Ashurst Governance & Compliance Update – Issue 63

Narrative and Financial Reporting

1.  FRC publishes revised guidance on going concern and related reporting

The Financial Reporting Council has published revised guidance on the 'Going concern basis of accounting and related reporting, including solvency and liquidity risks' having concluded its consultation launched in August 2024 (see AGC Update, Issue 55 – Item 7 for more on the consultation; the feedback statement can be found here).

The guidance is non-mandatory and is intended to serve as a practical guide to directors of all companies within its scope when demonstrating the assessments which underlie their going concern conclusions. 

The guidance now brings together the requirements of company law, accounting and auditing standards, the UK Listing Rules, the UK Corporate Governance Code and other relevant regulations reflecting changes made to them since its last publication in 2016. It provides additional guidance on overarching disclosure requirements, particularly in situations when significant judgement is involved in the assessment of the appropriateness of the going concern basis of accounting or the conclusion that there are no material uncertainties.

The guidance also sets out:

• the reporting requirements and how materiality is applied to them; and
• views on the assessment process with examples of specific scenarios.

2.  FRC launches public beta version of digital tool to transform access to company data

The FRC has announced the public beta launch of its digital reporting Viewer, a new tool designed to improve free access to structured company reporting data.

The Viewer enables users to view and analyse Inline eXtensible Business Reporting Language (iXBRL) files, displaying tagged data within reports. The FRC believes that the tool represents a significant step forward in making company financial information more accessible and transparent to stakeholders. The Viewer can be accessed here and with a demonstration here. 

The FRC is seeking feedback, which can be sent to ukixbrlviewer@frc.org.uk. This will be used to inform further developments and improvements.

Payment Practices Reporting

3.  Guidance on payment practices reporting published

The Department for Business and Trade has published updated guidance for companies and LLPs that are subject to the statutory reporting duty for payment practices and performance.

By way of reminder, the payment practices reporting regime has been extended and enhanced over the course of the last 18 months. As a consequence, the revised guidance: 

• reflects the additional reporting requirements introduced by the Reporting on Payment Practices and Performance (Amendment) Regulations 2024 with respect to the total of payments made during the reporting period and the percentage of payments not paid within agreed terms because of a dispute, in relation to financial years beginning on or after 1 January 2025 (for more, see AGC Update, Issue 47 – Item 3);
• reflects the additional reporting requirements introduced by the Reporting on Payment Practices and Performance (Amendment) Regulations 2025 with respect to retention clauses in qualifying construction contracts in relation to financial years beginning on or after 1 April 2025 (for more, see AGC Update, Issue 57 – Item 4);
• includes additional guidance and worked examples in relation to reporting the sum of payments made during relevant reporting time periods as prescribed by the regulations; and
• reflects the potential changes to entities within scope of the requirement to report on payment practices given the increase in the financial thresholds for making that determination introduced by the Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 with effect from 6 April 2025 (for more, see AGC Update, Issue 60 – Item 7).

Remuneration Reporting

4.  Directors' remuneration reporting and related requirements to be reduced

The draft Companies (Directors' Remuneration and Audit) (Amendment) Regulations 2025 and an explanatory memorandum have been published by the Department of Business and Trade. Their aim is to streamline directors' remuneration reporting and related requirements by repealing a number of provisions introduced in 2019 to comply with EU law that overlap with existing obligations. The main changes consider:

• removing certain remuneration reporting requirements, including requirements to disclose: (i) each director's fixed pay; and total variable pay; (ii) a comparison of each director's annual pay change with average employee pay change; and (iii) any changes to the exercise price or date for exercise of any share options;
• reverting to the pre-2019 provision that payments to directors not consistent with the remuneration policy may be approved by shareholders (rather than requiring an amendment to the policy itself); and
• removing additional requirements to make available the directors' remuneration report on the company's website and information about shareholder votes on the remuneration policy.

The regulations also remove unquoted traded companies from the directors' remuneration reporting requirements – i.e. the few companies admitted to the Specialist Fund Segment of the London Stock Exchange. 

The changes will apply to financial years commencing after the date that the Regulations come into force. For most companies, therefore, on the assumption that the Regulations come into force in 2025, the changes will take effect for the 2026 financial year.

