The Companies (Miscellaneous Reporting) Regulations 2018

July 16, 2018

The Companies (Miscellaneous Reporting) Regulations 2018

On 11 June the Government put before Parliament a substantial and important statutory instrument, “The Companies (Miscellaneous Reporting) Regulations 2018” (2018  Regulations) which gives effect to a wide range of corporate governance reporting improvements that BEIS has been working on ever since its Corporate Governance Green Paper of 29 November 2016 .  These make several amendments to existing disclosure regulations, and are potentially quite onerous. There are exemptions, however, depending on company size.  Regulation requirements:

• Production of a full statement in the Strategic Report explaining how Section 172(1) of the 2006 Companies Act has been complied with, i.e. how directors have met their obligation to promote the success of the company with regard for the interests of or impact on various stakeholders, including employees – applies ONLY to large companies (over £36m turnover plus 250 employees and/or assets of £18m) – unquoted companies can publish this on the website).

• Modifications to the director’s report (applies to large companies only)
– A statement summarising how the directors have had regard to the need to foster business relationships with suppliers, customers and others and the effect of that regard
– A comprehensive report on engagement with employees and its effect.  Applies to companies with more than 250 employees (no turnover or assets limit).

• A statement of corporate governance arrangements including identifying the corporate governance code the company has chosen to apply in the year, how it has done so and reasons for departure from the code.  This applies from 1 January 2019 to all companies (public and private) with more than 2000 employees and/or turnover of £200m and assets of more than £2 Bn.  Note that in March the Stock Exchange brought in a broadly similar requirement for all AIM listed companies with no size exemption, to apply from 28 September. Unquoted and AIM companies are expected to use their websites for this purpose.

• Several modifications to the Directors’ Remuneration Reporting Regulations (2013), including
– explanation of discretion on pay awards
– provision of data on the pay ratio of the CEO to the median employee – extended now to upper and lower quartile (for companies with more than 250 employees)
– Impact of share price increase on the historical single figure of remuneration and on future pay as shown in the “scenario charts” for each director.

These changes have been introduced, in part, to reinforce the application of the revised UK Corporate Governance Code, issued by the FRC on 16 July. Contact or for advice on implementing the new disclosure regulations.

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