Ashurst Governance & Compliance Update – Issue 64

Economic Crime and Corporate Transparency 

1. Window to undertake voluntary director identity verification opens

In AGC Update, Issue 63 - Item 10, we noted that directors of companies registered with Companies House (including overseas directors of both UK companies and UK 'establishments') will, from 8 April 2025, be able to verify their identity on a voluntary basis. Companies House guidance on how to do so can be accessed here.

How can a director voluntarily verify their identity? 

A director can either verify their identity directly with Companies House or do so indirectly via a third party provider (such as company formation agents, accountants or lawyers) known as an authorised corporate service provider (ACSP) who will deliver a confirmatory verification statement in respect of the individual to Companies House.

Identity verification will become mandatory for directors from a date to be determined in the Autumn. Once mandatory, the exact timing of the need for a director to be verified will depend on the date by which a particular company's confirmation statement must be filed. 

We would urge all directors to take advantage of this voluntary window and verify their identity whether themselves or through an Authorised Corporate Services Provider.

How can a director verify their identity directly with Companies House?

A director can verify their identity directly with Companies House by either using a fully digital service or a partially digital service involving an appointment at a Post Office.

• GOV.UK One Login web service (fully digital option). A director can verify their identity directly with Companies House by creating an account and using the fully digital on-line GOV.UK One Login web service. The director must provide certain required information and accompanying photographic identity evidence. The required information includes the director's name, former name (if any), date of birth, current residential address and a suitable email address that has not previously been used to verify identity. The accompanying photographic identity evidence includes the option of a passport, UK driving licence or other specified evidence. 
• GOV.UK One Login face to face service involving a Post Office appointment (partially digital option). A director who is unable to verify their identity on-line has the option of using an alternative partially digital service. The director must create an account on the GOV.UK One Login service, submit certain details (including a UK residential address) and generate an appointment at a selected Post Office branch. The director must attend the relevant Post Office branch and provide the required form of identity evidence, such as a passport, UK driving licence or other specified evidence. After the identity evidence has been checked at the Post Office branch, the director must log in to their GOV.UK One Login account to complete and submit their application to Companies House. 

Companies House will allocate a unique identifier number to a director whose identity has been successfully verified directly using either of the above options, each of which is a free service.

How can a director verify their identity indirectly with Companies House? 

A director can also verify their identity indirectly through an ACSP that has registered with Companies House. The ACSP will deliver a verification statement in respect of the director to Companies House. Individuals or organisations have been able to register as an ACSP since 18 March 2025. 

A director must provide the ACSP with certain required information (including name, former name, date of birth, a suitable email address that has not previously been used to verify identity and current home address) and accompanying identity evidence (such as a biometric or machine-readable passport, UK or EU photocard driving licence, a biometric EU or EEA identity card or other form of specified evidence). 

A director will only need to produce one of the designated forms of biometric or photographic evidence if the ACSP can validate cryptographic features by using approved identification document validation technology. In other instances, the director must provide two pieces of evidence from a wide range of options.

The ACSP must ensure that the director's identity is true and the accompanying evidence is real, after which it can deliver an appropriate verification statement to Companies House. This has the effect of changing the director's status from unverified to verified. Once the verification statement is delivered to it, Companies House must notify and allocate a unique identifier number to the relevant director.

Who else can voluntarily verify their identity with Companies House from 8 April 2025? 

In addition to company directors, members of LLPs, persons exercising significant control (PSCs) and "relevant officers" of registrable legal entities (RLEs) can also voluntarily verify their identity with Companies House from 8 April 2025, either directly or indirectly through an ACSP.

When will it become compulsory for directors to verify their identity?

Compulsory identity verification for directors (and the other individuals noted in the answer to the preceding question) is set to come into effect this Autumn, after which all existing directors of companies registered at Companies House will be given a period of up to 12 months to comply with the new law. Identity verification will also be compulsory on incorporation. 

By the end of 2026, Companies House will have completed the transition period for requiring identity verification and will begin compliance activity against those who have failed to complete the process.

What if a director fails to verify their identity after it becomes compulsory to do so?

A person will not be able to act as a director unless they have verified their identity. An individual who fails to verify their identity and continues to act as a director, and a company that fails to ensure that an individual has been verified, will commit a criminal offence. 

Failure to verify will also attract civil penalties issued directly by Companies House. A company's register could also be annotated to show the director's status as "unverified" which risks reputational damage. 

