The Government has published the long awaited regulations setting out the new narrative reporting framework. The aim of the regulations is to increase corporate transparency and make it easier to hold companies to account.
The changes are minimal for non-quoted companies and less significant than was originally proposed for quoted companies (ie. UK incorporated companies whose equity share capital is officially listed on the Main Market of the London Stock Exchange).
Summary of proposals for quoted companies
The Strategic Report (which is to replace the Business Review) will need to include, in addition to the existing enhanced requirements for quoted companies, details of the company’s strategy, business model and human rights issues, together with a breakdown showing the number of men and women on the board, within management and in the organisation as a whole.
The regulations will remove various reporting requirements, including detail on asset values, charitable donations and the policy and practice of payment to creditors.
It was originally proposed that an Annual Directors’ Statement would be created containing, in a prescribed format, the more detailed disclosures underpinning the Strategic Report. The Government has decided not to take forward these proposals as concerns were expressed that whatever was agreed, in terms of the format, would not be able to keep up with technological developments and would become “fixed in-time”.
The Government has also decided not to proceed with proposals requiring each director to sign off on the Strategic Report, in response to feedback, and has announced that it is unable to rectify areas where there is currently an overlap with the Listing Rules as the company law requirements are derived from EU law.
The new regulations will come into force in October 2013 so, for companies with reporting years ending after this date, they will be expected to prepare their accounts in line with the new framework.
Comments on the draft regulations must be received by 15 November 2012.