Government withdrawal of draft new reporting regulations

Of interest to all working in governance

On 16 October, the UK government announced it had withdrawn the draft Companies (Strategic Report and Directors’ Report) (Amendment) Regulations 2023, which were laid in Parliament on 19 July.

These regulations would have introduced further reporting requirements on both listed and private companies, including an annual resilience statement, material fraud statement a distributable profits figure, and a triennial audit and assurance policy statement.

This legislation would have applied to both public and private companies with a minimum of 750 employees and an annual turnover exceeding £750 million.

Parliament, which had laid out these proposed measures in July, was originally scheduled to debate the draft legislation on 17 October. However, in the light of business and wider stakeholder concerns that the existing non-financial reporting framework should be streamlined and simplified, the Department for Business and Trade has decided to reduce the regulatory burden in an effort to enhance the competitiveness of UK businesses .

Peter Swabey, Policy and Research Director CGIUKI said in the Institute’s press release:

“Although the proposed changes were relatively minor in themselves and we welcomed them as being both sensible and proportionate, they formed part of a broader discussion around the burden of corporate reporting and the competitiveness of the UK market and companies will be grateful for the government’s change in approach. In our recent Boardroom Bellwether report, carried out in partnership with the Financial Times, 81% of FTSE 350 company secretaries who responded told us that increasing reporting requirements are, either to some or to a large extent, reducing the time available for strategic discussions at board level, with that impact more pronounced at the smaller end of the FTSE 350. That cannot be the intention.

“The ever increasing breadth and depth of reporting requirements can contribute to a rise in boiler-plate disclosures, in particular where companies feel obliged to report on issues which they believe are simply not material to their business. It is right and important that management attention is given to reporting, but this should not unduly redirect attention away from business matters. Developments such as the Department for Business and Trade’s call for evidence on non-financial reporting offer hope that the government is looking to provide both companies and investors with more clarity, consistency and standardisation in non-financial reporting. It is essential that the government strikes the right balance to ensure effective governance practice without impeding boards proper focus on company strategy.”

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