The validity of the acts of an unverified director will be unaffected. However, persistent evasion by a director could potentially lead to disqualification.

What if a PSC fails to verify their identity after it becomes compulsory to do so?

Non-compliance will result in the status of the PSC (or relevant officer of a RLE) being flagged as "unverified" at Companies House and continued non-compliance will constitute a criminal offence punishable by the imposition of a fine. 

Should directors use the existing window to voluntarily verify their identity?

Yes, with an estimated 7.4 million individuals needing to verify their identity, it is advisable for directors to verify their identities voluntarily and obtain their unique identification number from Companies House as soon as possible. This will help avoid complications after identity verification becomes compulsory, such as directors being unverified when confirmation statements need to be filed at Companies House.

Do individuals that file information at Companies House need to verify their identity?

Individuals filing documents at Companies House must also have their identity verified. Alternatively, individuals can file documents at Companies House via an ACSP. Companies will be able to file documents with Companies House through their officers or employees if their identities have been verified, or by using an ACSP to do so.

When do individuals filing information at Companies House need to verify their identity by? 

Unlike directors, PSCs and other individuals noted above, individuals that file information at Companies House are not currently able to voluntarily verify their identity.

Identity verification for individuals that file documents at Companies House will become compulsory by Spring 2026. A third-party agent filing on behalf of a company will also need to have registered as an ACSP by Spring 2026.

Companies House intends to introduce additional filing requirements for limited partnerships by the end of 2026.

Employment Reform and Pay Gap reporting

2.  Mandatory ethnicity and disability pay gap reporting comes a step closer

As part of its far-reaching package of employment reforms, the government has published a consultation paper on introducing mandatory ethnicity and disability pay gap reporting for large employers (those with 250 or more employees) which will be included in the proposed Equality (Race and Disability) Bill.

What is the current position on pay gap reporting?

Large employers are familiar with mandatory gender pay gap reporting and it is intended to extend this obligation to include ethnicity and disability pay gap reporting. A similar reporting framework will be applied but there are particular considerations in relation to data collection and analysis which will apply for ethnicity and disability.

What is in the consultation paper?

The government is seeking views on over thirty questions which will help draft the legislation. Key areas covered relate to:

• pay gap calculations: It is proposed that the same set of pay gap measures (and reporting dates) that exist for gender pay gap reporting will be used.
  
  It is also suggested that it will be mandatory for employers to report on the overall breakdown of the workforce by ethnicity and disability and the percentage of employees who did not disclose their personal data on their ethnicity and disability. This additional data is intended to give context to the pay gap figures.
• producing action plans for ethnicity and disability pay gap reporting: Such plans could give details for any pay gaps and set out actions to improve equality in the workplace.
• enforcement: The Equality and Human Rights Commission's enforcement policy relating to gender pay gap reporting will be used for ethnicity and disability pay gap reporting.
• ethnicity data collection and calculations: The proposed method of data collection will be self-disclosure, but with the opportunity to opt-out. It is suggested that employers should collect data according to the Government Statistical Service harmonised standard used for the 2021 Census.
  
  To protect anonymity, it is suggested that there should be a minimum of 10 employees in any ethnic group being analysed which may mean adding together ethnic groups following the guidance on ethnicity data from the Office for National Statistics. Where an employer has smaller groups of employees in different ethnic groups, figures for two groups can be reported - such as comparing White British employees with ethnic minority employees. This is known as a binary classification and the paper sets out three options to achieve this.
• disability data collection and calculations: For disability reporting, the government is not proposing reporting by type of disability, instead there should be a binary approach measuring the disability pay gap by comparing the pay of disabled employees with non-disabled employees, using the Equality Act 2010 definition of disability. The same minimum of 10 employees will apply.

What's next?

The consultation closes on 10 June 2025 with the requirements likely to come into force in 2026. In the meantime, employers may want to start reviewing their processes especially around data collection.

An overview of the government's employment reform package is here and our March 2025 update here.

Narrative and Financial Reporting

3.  Remuneration reporting simplification confirmed

The Companies (Directors' Remuneration and Audit) (Amendment) Regulations 2025 (SI 2025/439) have been laid before Parliament with no changes having been made to them since their first publication.

