Corporate Law Update

• The Government’s second Economic Crime Bill clears the House of Commons
• The FRC publishes an updated statement of intent on ESG reporting
• The Government is consulting on changes to the UK’s invoice payment reporting regime
• QCA publishes review of the length of public company annual reports

Second Economic Crime Bill clears Commons stage

The Government’s Economic Crime and Corporate Transparency Bill has now cleared the House of Commons and moved to the House of Lords for debate.

There have been some amendments to the Bill following its passage through the House of Commons. These include the following key changes.

• Inserting the power to disqualify a person from acting as a director for breaching Part 1 of the Economic Crime (Corporate and Transparency) Act 2022, which establishes the UK’s register of overseas entities.
• Removing the ability for the Government to exempt directors of companies, as well as registered officers of general partners of limited partnerships, from mandatory identity verification.
• Allowing the Government to make regulations giving Companies House powers to share information with persons other than public authorities.

The Bill will now pass through the House of Lords, where it will be considered and debated before being passed back to the House of Commons.

FRC updates statement of intent on ESG reporting

The Financial Reporting Council (FRC) has published an updated statement of intent on environmental, social and governance (ESG) reporting.

The FRC first published its statement of intent in 2021 to identify underlying issues with the production, audit and assurance, distribution, consumption, supervision and regulation of ESG information.

It notes that, since then, it has undertaken a significant number of initiatives both to assist and support stakeholders and drive best practice in high-quality and comparable ESG reporting and disclosure.

The 2023 update sets out areas where the FRC feels there remain ongoing challenges in ESG reporting. It also suggests actions preparers can take to produce “decision-relevant information” and sets out the FRC’s plans to engage with the market to ensure that stakeholder needs are being met.

Government consults on payment practice reporting

The Government is consulting on changes to the UK’s payment practice and performance reporting regime.

Under the current regime, large UK companies and limited liability partnerships (LLPs) must publish a half-yearly report setting out their practice for paying supplier invoices, as well as statistics for their actual performance in paying invoices over the preceding year.

For more information on the regime, see our previous Corporate Law Update.

The key proposed changes are as follows.

• The regime is due to expire on 6 April 2024. The Government is proposing to extend the regime beyond this expiry date, although the consultation does not state for how long.
• Currently, in-scope businesses must report on the number of invoices paid within specified time periods. The Government is asking for views on whether it should introduce a parallel requirement to report on the total value of payments within each of those specified periods.
• In-scope businesses are currently required to publish their report every six months on a government portal. The Government is proposing to require in-scope businesses to include their payment practices and performance reporting in their annual report (potentially bringing subject to review by the company’s statutory auditors).
• The Government is asking whether in-scope businesses should be required to report on the number and value of their disputed invoices.

The Government has also raised specific questions on retention payments in the construction sector, which will be of interest to businesses operating in that sector.

The consultation closes on 28 April 2023.

QCA publishes review of length of public company annual reports

The Quoted Companies Alliance (QCA) has published a report on the increasing length of public companies’ annual reports.

The QCA reports that the average annual FTSE 100 annual report is 147,000 words (or 237 pages) long, and that of a mid-sized Main Market company is 94,000 words.

According to the review, the average annual report is increasing by 5,800 words (or nearly eight pages) per year as a result of new disclosure requirements. For AIM companies with valuations below £250m, the increase is 3,000 (or six pages) per year.

The QCA colourfully compares the current length of annual reports to that of popular novels.

The report is available to QCA members from its website.