News Story: Corporate reporting

On 19 July 2023, the draft Companies (Strategic Report and Directors' Report) (Amendment) Regulations 2023 and accompanying draft Explanatory Memorandum were laid before Parliament. The government has also published an overview of the draft regulations, explaining that they will require very large companies to report more effectively on business resilience and assurance, and respond to lessons learned from significant corporate collapses in recent years, including that of Carillion (Guidance: New transparency over resilience and assurance for big business). The new measures form part of the government's wider audit and corporate governance reforms, as set out in its Response to the White Paper on restoring trust in audit and corporate governance (see FC Feature 31 May 2022). 

The regulations 

The regulations amend Part 15 CA 2006, requiring companies with a high level of employees (750 employees or more) and turnover (an annual turnover of at least £750 million) to provide additional statements for inclusion in the strategic report and the directors' report. The regulations will require in-scope companies to provide:

• an annual resilience statement – to be included in the strategic report, explaining the steps they are taking to manage risk and build or maintain business resilience over the short, medium and long term;
• a triennial audit and assurance policy statement – to be included in the directors' report, detailing how the company intends to assure non-financial reporting over the next three years (as well as an annual update on the implementation of the policy);
• an annual distribution policy statement – to be included in the directors' report, as well as an annual distributable profits figure (to be included as a note to the accounts); and
• an annual material fraud statement – to be included in the directors' report, detailing steps taken to prevent and detect material fraud.

Timing

The regulations will come into force, if approved by Parliament, on 1 January 2025. Initially, the regulations will only apply to UK companies with equity share capital admitted to trading on a UK regulated market. The regulations will apply in respect of those companies to financial years beginning on or after 1 January 2025. 

Other in-scope companies (ie very large private companies, non-traded public companies and companies with shares admitted to trading on AIM) will be required to comply with the regulations in respect of financial years beginning on or after 1 January 2026.  

FRC response

The FRC has welcomed the new (draft) corporate reporting requirements and indicated that it is developing detailed non-statutory guidance, on which it will consult separately, to help companies comply with the new requirements (FRC Press Release). The FRC expects to publish draft guidance for consultation by the end of 2023 or early 2024.

The FRC will also be holding a Webinar on 27 July 2023 to discuss the new requirements and indicate how they will strengthen the corporate reporting landscape. 

For further information concerning the requirements for directors' reports and strategic reports, see Accounts and reports, Q&A here.

First published on the Corporate News Service on 20th July 2023

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