As we covered in AGC Update, Issue 63 – Item 4, the Regulations seek to amend the Companies Act 2006 and the Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008 to revoke or repeal most of the requirements relating to the reporting of directors' remuneration by quoted companies that were introduced in 2019 to implement parts of the revised Shareholder Rights Directive (EU) 2017/828. These requirements overlapped with pre-existing and continuing UK reporting requirements. The explanatory memorandum provides a detailed overview of the changes made.

The Regulations also make changes to the existing audit regulatory framework by way of amendments to the Statutory Auditors and Third Country Auditors Regulations 2013 and Statutory Auditors and Third Country Auditors Regulations 2016, to correct inconsistencies and gaps that arose during the process of assimilating relevant EU audit legislation following Brexit. Changes include clarifying the definition of audit committee and giving the FRC powers to oversee third country audits, deregister third country auditors in certain circumstances and allow an audit firm to submit an audit tender relating to a PIE to which it provides prohibited non-audit services.

The Regulations come into force on 11 May 2025 with the revised remuneration reporting requirements applying to financial years of in-scope companies beginning on or after that date.

4.  FRC releases updates to reflect reporting threshold amendments

By way of reminder, in AGC Update Issue 60, item 7 we covered the publication of The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 which not only raise the company size qualification thresholds for micro, small and medium-sized companies and groups but also remove certain reporting requirements for directors' reports. The changes come into effect for financial periods beginning on or after 6 April 2025.

To assist stakeholders understand and meet their reporting responsibilities, the Financial Reporting Council has issued the following:

• A summary document which outlines the changes to reporting thresholds, along with key considerations for stakeholders.
• Amendments to 'FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland' and 'FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime'.
• An updated 'Overview of the financial reporting framework'. This aims to assist smaller entities by providing an overview of the more simple financial reporting regimes that may be available to them.
• Updated and streamlined 'Scoping Tables' which set out Companies Act 2006 disclosure requirements for the strategic report, the directors’ report and in relation to energy and carbon reporting. This publication supersedes Appendices II, III, IV(a) and IV(b) in the FRC's 'Guidance on the Strategic Report'.
• An updated version of FRS 102 Factsheet 8 - Climate-related matters.

5. FRC publishes materials to support SMEs understand audit requirements 

As part of its campaign to support small and medium-sized enterprises access audit services, the Financial Reporting Council has published the first in its series of supporting materials to help SMEs to engage with the annual audit process.

The summary document is intended to provide owners and managers, as well as other stakeholders, with an introduction to audit standards, setting out the role International Standards on Auditing or 'ISAs' play in delivering transparent and accountable capital markets, and setting out the process for the development of standards in both the UK and international context. 

The materials are accompanied by a podcast which discusses the role of audit standards and how they can be applied in a proportionate and scalable way. 

Modern Slavery Act

6. Home Office updates guidance on transparency in supply chains 

The UK Home Office has published updated statutory guidance on how businesses should comply with section 54 of the Modern Slavery Act 2015 (MSA). By way of reminder, section 54 requires large businesses to publish annual statements detailing their efforts to prevent modern slavery within their operations and supply chains.

The updated guidance sets out the government's expectations for these statements as well as practical advice, reflecting lessons learnt in the decade since the MSA was introduced. The guidance places particular emphasis on transparency, stakeholder engagement and seeking continuous improvement in how businesses respond to modern slavery.

The guidance is significant - managing supply chain risk is now more of a priority than ever before. The EU has enacted ambitious supply chain due diligence legislation (albeit that this is currently subject to proposed simplification under the EU's Omnibus Directives – see AGC Update, Issue 63 – Item 5). In England, courts are showing a willingness to hear supply chain liability claims arising from allegations of harm overseas. They are also holding enforcement bodies to account when they fail to investigate the consequences of alleged human rights abuses within their sphere of responsibility. The UK Parliament's Joint Committee on Human Rights is currently conducting an inquiry into the UK’s legal and voluntary frameworks in relation to forced labour in international supply chains – this could ultimately lead to changes to legislation.

For a detailed overview of the revised guidance, who it applies to and what in-scope companies should do in response, see our update here.

For an overview of other changes to the MSA regime as a whole, see AGC Update, Issue 60 – Item 14.