Sustainability Reporting

5. European Commission publishes Omnibus Package to simplify sustainability regulations

The European Commission has published the first Omnibus Package, which proposes to simplify the requirements of the Corporate Sustainability Due Diligence Directive 2024/1760 (CS3D), the Corporate Sustainability Reporting Directive 2022/2464 (CSRD) and the EU Taxonomy Regulation 2020/852 (Taxonomy Regulation). The overarching aim of the Omnibus Package is to reduce the administrative burden placed on in-scope companies and enhance EU competitiveness. The Omnibus Package includes targeted changes to the Carbon Border Adjustment Mechanism to benefit SME importers. Changes are also made to the thresholds dictating which companies are in scope and to implementation timetables.

For a detailed overview of the changes proposed, the revised implementation timetables and our views, click here.

Corporate Governance

6. Cross-sector principles-based guidance for board risk committees and risk functions published

The Risk Coalition has published principles-based guidance for board risk committees and risk functions across sectors entitled 'Raising your Game'. This follows the publication in 2019 of its 'Raising the Bar' guidance for board risk committees and risk functions in the UK financial services sector. 

By way of reminder, the Risk Coalition is a network of not-for-profit professional bodies, membership organisations and corporates committed to raising standards of risk governance, oversight and risk management in the UK.

The new guidance, which is aimed at companies across all sectors and of diverse sizes, is intended to enhance risk governance, risk-taking, resilience and reporting for board risk committees and risk functions. 

The eight principles in the guidance cover board accountability, committee purpose, committee composition and membership, the organisation's approach to risk, risk culture and behaviours, navigating risks and pursuing opportunities, risk management, internal control systems and reporting, and independent risk oversight and challenge.

7. GC100 publish results of poll on AI and minute-taking

GC100, the representative body of general counsel and company secretaries in the FTSE 100, has published the results of its poll which sought feedback on how listed companies and large private companies approach minute-taking, in particular the part being played by AI and other forms of technology in that process.

Key findings from those who responded include:

• There were mixed views on whether AI has a role in the boardroom.
• 92% have not introduced AI to assist with minute-taking.
• 84% do not have an internal policy on the use of AI transcription in relation to minutes.
• Where minutes and transcripts are produced by AI, they are typically reviewed by the company secretary or a member of their team.
• Access to information is typically restricted or limited to a particular group (such as the board, general counsel and company secretary) and frequently shared using a secure board portal.

Subscribers to Practical Law can access a summary of the findings of the poll here.

Diversity, Equity & Inclusion

8. FTSE Women Leaders publishes latest diversity review

The FTSE Women Leaders Review has published its annual report on gender balance on boards and in leadership positions in the FTSE 350 and 50 of the UK's largest private companies. For an overview of the previous 2024 report, see AGC Update, Issue 50 – Item 3. The press release also contains a useful summary of this year's findings.

By way of reminder, the report assesses progress made against recommendations (see below) on the representation of women on boards and in senior leadership roles which built on the work of the Hampton-Alexander and Davies Reviews.

Key findings in the report include:

Women on boards:

• In the FTSE 350, 43.4% of board roles were held by women (2023: 42.1%). Women held 15.6% of executive roles (2023: 14.6%).
• In the 50 largest private companies, 30.5% of board roles were held by women, a slight decrease from last year (2023: 30.6%).
• 73.4% of the FTSE 350 have met or exceeded the target of a minimum of 40% women's representation on the board (2023: 67.1%), while 21 companies have not yet reached the 33% threshold.
• There were no all male boards in the FTSE 350 for the fifth year in a row.
• The overall trend of women occupying one of the 'four key roles' (Chair, CEO, SID or CFO) in FTSE 350 companies was positive with most gains in the role of the SID. The representation of women in roles such as HR director, General Counsel, Company Secretary, CIO also demonstrated a positive trend.
• Of the 50 largest private companies, 34% met or exceeded the 40% target, a decrease from last year (2023: 38%). The number of all male boards increased from five to seven.

Women in leadership (being the executive committee and the direct reports to the executive committee):

• The level of women in leadership roles was 36.6% for the FTSE 100 (2023: 35.2%), 34.2% for the FTSE 250 (2023: 33.9%) and 36.8% for the 50 largest private companies (2023: 36.8%).
• There were 10 all male executive committees in the FTSE 350, a similar number to recent years but a considerable drop from 50 in 2018. There was only one such committee among the 50 largest private companies.
• The report acknowledges that the 40% target may not be achieved until beyond 2025 as 101 of the FTSE 350 and 11 of the 50 largest private companies still have less than a third of their leadership roles held by women.

