required under Article 22(1) of the Corporate Sustainability Due Diligence Directive ((EU) 2024/1760).
• The EU Taxonomy and other tools including disclosures required by EU legislation - e.g. the EU Emissions Trading Scheme or the Industrial Emissions Directive - can help to evaluate the robustness and consistency of TPs.
• Effective TPs take a holistic approach which integrates climate mitigation and adaptation actions with broader environmental and social objectives.

The PSF's core elements are similar to the core elements for a credible TP that the Transition Plan Taskforce included in its Disclosure Framework and that are likely to form the basis of the mandatory TP requirements anticipated in the UK (see Transition Plan Taskforce issues Disclosure Framework and consults on sector guidance).

12. ISSB votes to amend Climate-related disclosures

The International Sustainability Standards Board (ISSB) has voted to make certain technical amendments to its IFRS S2 Climate-related Disclosures. Specifically, it is proposed that S2 will be amended to allow:

• Emissions associated with derivatives, facilitated emissions and insurance-associated emissions to be excluded from the measurement and disclosure of Scope 3 Category 15 greenhouse gas (GHG) emissions. This relief will not cover financed emissions (which would still need to be disclosed) and entities would need to disclose the amount of derivatives and specific financial activities that were excluded under this relief.
• Entities to use global warming potential values that are not based on the latest IPCC assessment and a method other than the Greenhouse Gas Protocol Corporate Standard for measuring GHG emissions where these are required by an authority in their jurisdiction, or an exchange on which they are listed.
• In certain circumstances, use of alternative classification systems other than Global Industry Classification Standard when disaggregating specific financed emissions information, subject to disclosure of the system used and the basis of selection.

The ISSB expects to publish an exposure draft of the amended S2 in Q2 2025.

Authors: Will Chalk, Partner; Rob Hanley, Partner; Becky Clissmann, Counsel; Vanessa Marrison, Expertise Counsel; Marianna Kennedy, Senior Associate;  - Sustainability, Shan Shori, Expertise Counsel.