Corporate Governance

7.  FCA Handbook Notice 128 – UKLR and DTR updates for 2024 Governance Code

The FCA has published Handbook Notice 128 which sets out, amongst other things, changes to the FCA Handbook that have been made to reflect the 2024 UK Corporate Governance Code (Code),  by the FRC in January 2024, and the FRC’s updated Code guidance (for more detail on the guidance, see AGC Update, Issue 48 – Item 1).  

The changes made by FCA Handbook include:

• Updating the definition of the Code in the Glossary to refer to the 2024 edition.
• In response to the FRC's clarification that the Code guidance is not intended to be prescriptive, removing reference to related guidance from a number of provisions (including UKLR 6.6.6R(3) (financial reporting disclosures), DTR 7.1.7G (audit committees) and DTR 7.2.8G (corporate governance statement)), and adding a note to highlight that the FRC publishes guidance on the Code on its website.
• Clarifying by way of a note to UKLR 11.7.7R (notifications and periodic financial information) that externally managed investment companies may use the Association of Investment Companies' Corporate Governance Code (seee AGC Update, Issue 56 – Item 1 for an overview of the revised AIC Code).

Certain transitional provisions have also been introduced to facilitate the application of the 2024 Code and to ensure there is clarity about which edition of the Code is relevant to a specific provision of the UK Listing Rules or the Disclosure Guidance and Transparency Rules. 

In respect of the UKLRs, where an issuer listed in the commercial companies category or the closed-ended investment fund category has an accounting period beginning:

• Before 1 January 2025, the 2018 Code applies.
• On or after 1 January 2025 but before 28 March 2025, references to the Code may be read as either the 2018 Code or the 2024 Code (except for Provision 29, where Provision 29 of the 2018 Code would continue to be applicable). If an issuer chooses not to apply the 2024 Code, it must disclose this fact in the relevant statement contained in its annual report.
• On or after 28 March 2025 but before 1 January 2026, it must apply the 2024 Code (except for Provision 29, where Provision 29 of the 2018 Code would continue to be applicable).

In relation to transitional provisions under the DTRs, for issuers with an accounting period beginning:

• Before 1 January 2025, the 2018 Code applies.
• On or after 1 January 2025 but before 28 March 2025, references to the Code may be read as either to the 2018 Code or the 2024 Code.

The Handbook updates follow the FCA's consultation set out in its Quarterly Consultation Paper (CP 24/26) (see AGC Update Issue 60, item 5).

Equity Capital Markets

8.  Spring Statement: PISCES moves forward

Alongside the Chancellor's Spring Statement, the following documents were published in respect of the Private Intermittent Securities and Capital Exchange System (PISCES):

• A draft statutory instrument to exempt share transfers on PISCES from Stamp Duty and Stamp Duty Reserve Tax. The related technical consultation ends on 23 April 2025; and
• A technical note providing details of the tax implications for companies and employees in relation to shares traded by employees on PISCES.

By way of reminder, PISCES is a new type of stock exchange that will allow private companies to have their shares traded intermittently. Secondary legislation to create the legislative framework for PISCES is expected to be put before Parliament in May 2025, with trading on PISCES likely to begin later in 2025.

For further background on PISCES, see AGC Update, Issue 50 – Issue 14.

9.  LSE publishes Discussion Paper on the future of AIM

The London Stock Exchange has published a Discussion Paper – Shaping the Future of AIM in which it seeks market engagement to support the continued development of the market. 

In the Discussion Paper, the LSE highlights that AIM is considered a central part of the UK capital markets reform agenda and, against this background of significant regulatory change in the capital markets landscape, AIM remains critical to the UK's funding continuum and to the long-term success of the UK capital markets.

The Discussion Paper provides stakeholders with the opportunity to share their views on the overall functioning and positioning of AIM in addition to a number of specific proposals for changes to the AIM Rules. The proposed changes include, amongst other things, streamlined content requirements for admission documents, a revised substantial transaction threshold (in line with the Main Market approach to significant transactions) and alternative approaches to working capital disclosures.

The Discussion Paper is open for responses to 16 June 2025 and will be supported by wider market engagement. Any proposed changes to the AIM Rulebooks will be put forward for market consultation.

10.  FCA publishes new 5-year strategy

The Financial Conduct Authority has published its new 5-year strategy for 2025 to 2030.