Recommendations

By way of reminder, the four key recommendations of the FTSE Women Leaders review are:

• A minimum target for FTSE 350 Boards and Leadership teams of 40% women’s representation by the end of 2025.
• At least one woman in any of the following roles: Chair, Senior Independent Director, Chief Executive Officer or Finance Director by the end of 2025.
• Key stakeholders should set best-practice guidelines or use alternative mechanisms to encourage any FTSE 350 Board that has not yet achieved the previous 33% target for the end of 2020, to do so.
• The scope of the Review includes 50 of the UK’s largest private companies.

9. Parker Review publishes update report on ethnic diversity of boards and senior management 

The Parker Review Committee has published its update report for 2025 following its survey of FTSE 350 companies and certain private companies on the ethnic diversity of their boards and senior management. For an overview of the previous 2024 report, see AGC Update, Issue 50 – Item 3. The report also contains an update from the Change the Race Ratio campaign as well as setting out some of the key legal considerations that apply to employers reporting on ethnical diversity.

By way of reminder, the Parker Review targets, which have evolved over time, currently expect:

• At least one ethnic minority director on each FTSE 100 board (by 2021), FTSE 250 board (by 2024) and large private company board (by 2027).
• FTSE 350 companies to set a target to be achieved by December 2027, for senior management who self-identify as being in an ethnic minority. This target should have been set by December 2023.
• Companies to develop mechanisms to identify, develop and promote people from ethnic minorities and set objectives for pipeline development.
• A company’s annual report to describe its policy on ethnic diversity.

Companies not meeting recommendations by the relevant dates are expected to explain why in their annual report.

This year's report concludes that in the past year, virtually all FTSE 100 companies have met the Review's target and there has been good progress in the FTSE 250. That said, FTSE 250 companies appear to have found meeting the target to be a tougher challenge than their FTSE 100 counterparts. It believes that this is due to several factors, including that FTSE 250 boards are generally smaller than FTSE 100 boards and subject to fewer rotations, the cost implications of additional directors and a need to be more open to directors with more specific experience and/or limited public company experience.

All of the FTSE 100 and 236 of the FTSE 250 companies responded to the survey. 34 of the 50 largest privately owned businesses also did so. The report sets out (as at December 2024 and in relation to those companies that responded):

• 95% of FTSE 100 companies, 82% of FTSE 250 companies and 48% of the 50 largest private companies had at least one ethnic minority director on their board.
• The proportion of board directorships represented by ethnic minority directors was 19% of FTSE 100 companies, 15% of FTSE 250 companies and 13% for the 50 largest private companies.
• The average percentage of ethnic minority representation in senior management was 11% of FTSE 100 companies, 9% of FTSE 250 companies and 9% for the 50 largest private companies.
• The average target for the proportion of ethnic minority representation in senior management in 2027 was 15% for FTSE 100 companies, 13% for FTSE 250 companies and 13% for the 50 largest  private companies.

Ethnicity pay gap reporting

Relatedly, and as heralded in the summer 2024 King's Speech, the government has launched a consultation on how to introduce ethnicity and disability pay reporting for large employers – i.e. those with 250 or more employees. As this is a breaking story, and there is a lengthy consultation period, we will include an in-depth article in the next AGC Update. 

Economic Crime and Corporate Transparency

10. ECCTA: An update on ACSPs, identity verification and implementation of the Act

Revised dates for registering as an ACSP and voluntary identity verification

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) provides that anyone filing documents at Companies House will only be able to do so if their identity has been verified or they are registered as an authorised corporate service provider (ACSP).

Earlier this year, Companies House updated the outline transition plan for reforming its role in connection with ECCTA, noting that individuals and organisations would be able to register as an ACSP from 25 February 2025. 

After postponing the launch of its service to register as an ACSP from 25 February 2025, Companies House has updated the outline transition plan to confirm that it is permissible to apply to become an ACSP from 18 March 2025. Once registered, ACSPs will be able to carry out identity verification services ahead of the implementation of the compulsory identity verification regime in Autumn 2025 for directors, persons exercising significant control (PSCs) and anyone filing information with Companies House.

The updated outline transition plan also envisages individuals being able to voluntarily verify their identity from 8 April 2025 (instead of the previously envisaged date of 25 March 2025). Wherever possible, it is generally advisable for directors, PSCs and anyone filing documents at Companies House to verify their identities voluntarily after 8 April 2025. Compulsory identity verification is still expected to come into effect in Autumn 2025.

