Corporate Governance Reform/Audit
1. FRC publishes guidance on auditors' responsibilities under Provision 29 of the UK Corporate Governance Code 2024
The Financial Reporting Council has published a 'mythbuster' on auditors' responsibilities in relation to Provision 29 of the UK Corporate Governance Code 2024 as well as three revised UK auditing standards which seek to make auditors' reports shorter, clearer and more useful.
By way of reminder, Provision 29 of the 2024 Code introduces a new expectation that boards will not only monitor a company's risk management and internal control framework and, at least annually, carry out a review of its effectiveness but also describe how that process has worked, declare the effectiveness of material controls and describe any material controls which have not operated effectively. The Provision applies to financial periods beginning on or after 1 January 2026. Our podcast on 'Internal controls and Provision 29 of the Code' can be found here.
The FRC's mythbuster sets out information for stakeholders that may assist in determining an auditor's responsibilities under relevant standards for audits of financial statements where the accompanying annual report contains a statement made in accordance with Provision 29. Questions addressed include whether the auditor's opinion will cover the Provision 29 statement; the extent of an auditor's responsibilities in respect of the statement; whether an auditor is required to test the design, implementation and operating effectiveness of material controls identified by a board in order to comply with Provision 29; and an auditor's responsibilities if they identify a significant deficiency in internal controls as part of their audit.
As regards the auditor reporting standards (specifically, ISAs (UK) 700, 701 and 720), these have been updated to remove unnecessary reporting requirements, increase the volume of useful information in the auditor's report and bring UK standards into closer alignment with their international equivalents. Notably, for those companies which apply the 2024 Code, the standards introduce a requirement for auditors to describe how a company's controls affected the audit and to communicate very serious control deficiencies in the auditor's report. The revised standards take effect with regard to audits for periods from 15 December 2026. Various superseded FRC Bulletins have been withdrawn.
The FRC has also published reforms to its Audit Enforcement Procedure, modernising its regulatory toolkit in order to enable it to act more quickly. The revised AEP introduces a new and expanded range of routes to resolution, intended to enable the FRC to respond to cases in a targeted and timely way.
2. Accessing the register of members
In the case of BCNO Ltd v Cooke [2026] EWHC 1263 (Ch), the High Court decided that its ability to give directions as to whether a company need comply with a request for access to the register of members only arises where there has been a valid request made for such access under section 116 of the Companies Act 2006. Absent provision of the correct information under section 116, a company can therefore ignore a request without the need to seek a court order under section 117 determining that the request has been made for an improper purpose.
By way of reminder, section 116(4) prescribes the information which such a request must contain: the address of the party seeking access, the purpose for which the information is sought; and whether the information will be disclosed to others. In Fox-Davies v Burberry plc, the Court of Appeal decided that compliance with section 116(4) was mandatory if the request was to be valid. As a result, absent such compliance, a company has no obligation under section 117 of the Act either to comply with the request or to challenge the request in court.
On the facts of BCNO v Cooke, since the parties agreed that the request for access did not comply with section 116(4), and therefore did not comply with section 116, the jurisdiction of the Court under section 117 never arose.
The Court did not consider what a company should do if it was unsure as to whether section 116 had been complied with, although it did go on to say that, given the nature of the information required by section 116(4), there would usually be little doubt as to whether a request did or did not comply with the requirements.
By way of further reminder, in AGC Update, Issue 83 – Item 2 we reported that the Chartered Governance Institute UK & Ireland had issued an update to its guidance note on the 'proper purpose' test under sections 116 to 119 of 2006 Act.
3. Small Business Regulatory Taskforce established
The government has announced the establishment of the Small Business Regulatory Taskforce. The Taskforce has been set up to develop recommendations targeting the removal or streamlining of regulatory costs faced by SMEs so as to reduce the administrative burden of regulation by 25%.
The Taskforce will be co-chaired by Blair McDougall, MP and Minister in the Department of Business and Trade and Tina McKenzie, Chair of Policy and Advocacy at the Federation of Small Business.
