Thank you for your interest in our updates on the latest regulatory developments. There are a number of issues of interest this month. Do, please, feel free to bring these to the attention of colleagues for whom they might also be relevant.
Peter Swabey FCG,
Policy & Research Director
1 Research into boards’ people processes
Of interest to members involved in boards of large or regulated organisations
REQUEST FOR SUPPORT FROM MEMBERS
The Institute is collaborating with Loretto Leavy FCG and Professor Ruth Sealy of the University of Exeter Business School to understand board behavioural dynamics for large and regulated organisations (boards which would typically be required to have mandatory committees). The overall aim is to publish practical recommendations for boards which highlight the importance of behavioural dynamics in maximising inclusion and board effectiveness. The final output will be a ‘how-to’ guide detailing six process maps which address behavioural dynamics at different stages of the board’s lifecycle.
The six process maps cover:
- appointing directors
- inducting, training and developing
- evaluating and acting
- NED succession planning
- composing and designing
- reappointing.
CGI is delighted to support this research which will provide a framework for maintaining relationships which can be used by boards and chairs to improve effectiveness and will provide additional practical how-to advice for company secretaries and governance professionals assisting boards. Although we assume that there is little gap between reporting and the actions taken by boards, the University wants to validate its findings against real-life experiences. CGI invites members to participate in workshops to review each process map. Please join the final two workshops on 13 November and 27 November, by registering or contacting Loretto Leavy: L.Leavy@Exeter.ac.uk.
2 FRC: Assurance of Sustainability Reporting Market Study
Of interest to members involved in audit, assurance or sustainability reporting
REQUEST FOR SUPPORT FROM MEMBERS
The FRC is undertaking a market study to understand how assurance on sustainability reporting is being used by companies, and to understand the number and quality of providers of this type of assurance. The emerging findings have now been published, which provide a summary of the data and information the FRC has collected through stakeholder engagement so far.
The next stage of this market study aims to move from a summary of current market conditions to recommendations from the FRC for improving and safeguarding the market. To do so, the FRC is continuing to host roundtables, and is also looking for written responses to the following questions:
1. Do you agree with our emerging findings? Please explain.
2. Do you have any views or suggestions on any actions that should be taken in light of our emerging findings?
3. How might future developments such as mandatory application of the International Sustainability Standards Board’s (ISSB) sustainability disclosure standards impact the UK sustainability assurance market, including choice of provider and capacity?
4. What should be the future regulatory and policy approach to sustainability assurance in the UK to ensure a well-functioning market that delivers high-quality assurance? Please provide any specific suggestions for changes you would like to see including in relation to the introduction of any regulatory regime.
The Institute is hosting a second roundtable with the FRC towards the end of November, which is an opportunity for members to share their views. We are also responding with a written submission. If you would like to be involved in the roundtable, or share thoughts for our submission, please contact policy@cgi.org.uk by Wednesday 20th November.
3 AI in governance
Of interest to all members
REQUEST FOR SUPPORT FROM MEMBERS
The Institute is currently conducting research into our members’ perceptions of AI. We invite you to participate in our survey by answering four short questions on: AI challenges for boards, concerns about data protection and privacy, where attention on AI should be focused and AI and transparency.
If you wish to make other comments on AI usage and adoption, please contact Valentina Dotto at policy@cgi.org.uk.
4 Companies House implementation timeline for the Economic Crime and Corporate Transparency Act
Of interest to all involved in filing at Companies House
On Wednesday 16 October, Companies House published its intended implementation timeline for the Economic Crime and Corporate Transparency Act 2023. This shows how more measures will be introduced under the act over the next few years.
We have been talking about these changes from some months in Technical Briefings and in our policy presentations, so it is good to see the dates firming up. Companies House are, in any event, committed to giving us plenty of notice before you need to take action. Timelines are dependent on secondary legislation and will be kept under review.
