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News – 19.12.24

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Changes to the Directors’ report and Strategic report

The Companies (Miscellaneous Reporting) Regulations 2018 SI 2018/860 has come into effect. This legislation has new requirements for disclosures in the Directors’ report and Strategic report for some companies.

Who is affected?

This applies to all companies (but not LLPs) that are “large” because they exceed two out of three of the following Companies Act 2006 size criteria for two years in a row:

Turnover/revenue	<£36m
Total assets	<£18m
Average number of employees	Not more than 250

It also applies to companies that are considered to be "large" because they are not eligible to be classified as small or medium-sized under the Act because they are one of the following:

a public company;
FCA regulated MiFID investment firm;
an authorised insurance company;
a banking company;
an e-money issuer;
a UCITS management company; or
a company that carries on insurance market activity.

There are also new requirements if the company is "medium" or "large" and has over 250 UK employees, including those employed by a subsidiary of the company (covered below) and for quoted and very large private companies (which we have not covered in this document).

About the author

Katherine White

+44 (0)20 7556 1374
whitek@buzzacott.co.uk
LinkedIn

Who is affected?

This applies to all companies (but not LLPs) that are “large” because they exceed two out of three of the following Companies Act 2006 size criteria for two years in a row:

Turnover/revenue	<£36m
Total assets	<£18m
Average number of employees	Not more than 250

It also applies to companies that are considered to be "large" because they are not eligible to be classified as small or medium-sized under the Act because they are one of the following:

a public company;
FCA regulated MiFID investment firm;
an authorised insurance company;
a banking company;
an e-money issuer;
a UCITS management company; or
a company that carries on insurance market activity.

What is the effective date?

This applies to the financial statements for accounting periods that commenced on or after 1 January 2019.

What are the new requirements for large companies?

Large companies must now include a statement in the Strategic report on how the directors have complied with s172 of the Companies Act 2006: the duty to promote the success of the company, when conducting their duties. This includes:

the likely consequences of any decision in the long term;
the interests of the company’s employees;
the need to foster the company’s business relationships with suppliers, customers and others;
the impact of the company’s operations on the community and the environment;
the desirability of the company maintaining a reputation for high standards of business conduct; and
the need to act fairly between members of the company.

The statement should cover:

the issues, factors and stakeholders the directors consider relevant in complying with the above and why;
the main methods the directors have used to engage with stakeholders and understand the relevant issues; and
information on the effect taking these into account had on the company’s decisions and strategies during the financial year.

The above statement must also appear on a website.

All large companies must also include a statement in their Directors’ report summarising:

how the directors have had regard to the need to foster the company’s business relationships with suppliers, customers and others, and
the effect that has had, including on the principal decisions taken in the financial year.

Additional requirements for companies with 250+ UK employees

What are the additional requirements for medium and large companies with more than 250 UK employees?

All large and medium-sized companies with more than 250 UK employees (including those employed by a subsidiary of the company) must include an “Employee engagement statement” in the Directors’ report on how the directors have:

engaged with employees;
taken their interests into account; and
the effect of doing so, including on the principal decisions taken in the financial year.

Who will write these disclosures?

The company’s directors are responsible for preparing the disclosures. Your Buzzacott team can provide guidance to help you apply the requirements.

Get in touch

Please get in touch if you want to discuss the new requirements and if they affect your company.