The Taskforce is expected to report back to the government with its findings and recommendations in Autumn 2026.
Economic Crime and Corporate Transparency
4. ECCTA accounts changes delayed until April 2028
The government has issued a written statement announcing how key accounts and reporting reforms set out in the Economic Crime and Corporate Transparency Act 2023 are to be implemented. The government hopes that the reforms will make filing requirements easier to understand, reduce fraud and error, and improve transparency.
The reforms were due to come into force in April 2027 but will now come into force in April 2028 to give companies more time to prepare.
Filing of accounts by small companies and micro-entities
After concerns that many 'small' and 'micro-entity' companies were using options to file accounts in a manner requiring minimal disclosure when they were not eligible to do so, ECCTA amended company law to oblige small and micro-entity companies to file a balance sheet and a profit and loss account. This change will continue to be implemented but, in response to concerns about commercial risk and the potential impact on investment opportunities, small and micro-entity companies will be permitted to opt out of publishing this information on the public register. Companies House, law enforcement and HMRC will still have access to the information. Details of how to opt out will be confirmed in due course. Small companies will no longer be able to prepare and file abridged accounts.
For accounting periods beginning on or after 6 April 2025:
- a 'small' company is a company that meets at least two of the following conditions in a financial year: a turnover no more than £15 million; a balance sheet total no more than £7.5 million; or no more than 50 employees on average, and
- a 'micro-entity' is a company that meets at least two of the following conditions in a financial year: a turnover of £1 million or less; a balance sheet total of no more than £500,000; or 10 employees or fewer.
The written statement confirms that the other key accounting changes noted below will also take effect from April 2028.
Format of accounts
Companies will be required to file the component parts of their annual report and accounts together. Companies will also be required to file their accounts at Companies House using commercial software in Inline eXtensible Business Reporting Language (iXBRL) format. The current web and paper filing routes will close for accounts, although they will remain open for other filings.
Audit exemption
A company claiming an audit exemption will have to include on its balance sheet a statement by the directors identifying the relevant exemption and confirming that the company qualifies for it.
Accounting reference period and annotating the register
The government will bring forward secondary legislation to reduce the number of times a company can shorten its accounting reference period and provide for the register to be annotated where a company has not complied with accounts requirements under the CA 2006.
Updated guidance
Companies House has updated its guidance on the accounts reforms which is accessible in the following links: Changes to accounts, Guidance: Filing your Companies House accounts and Guidance: Using software to file your company's information.
Other ECCTA developments
In AGC Update, Issue 83 – Item 4, we covered the publication by the government of draft regulations intended to increase the scope of offshore trusts required to register with HMRC's Trust Registration Service. The regulations have now been made and came into force on 30 June 2026.
Equity Capital Markets
5. FCA reviews TVR disclosures and significant transactions regime
The FCA has published Primary Market Bulletin 64; covering two areas of practical relevance to UK-listed companies: (i) total voting rights disclosures and (ii) significant transaction notifications under the reformed UK Listing Rule regime.
Total Voting Rights - Follow-Up Review
The FCA has completed its 2025 follow-up review of TVR disclosures, building on its 2020 review.
TVR disclosures are a source of market transparency. They allow shareholders and the wider market to understand the total number of voting rights against which holdings are measured at any given point in time, which in turn enables investors to assess whether regulatory notification thresholds have been crossed and to identify potential shifts in influence or control.
The FCA's focus is on specificity. From its sample of issuers that had increased or decreased their share capital between the relevant reporting periods and did not use the 'Total Voting Rights' categorisation, whilst the review found that most included information relevant to TVR or share capital in some form, the FCA remains concerned that a number of disclosures lacked the clarity needed to satisfy DTR 5.6.1R (disclosure of the total number of voting rights and capital in respect of each class of share at the end of a calendar month during which an increase or decrease has occurred). In this context, the absence of a subsection for TVR or any direct mention of the total number of voting rights was stressed.