There will be key moments on the implementation timeline that are important to you. So, it’s important that you start to prepare, and that you keep your registered email address and other details up to date, and make sure your emails are monitored. You can also keep up to date by visiting the Changes to UK company law website. This is regularly updated with new information.
The plan announced by Companies House is as follows;
Autumn / Winter 2024
- Additional compliance and enforcement action, including financial penalties
- New powers to strike companies off more quickly if registered on a false basis. For example, if information is false or misleading.
Spring / Summer 2025
- Anti-money laundering supervised firms and sole traders can apply to become Authorised Corporate Service Providers (ACSPs)
- Individuals can voluntarily verify their identity
- Individuals can apply to protect more of their personal information
- Access on request to trust information on the Register of Overseas Entities
Autumn / Winter 2025
- All new directors and people with significant control (PSCs) must verify their identity
- All existing directors and PSCs must verify their identity over a twelve-month period
Spring / Summer 2026
- Anyone filing information at Companies House must verify their identity
- Existing limited partnerships must comply with the new rules within six months
Autumn / Winter 2026
- End of the identity verification transition period. Anyone owning, running or filing on behalf of a company must be verified
- End of six-month transition period for LPs. Increased transparency about general and limited partners
- Compliance activity begins against those who have not verified their identity.
CMA legal has published an article on the timetable.
5 The value of non-financial reporting for investors
Of interest to all working in corporate governance
On 14 October, the government published several corporate reform announcements, included in a written ministerial statement to Parliament by Jonathan Reynolds, Secretary of State for Business and Trade, on the UK’s Modern Industrial Strategy.
On the subject of non-financial reporting and related matters, the Secretary of State has announced the Government's intention to lay regulations by the end of the year aimed at reducing regulation on small and medium-sized companies and adjusting the monetary size thresholds for micro, small, and medium-sized companies. These regulations will:
- Lift the monetary thresholds that determine company sizes by around 50%;
- Remove several low-value, obsolete or overlapping requirements for what companies must put in their Directors’ Report and Directors’ Remuneration Report and Policy; and
- Fix some technical issues in the audit regulatory framework.
The Secretary of State also announced that the Department for Business and Trade will undertake an ambitious consultation on the Future of Corporate Reporting. This consultation will be launched next year and will focus on simplifying and modernising non-financial reporting to better meet business and investor needs.
To complement these announcements, the Government has also published research on the Value of non-financial reporting to investors.
The Government is also taking the opportunity to publish a response to the consultation on corporate reporting for medium-sized companies, which was launched by the previous Government. The Government is not taking forward any of the proposals covered in that consultation at this time and will instead consider those aspects in the broader Future of Corporate Reporting work.
6 Companies House stakeholder newsletter – October 2024
Of interest to those responsible for corporate filings
On 29 October, Companies House published its stakeholder newsletter, covering a variety of useful subjects:
- A reminder about the implementation timeline (see above).
- New guidance on late filing penalties.
- Their first ever strategic intelligence assessment, an in-depth analysis of the key threats faced by Companies House.
- The Business Registry Insights dashboard showing international comparisons of company registers.
- Research on the value of corporate transparency in tackling crime - new research commissioned by the Department for Business and Trade which estimates the economic value of the company register for the public and private sectors for tackling crime.
- The government's plans to reduce burdens for small and medium sized companies (mentioned above).
- A new report on corporate re-domiciliation.
7 Investment Association: Principles of remuneration
Of interest to all working in corporate governance
The Investment Association published its 2025 Principles of Remuneration on 8 October. The guidelines call for clear links between pay, performance, and ESG targets, with strong transparency and clawback measures to ensure accountability and build stakeholder trust. There is little here in the way of surprises, but it is encouraging to see that there is some additional flexibility built into the revised guidelines.
There has already been a rush of law firms commenting on the new guidelines. Ones that I have seen included: Herbert Smith Freehills, Latham and Watkins, Slaughter and May and Stephenson Harwood.