The FCA will focus on the following four priorities:

• Be a smarter regulator by improving processes and embracing technology to become more efficient and effective.
• Support sustained economic growth by enabling investment and innovation and ensuring the continued competitiveness of the UK’s world-leading financial services.
• Help consumers navigate their financial lives by working with industry to boost trust and product innovation and ensuring the right information and support is available for people to take financial decisions.
• Fight financial crime by focusing on those who seek to use the fact they are regulated to do harm, and going further to disrupt criminals and support firms to be an effective line of defence.

The new strategy seeks to build on developments over the course of the FCA's previous three-year strategy, including the most significant revisions to the listing regime in over three decades (see our previous briefing here), introducing the Consumer Duty to set higher standards of consumer protection and authorising firms that meet the regulator’s high standards more quickly.

11. UKLRs - Developing trends in Significant Transaction Announcements

For listed companies, the most eye-catching reforms to the Listing Regime in July 2024 were the changes to the rules relating to significant transactions. Shareholder approval for the most significant transactions (other than reverse takeovers) was replaced by a requirement for enhanced announcements. Our update provides an overview of key emerging points of practice we have observed under the UKLR 7 framework as the new regime begins to bed in. Areas of focus include:

• A variance in approach as to the depth of content included in UKLR 7 announcements.
• A trend towards standardisation in terms of risk factors.
• Diverging practice as regards the involvement of third-party accountants.

Sustainability

12.  EU Parliament adopts Stop-the-clock Omnibus proposal while process to simply ESRS starts

As was widely anticipated, the EU Parliament has adopted the EU Commission's proposal in the first Omnibus Package to delay the application dates of certain corporate sustainability reporting and due diligence requirements, as well as the transposition deadline of the due diligence provisions, the so-called: 'Stop-the-clock' proposal. As the EU Council has also endorsed the text of the Stop-the-clock Directive, all that remains for the Directive to become law is formal approval by the EU Council and publication in the EU's Official Journal. 

The substantive proposals to simplify the underlying obligations in the EU's Omnibus Package will now be negotiated by the EU Parliament and EU Council and are likely to take longer to become law.

Meanwhile, the EU Commission has asked EFRAG to provide them with technical advice, by 31 October 2025, on streamlining the EU Stainability Reporting Standards (ESRS), so that it can adopt a delegated act containing the revised ESRS within six months of the substantive changes to the Corporate Sustainability Reporting Directive entering into force.

For more information, see EU Parliament adopts Stop-the-clock Omnibus proposal and process to simplify ESRS starts.

13.  US rows back on climate-related disclosure

The Securities and Exchange Commission has voted not to defend the litigation on its climate-related disclosure rules, which created a disclosure regime modelled on the Taskforce on Climate-related Financial Disclosures recommendations for climate-related risks by public companies and issuers in public offerings (see AGC Update, Issue 50 – Item 10).

The litigation consolidates several claims by US States and private parties which were brought against the SEC soon after the rules were finalised in March 2024. As a result, the SEC stayed the rules pending the outcome of the consolidated litigation.

Following the vote, the SEC has sent a letter to the Court withdrawing its defence of the rules and stating that Commission counsel are no longer authorised to advance the arguments in the brief that the Commission had previously filed.

Commissioner Caroline Crenshaw, who was instrumental in the development of the rules, has issued a statement criticising the process by which the SEC is dismantling the rules and advocating that either the SEC should ask the court to stay the litigation while it comes up with a rule that it is prepared to defend or, if the court continues the case without the SEC’s participation, it should appoint counsel to advocate in the litigation on behalf of investors, issuers and the markets.

The SEC's move was not a surprise and reflects the fast-changing landscape on ESG and sustainability reporting that has also seen the EU announce proposals to reduce the impact of the Corporate Sustainability Reporting Directive and Corporate Sustainability Due Diligence Directive (see Item 12 above and AGC Update, Issue 63 – Item 5). Despite this, US companies may still find themselves obliged to report on their climate-related risks as a result of state-level legislation (such as that in California), legislation in other jurisdictions that they operate in, particularly the UK or EU, or as a result of investor demand.

Authors: Will Chalk, Partner; Rob Hanley, Partner; Ruby Hamid, Partner; Judith Seddon, Partner; Neil Dononvan, Partner; Crowley Woodford, Partner; Ruth Buchanan, Partner; Maria-Laure Knapp, Director; Becky Clissmann, Sustainability Counsel; Marianna Kennedy, Senior Associate; Vanessa Marrison, Expertise Counsel; Shan Shori, Expertise Counsel.