The FCA notes the removal of DTR 6.2.2BR further to several policy changes implemented in November 2025. Issuers are now required to select only a headline category per disclosure when submitting to the National Storage Mechanism; issuers are no longer able to select (sub)classes of regulated information.
Against that backdrop, the FCA highlights three practical steps:
- Confirm TVR figures explicitly - Issuers should ensure every relevant disclosure specifically confirms the TVR figure in accordance with DTR 5.6.1R, particularly where it sits within a broader announcement and shareholders may otherwise struggle to identify a change in the denominator for calculating percentage voting rights.
- Use the correct headline classification where possible - For disclosures that confirm TVR figures, issuers should select, to the extent possible, 'Total Voting Rights' as the applicable headline information classification of regulated information under DTR 6.2.2AR and DTR 8 Annex 2R.
- Use clear language when TVR information is embedded in other disclosures - Where a broader headline is appropriate, issuers should include an express reference to 'total voting rights' so the information remains easily locatable on the NSM via keyword search.
Significant Transactions - Observations on Notifications
Since the 2024 UKLR reforms replaced FCA-approved circulars and shareholder votes with a notification-based regime for significant transactions (broadly, non-ordinary course transactions at or above 25% on any class test), the FCA has been monitoring how the new UKLR 7.3 framework is bedding in. The FCA has identified two areas for improvement:
- Risk disclosures (UKLR 7 Annex 2, Part 1, 1.1R(7)): The FCA has observed different approaches to the number and presentation of risks to the company and notes that some issuers have shifted from the structured format formerly used in Class 1 circulars - where each risk was stated and briefly explained - towards more high-level descriptions and a less defined structure. While acknowledging that detail will vary by deal size and complexity, the FCA stresses that in line with UKLR 7.3.5G(2), which provides that issuers should consider the nature and circumstances of the transaction and what information is necessary to support shareholder engagement and market transparency, risk descriptions should be tailored to the specific company and transaction, rather than be formulaic. For background, see our Developing Trends in Significant Transaction Announcements update here.
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Board statements on best interests (UKLR 7 Annex 2, Part 1, 1.1R(16)): The FCA has noted instances where board statements did not track the prescribed wording. Issuers must use the mandated text: "the transaction is, in the board's opinion, in the best interests of security holders as a whole." Bespoke or narrowed formulations that dilute the rule's intent are not acceptable.
The same applies to the 'fair and reasonable' statement for related party transaction notifications; UKLR 8.2.2R(4) requires a statement by the board that the transaction or arrangement is 'fair and reasonable' as far as the security holders of the company are concerned and that the directors have been so advised by a sponsor. As set out in UKLR 8.2.4G, a clean confirmation tracking the prescribed wording should be given - departures from the mandated text are not appropriate.
6. Proposed changes to UK Listing Rules for closed-ended investment funds
As trailed in AGC Update, Issue 80 – Item 2, the Financial Conduct Authority has published a consultation on proposed changes to the UK Listing Rules for closed‑ended investment funds, focusing on the management of conflicts of interest and the protection of shareholder rights.
The FCA has explored a range of potential scenarios to test whether its conflicts of interest framework for CEIFs would operate consistently in future, adopting a purposefully forward-looking approach. The FCA has identified a limited number of amendments which it believes will ensure its rules continue to apply consistently in all relevant scenarios. Specifically, the FCA's proposals would:
- Bring proposed investment managers within the scope of the UKLR 11 relevant related party provisions to provide consistent protections to all changes to investment manager fees.
- Ensure that the association between a director and a substantial shareholder which proposed the director for a board appointment is adequately accounted for in the UKLRs to strengthen the integrity of a board being able to act independently of any investment manager.
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Where a substantial shareholder is also an investment manager of the CEIF, recognise the conflict arising by preventing the substantial shareholder from voting on material changes to the investment policy.
The FCA considers these changes necessary given the central role of the investment management relationship.
