Changes to the Directors’ report and Strategic report

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:

1. the likely consequences of any decision in the long term;
2. the interests of the company’s employees;
3. the need to foster the company’s business relationships with suppliers, customers and others;
4. the impact of the company’s operations on the community and the environment;
5. the desirability of the company maintaining a reputation for high standards of business conduct; and
6. 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.