New commencement regulations

The ECCTA 2023 (Commencement No. 4) Regulations 2025 have been published, bringing into force on 18 March 2025 certain provisions of ECCTA 2023 relating to ACSPs and identity verification, including sections 65 (procedure for verifying identity), 66 (authorisation of corporate service providers) and 68 (allocation of unique identifiers).

The regulations also bring into force section 70 of ECCTA 2023 on 18 March 2025. This gives the Registrar the power to strike off any company on the register that has been formed for a false purpose. 

Companies House guidance on registering as an ACSP

Companies House has issued guidance on ACSPs and identity verification (Applying to register as a Companies House authorised agent, Being an Authorised Corporate Service Provider and How to meet Companies House identity verification standard) which highlights that:

• An ACSP must be registered with at least one UK anti-money laundering supervisory body.
• An application to register an organisation as an ACSP must be made by an individual with a senior role whose identity has been verified by Companies House. Once registered, the ACSP will have an online account to which others who work for the ACSP can be added.
• Changes to an ACSP's details must be notified to Companies House within 14 days. There is also an obligation for ACSPs to keep records of any identity checks which they have verified for seven years.
• An ACSP must obtain documentary evidence about the individual whose identity they are verifying. Identity documents can be checked by a person trained in detecting false documents, by a specialist training provider or by using identification document validation technology (IDVT). The documents which need to be provided will depend on whether they are being checked by a person or using IDVT. The ACSP will need to confirm to Companies House that the verification checks have been completed to the required standard.
• All officers of a corporate ACSP are responsible for complying with the relevant legal requirements, failure to comply being an offence punishable by a fine or criminal prosecution, and potentially leading to the ACSP's status being suspended or cancelled.

Latest guidance

Companies House has also published guidance on the upcoming identity verification regime. The guidance covers who must verify, when they must do so and how to go about it. It also sets out what happens once an identity has been verified and the consequences of failing to do so. Guidance covering how a company can be removed from or restored to the register has also been published. As both documents have been published recently, we will include more in-depth analysis of them in the next AGC Update. 

11. Register of overseas entities: protecting personal information 

By way of reminder, the Register of Overseas Entities (ROE) came into being in the UK on 1 August 2022 through the Economic Crime (Transparency and Enforcement) Act 2022. Overseas entities who want to buy, sell or transfer property or land in the UK, must register with Companies House and disclose details of their registrable beneficial owners or managing officers. For background on the ROE, see AGC Update, Issue 23 – Item 3.

Companies House has now published guidance on how to protect personal information on the ROE, which confirms that beneficial owners, managing officers and trust members can apply to protect their name and home address from being disclosed on the ROE if they, or anyone living with them, are at risk of harm or intimidation should their information be made available to the public.

The process for protecting personal information involves completing an application form and submitting it, together with a fee of £100, to the Registrar of Companies. It is worth noting that where a person wishes to remove their home address from the register, it must be replaced with a different address, such as a new service address or a principal office address.

The Listing Regime – continuing obligations

12. FCA publishes Primary Market Bulletin focusing again on market abuse

The FCA has published PMB 54, the main focus of which is strategic leaks and unlawful disclosure.

The FCA notes that it has seen an increase in cases where material information on live M&A transactions appears to have been deliberately leaked to the press. Examples include details of discussions between the board of an offeree company and a potential offeror following an approach for a possible offer and where the offeree board has rejected an approach but an increased offer is likely. In many cases, the leaked information constituted inside information under article 7 of the UK Market Abuse Regulation (UK MAR) and resulted in a significant effect on the share price of the offeree company and/or the offeror.

The FCA is concerned by leaks which occur inadvertently, through hinting at market sensitive information, even if specific details are not mentioned, and strategic leaks, where inside information is deliberately given to the press by individuals at an issuer or its advisers. These leaks can cause significant movement in share prices and trigger the improper dissemination of information, thereby damaging the smooth operation and integrity of markets.

By way of reminder, article 14 of UK MAR, which applies to individuals regardless of whether they are employed by a regulated firm or issuer, expressly prohibits the unlawful disclosure of inside information. The FCA can impose unlimited fines, order injunctions or prohibit regulated firms or approved persons for breaches of UK MAR.