Responses are invited by 14 August 2026. The FCA intends to finalise rules before the end of 2026.
The FCA is also exploring which types of investment entities should be eligible to list in the UK - in particular, whether the requirement to manage assets in a way that aligns with the objective of spreading investment risk remains proportionate. This work is ongoing and the FCA expects to publish a timeline for next steps later in the year.
Separately, the FCA has published guidance on good practice to support retail investors in exercising their voting rights - as part of its broader work on effective shareholder engagement. The guidance is aimed at investment platforms, stockbrokers and trading apps as well as other retail investment intermediaries.
7. FCA consults on increases to fines for serious market abuse breaches
The FCA has published a consultation on proposed updates to its Decision Procedure and Penalties Manual (DEPP) including:
- raising the minimum fine for individuals, for the most serious cases, from £100,000 to £150,000 to account for inflation; and
- making clear that the FCA may increase penalties for wealthier individuals for deterrent effect having regard to their income and assets.
Responses to the consultation should be submitted by 10 August 2026.
Tax and Distributions
8. HMRC consults on reforms to tax treatment of distributions and returns of capital
HMRC has published a consultation: HMRC: Modernising the distributions framework, in which it sets out proposals to change significantly the tax framework for distributions and capital repayments from companies to individuals.
More detail can be found in our Tax team's update here. Responses to the consultation should be submitted on or before 14 September 2026.
Market Abuse Regulation in the EU
This section summarises various developments relating to the EU Market Abuse Regulation. These will be of relevance to those with securities admitted to relevant EU markets. Whilst not of direct relevance to those with securities admitted only to UK markets, where the UK Market Abuse Regulation applies, developments may be indicative of the direction of travel for the UK regime and/or be considered by courts in the UK in similar circumstances.
9. Key EU Listing Act reforms taking effect
The EU Listing Act, which was published in the Official Journal in November 2024, introduced a number of amendments to the EU Market Abuse Regulation (EU MAR). While certain changes took effect in December 2024, the most significant reforms in this area came into effect on 5 June 2026. In summary, the reforms remove the obligation to disclose inside information relating to intermediate steps in protracted processes and replace one of the conditions for delaying disclosure with a more objective test. Though UK MAR remains unchanged for now, issuers subject to both UK and EU market abuse regimes will need to manage the growing divergence carefully.
Protracted processes: No disclosure of intermediate steps
From 5 June 2026, under the amended EU MAR regime, issuers are no longer required to disclose inside information relating to intermediate steps in a protracted process, provided that confidentiality can be maintained. A disclosure obligation arises only once the final event or final circumstances have occurred, although issuers may still delay disclosure of that final event under the amended Article 17(4) conditions discussed below.
The rationale for this reform is that premature disclosure of preliminary information - mere intentions, ongoing negotiations or their progress - may mislead investors rather than support efficient price formation. Critically, however, issuers must still ensure confidentiality of inside information at intermediate stages, maintain insider lists, comply with the prohibition on insider dealing and disclose immediately if confidentiality is breached.
Revised conditions for the delay of disclosure
Article 17(4) of EU MAR permits issuers to delay disclosure provided three cumulative conditions are met. Two of those conditions remain unchanged: immediate disclosure must be likely to prejudice legitimate interests and the issuer must be able to ensure confidentiality. The second limb - that delay must not be 'likely to mislead the public' - has been replaced with a more objective test, which is that the information the issuer intends to delay must not be 'in contrast with' the issuer's latest public announcement or communication on the same matter. This gives issuers a clearer, more workable standard and removes a degree of subjective assessment that had the potential to cause difficulty in practice.
Implementing measures
The European Commission adopted two Delegated Regulations in April 2026, which are expected to come into force in Q3 2026.
The first Delegated Regulation supplements the amended disclosure regime by establishing non-exhaustive lists of (a) final events in protracted processes (for example, material agreements, share issuances, share buybacks and financial results), together with the moment at which disclosure is required and (b) situations where the inside information whose disclosure is intended to be delayed is 'in contrast with' an issuer's latest public announcement, including profit warnings and environmental targets that are not met, for example. Final events or final circumstances with respect to protracted processes not included in the list remain subject to a case-by-case assessment by the issuer.
