Publication of the draft Companies (Strategic Report and Directors’ Report) (Amendment) Regulations 2023 and the first two IFRS Sustainability Disclosure Standards are among the most noteworthy recent developments. The Employment Relations (Flexible Working) Bill has also received Royal Assent and in-house lawyers should be aware of two related consultations on flexible working arrangements.
Corporate and financial reporting
The draft Companies (Strategic Report and Directors’ Report) (Amendment) Regulations 2023 have been published. They reflect the government’s response to the BEIS consultation on restoring trust in audit and corporate governance. The draft regulations amend the Companies Act 2006 to introduce new reporting requirements for companies with a high level of employees and turnover (that is, companies with 750 or more employees and an annual turnover of £750 million or more). Among other things, the new requirements cover:
- Information about distributable profits, distributions and purchase of own shares as a note to the accounts.
- A distribution policy statement in the directors’ report.
- A resilience statement in the strategic report.
If approved by Parliament, the draft regulations will come into force on 1 January 2025. They will take effect in two stages so that they will apply to financial years beginning on or after 1 January 2025 for companies whose equity share capital is admitted to trading on a UK regulated market for the whole of the financial year, and 1 January 2026 for other in-scope companies (such as very large private companies, non-traded companies and AIM companies).
The International Sustainability Standards Board has issued the first two IFRS Sustainability Disclosure Standards: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. IFRS S1 and IFRS S2 are effective for annual reporting periods beginning on or after 1 January 2024, with early application permitted provided IFRS S1 or IFRS 2 is also applied. The FRC, in its role as The Secretariat to the UK Sustainability Disclosure Technical Advisory Committee, has issued a call for evidence to collect views to inform the proposed endorsement of the IFRS Sustainability Disclosure Standards in the UK. Responses to the call for evidence should be received by 11 October 2023.
The FRC has published a report setting out the findings of its review of the TCFD disclosures in the 2022 annual reports of 20 companies operating in the materials and buildings, energy, banks, and asset manager sectors. The FRC found an incremental improvement in the quality of reporting since its last review and also reports seeing increased transparency in companies’ statements of the extent of consistency with the TCFD framework, including clearer statements about data that is not yet available.
The Employment Relations (Flexible Working) Bill has received Royal Assent. Announcing that the Bill was to receive Royal Assent, the government referred to the right to request flexible working becoming a “day one” right. While this is not an amendment made by the Act, the announcement reiterates previous government statements that the current requirement for an employee to have at least 26 weeks’ continuous employment by the date of a request will be removed by secondary legislation.
The Department for Business and Trade (DBT) has issued a call for evidence on non-statutory flexible working. Responses will help to develop the government’s evidence base on non-statutory flexible working and inform its flexible working strategy. The call for evidence closes on 7 November. It follows Acas’ publication of a consultation on an updated statutory Code of Practice on handling statutory flexible working requests. This consultation will remain open until 6 September.
UK prospectus regime
The FCA has published two further engagement papers (The Public Offer Platform (Engagement Paper 5) and Primary multilateral trading facilities (Engagement Paper 6)) as part of its series of engagement papers relating to the new regime for public offers and admissions to trading on UK public markets. The deadline for responding to the questions raised by all the engagement papers is 29 September. The government has also published a near-final version of The Public Offers and Admissions to Trading Regulations 2023. They will replace retained EU law relating to the prospectus regime and create a new regulatory framework for public offers and admissions to trading.
The European Commission has adopted its adequacy decision on the EU-US Data Privacy Framework (DPF). The Commission has concluded that the US ensures an adequate level of protection, comparable to that in the EU, for personal data transferred from the EU to US companies under the DPF. US companies will be able to join the DPF by committing to comply with a detailed set of privacy obligations that apply immediately on self-certification, and they will need to recertify annually. The European Data Protection Board has adopted an information note that explains the impact of the DPF for data subjects in the EU and organisations transferring data from the EU to the US.
Practical Law has published a new article on the DPF: EU-US Data Privacy Framework: European Commission takes third bite at the adequacy cherry.
Environmental NGO, ClientEarth (CE), has announced that it will appeal against the High Court’s dismissal of its application to continue its derivative claim against Shell plc. CE’s landmark shareholder action is part of the wider picture of activist and shareholder action against companies on climate change risks and net zero emissions targets and strategies.
Economic Crime and Corporate Transparency Bill
The Economic Crime and Corporate Transparency Bill has had its third reading in the House of Lords. The Lords agreed amendments to the PSC regime in the Companies Act 2006 and the Bill was passed and returned to the House of Commons to consider these amendments. The Bill passes back and forth between the Houses (ping pong) until amendments and exact wording are agreed.
Dates for your diary
CMA consultation on revised prioritisation principles closes.
DBT call for evidence for the non-financial reporting information review closes.
CMA calls for information on Phase 2 merger investigations close.
Consultation on tackling non-compliance in the umbrella company market closes.
Deadline for responding to the Ministry of Justice’s consultation on a mechanism for surrendering unclaimed balances paid into Court Funds Office.