The FCA reminds market participants of best practice in mitigating unlawful disclosure and limiting market abuse, which it has shared previously in PMB 42 (for a summary, see AGC Update, Issue 46 – Item 2) and PMB 52 (for a summary, see AGC Update, Issue 59 – Item 13). It reiterates that individuals directly involved in transactions appear to be handling inside information poorly and taking inadequate action to prevent leaks. The FCA is also concerned that a culture may have developed among market participants where strategically leaking inside information to the media during a transaction is seen as acceptable. The FCA stresses that anyone unlawfully disclosing inside information, deliberately or otherwise, risks being investigated for market abuse.

Firms and issuers can mitigate reputational and professional risk by taking precautions when dealing with inside information and adopting a firm stance to combat any form of unlawful disclosure. The FCA highlights that written policies and procedures for identifying and handling inside information can be of limited effect where they are not accompanied by a culture and practices which actively discourage leaks. 

The FCA also reminds issuers and advisers of the rules governing secrecy of information under Rule 2.1(a) of the Takeover Code.

Further, the PMB highlights other recent FCA publications:

• Policy Statement: Enhancing the National Storage Mechanism (PS 24/19), which sets out the FCA's final policy position, rules and guidance related to changes to the requirements for submitting regulated information to the National Storage Mechanism. The new rules will come into force on 3 November 2025. For a reminder of those changes, see AGC Update, Issue 60 – Item 6.
• Quarterly Consultation Paper (CP 25/4), which includes, amongst other things, a proposed amendment to the rules around relevant related party transactions in UKLR 11 (see the next item).

13. FCA amends related party rules for closed-ended investment funds

The FCA has published Quarterly Consultation Paper No 47 (CP 25/4), in which it proposes, amongst other things, amendments to the UK Listing Rules regarding related party transactions by closed-ended investment funds. The amendments are primarily focused on correcting an unintended omission.

Since the UKLRs came into force in July 2024 (see our overview of the changes to the regime here), the FCA has become aware that it unintentionally omitted to carry forward one element of the related party transaction rules in respect of voting on relevant related party transactions. As such, it is now proposing a change to UKLR 11.5.5R to correct this omission.

By way of reminder, in PS 24/6 (Feedback to CP 23/31 and final UKLRs), the FCA confirmed that it would retain a requirement for a shareholder vote and related circular requirements for relevant related party transactions - i.e. transactions relating to fees or other remuneration payable in connection with services rendered by an investment manager or a member of the investment manager’s group, where any percentage ratio is five per cent or more on the class tests (or is uncapped) (UKLR 11.5.5R).

However, the FCA did not intend to change its policy approach in respect of the exclusion of the related party and its associates from a vote on a relevant related party transaction. This is evident from UKLR 11.6.6R(5) which requires a relevant related party transaction circular to include 'if applicable, a statement that the related party will not vote on the relevant resolution, and that the related party has undertaken to take all reasonable steps to ensure that its associates will not vote on the relevant resolution, at the meeting.'

The FCA is therefore proposing to amend UKLR 11.5.5R to include the previous LR 11.1.7R(4) requirement with respect to the exclusion of related parties and their associates from voting. 

Comments on the proposals should be submitted to the FCA by 5 May 2025.

14. FTSE Russell announces changes to FTSE UK Index Series methodology 

FTSE Russell has announced two changes to the FTSE UK Index Series methodology.

Following a review of the FTSE UK Index Series, FTSE Russell will make changes to the sterling denominated price requirement and fast entry thresholds, effective from the September 2025.

Sterling denominated price requirement

Securities which trade in non-GBP currencies (e.g. euro or US dollar) will be considered for potential inclusion in the FTSE UK Index Series, if otherwise eligible. Currently, only securities trading in sterling are eligible for inclusion. Inclusion will still require a UK nationality and a listing on the Equity Shares (Commercial Companies) or Closed-ended Investment Funds categories, as set out in the FTSE UK Index Series Ground Rules.

Fast entry thresholds

FTSE Russell will also lower the fast entry thresholds employed within the FTSE UK Index Series. This change seeks to ensure that IPOs which are of a certain size and which are eligible for inclusion in the applicable indices are included in a timely manner. If a company ranks 225th or above (previously 75th ranking or above), based on the close price on the first day of unconditional dealings, and has an investable market capitalisation of £1 billion (previously £2 billion), if otherwise eligible, it will be placed in the FTSE 100 or FTSE 250 (as appropriate) after the close on its fifth day of trading. Concurrently, the lowest rank constituent will be deleted from the applicable index and associated membership changes implemented.

The fast entry thresholds will be reviewed on an annual basis to ensure they remain fit for purpose.

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