The second Delegated Regulation, among other things, updates the detailed rules on closed period trading exemptions for persons discharging managerial responsibilities (PDMRs) to align with the changes introduced to EU MAR by the Listing Act. The following amendments to the PDMR regime under Article 19 of EU MAR took effect in December 2024:
- The notification threshold was raised from €5,000 to €20,000 per calendar year (national authorities may increase to €50,000 or reduce to €10,000).
- Broader closed period exemptions were introduced permitting PDMRs to trade during closed periods, including transactions not involving active investment decisions or resulting exclusively from external factors or third-party actions.
- The existing closed period exceptions of severe financial difficulty and transactions made under, or related to, employee share schemes were extended to financial instruments other than shares.
As stated above, these amendments do not apply to the UK PDMR regime.
Revised ESMA Guidelines on delayed disclosure
ESMA has consulted on proposed amendments to its Guidelines on Delayed Disclosure of Inside Information, with final Guidelines expected in Q4 2026. Given that protracted processes are no longer subject to the disclosure obligation until completion, ESMA proposes to delete from the Guidelines all legitimate interests that relate to protracted processes, as these are now addressed by the Delegated Regulation (see above). To support issuers and enhance clarity, ESMA identifies additional legitimate interests for delay - for example, where the issuer is requested not to disclose by a public authority or is participating in several procurement processes for similar contracts. ESMA is also proposing to delete the section on when delay would 'mislead the public', reflecting the Listing Act's replacement of that condition.
The revised Guidelines will not apply to the UK MAR regime. The pre-Brexit version of the ESMA Guidelines (dated October 2016) continues to apply to UK-listed issuers, to the extent relevant.
Insider Lists
In addition to the substantive disclosure changes, the administrative requirements for insider lists are also being updated. Under Implementing Regulation (EU) 2026/1291, as of 5 July 2026, a new abbreviated insider list format - previously available only to certain SME Growth Market issuers - will apply to all issuers subject to EU MAR. The simplified templates remove several personal data fields, including home addresses and personal telephone numbers.
Practical Implications for Dual-Listed Issuers
Dual-listed issuers - subject to both UK and EU MAR - will need to navigate the growing divergence between the UK and EU regimes. They will need to review their disclosure policies, insider list procedures and compliance frameworks to ensure they adequately address both regimes in parallel.
Sustainability
10. Anti-Deforestation Due Diligence - expected consultation on GB regulations
The Department for Environment, Food and Rural Affairs has announced its intention to consult on new anti-deforestation due diligence requirements for GB businesses with turnover above £1 million. The proposed rules will require businesses to verify that products they use are not made from commodities produced on illegally deforested land. Legislation is targeted for 2027. The UK scheme is designed to align to some extent with the EU’s Anti-Deforestation Regulation (EUDR), which applies from 30 December 2026, focusing on the same seven commodities: cattle, cocoa, coffee, palm oil, rubber, soy and wood. It should be noted that the £1 million turnover threshold is significantly lower than previously indicated, and any in-scope business using these commodities or specified derived products within Great Britain will need to implement supply chain due diligence processes.
For companies also subject to EUDR, the due diligence information gathered for EU compliance should also satisfy the new GB requirements. However, the GB scheme will only restrict products made from illegally deforested commodities, whereas the EUDR prohibits all connections to deforestation that has occurred post-2020, regardless of its legality — creating the possibility that products that are non-compliant with the EUDR could be diverted to the GB market. We explore these issues, the key differences between the regimes, and practical steps businesses can take now to prepare in our latest article here.
For our previous updates on this topic click here and here.
Authors: Will Chalk, Partner; Shan Shori, Expertise Counsel; Becky Clissmann, Sustainability Counsel; Marianna Kennedy, Senior Associate