8 Fundraising Regulator: Code consultation
Of interest to members in the charity sector
The Institute has submitted a response to the Fundraising Regulator’s consultation on the Fundraising Code, which has been extensively redrafted. Our response highlights the critical role that trustees play in ensuring fundraising is carried out in an ethical and appropriate manner. It emphasises the importance of embedding good governance practices in areas such as due diligence, data processing and effectively recording decisions.
9 Companies House communication to formation agents
Of interest to those forming companies
Companies House has asked us to share the following with members.
“We recently emailed you about the requirement to include a cover letter with your application for administrative restoration to confirm that either none of the directors had any fines issued by a court relating to the company before it was struck off the register, or that all fines issued by a court relating to the company before it was struck off the register have been paid.
We've reviewed this requirement and can confirm you no longer need to include this cover letter with your application.
You must continue to make sure the applicant, and anyone who was a director of the company before it was struck off and dissolved and, if restored, would be the director immediately after its restoration, pays any outstanding fines or financial penalties imposed on them in respect of an offence under the Companies Acts relating to the company. This is in addition to the existing condition that any outstanding penalties for failing to file accounts have been paid.”
10 The Academy Trust Governance Code celebrates one year
Of interest to members working in academy trusts
The Academy Trust Governance Code is now a year old, having been launched in October 2023. Do you have comments or feedback on the level of uptake of the Code, its impact, or any minor changes you would like to see made? As a member of the Code steering group, the Institute is seeking feedback on these points, so that we can ensure the Code is delivering across the academy trust sector. Please do reach out to share how the Code has worked (or not worked) for you, to policy@cgi.org.uk.
11 Further reading
And finally, some articles that passed across my desk and struck me as being of interest to members:
AI has much to offer but cannot replicate genuine legal reasoning: The winning entry for this year’s Times Law student essay competition on the subject “AI: opportunity or threat for the legal profession?” was published in the Times last May. Obviously, governance professionals are not the same as lawyers, but I found it an interesting read just the same.
AI for charities: Mishcon de Reya have provided a brief guide to AI for charities, which covers key areas of risk, compliance and opportunities.
Governing AI: Deloitte has published an interesting report on The Governance of AI: a critical imperative for today’s boards.
Ageism in the boardroom: An examination of age diversity in boardrooms from the Financial Times.
Employment Rights Bill: This is a flagship piece of legislation for the new government on which we await more details. An article from Lewis Silkin gives helpful pointers.
European Sustainability Reporting Standards: A very interesting blog from Falcon Windsor, reporting on a webinar that they hosted, which produced a very important piece of information for companies who have to report against the EU’s European Sustainability Reporting Standards, or ESRS: if a company is not listed in the EU, the ESRS statement/disclosures can sit OUTSIDE the annual report, in a separate, standalone document. The source document for this (you know I am a Chartered Secretary) is an FAQ document issued by the European Commission back in August, where questions 25 and 86 address this point.
Greenwashing risk: GRI have published a blog looking at greenwashing risk from a legal perspective, which covers recent cases. For more information about what greenwashing means for governance professionals, and three actions to take to reduce greenwashing risk, read the Institute’s thought leadership.
Irish Corporate Governance Code: I mentioned last month that Euronext has published the Irish Corporate Governance Code, which will apply to financial years commencing on or after 1 January 2025. McCann FitzGerald LLP has published a helpful article summarising the principal requirements and the differences from the UK Corporate Governance Code.
ISSB Global standards: Is your company preparing for additional mandatory climate-related disclosures under the ISSB global standards? An article from Charles Russell Speechlys provides a helpful comparison with the existing TCFD framework.
On the subject of further reading, it would be remiss of me not to mention the CGIUKI blogs published in October:
2 October - Do we understand board appointments?
11 October - How do you embed and enhance director and board development?
15 October - Enhanced powers for Ofwat: strengthening oversight and accountability
21 October - Three things to look out for in the Budget
21 October - How do you plan for changes on your board?
29 October - How do you continually develop your board?
30 October - Budget October 2024
