Ashurst Governance & Compliance Update – Issue 73

Economic Crime and Corporate Transparency

1.  Identity verification for directors, LLP members and PSCs imminent – a reminder

By way of reminder, with effect from 18 November 2025, company directors, LLP members and persons with significant control (PSC) of companies or LLPs must comply with the new identity verification (IDV) provisions introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA). 

Detail on the implications of identity verification for new and existing directors, LLP members and PSCs can be found in AGC Update, Issue 70 – Item 1. 

For a series of Q&As on the new IDV requirements, please read AGC Update, Issue 63 - Item 10.

2.  Regulations to amend Companies House fees published

The Registrar of Companies (Fees) (Amendment) Regulations 2025 have been published, together with an Explanatory Memorandum.

The regulations amend various fees charged by Companies House to reflect increased costs from the expansion of the Registrar's role and functions as a result of the ECCTA. In relation to companies, the regulations increase incorporation fees and annual confirmation statement fees. The regulations also amend fees for LLPs and overseas companies.

The regulations will come into force on 1 February 2026. Most of the changes made by the regulations do not have effect where a document is delivered to the Registrar of Companies on or before 31 January 2026 but is registered on or after 1 February 2026.

Narrative and Financial Reporting

3.  Discussion paper on the future of digital reporting published

The Financial Reporting Council has published a discussion paper focused on the ongoing development and use of digital reporting and taxonomies. It builds on the FRC's August 2024 discussion paper: Opportunities for the future of digital reporting (see AGC Update, Issue 66 – Item 3)

The paper outlines changes aimed at improving the usability, scalability and technical integrity of taxonomies, thereby making it easier for users to apply the taxonomies and reduce regulatory burden. The FRC explains that some proposals are well-defined and ready for implementation, while others are more exploratory.

The topics covered in this paper include:

• The use of typed dimensions to replace explicit dimensions with large sets of domain members.
• The addition of a formula linkbase to support automated validation and improve data quality.
• The replacement of fixed item types with extensible enumerations to align with modern XBRL standards.
• A review of entry point design and schema discovery, where ideas and solutions are sought to improve accuracy and usability.

All stakeholders with knowledge and experience of using XBRL, including preparers, software vendors and data consumers, are invited to review the proposals and provide feedback to the FRC ahead of any of the changes being introduced. Responses should be sent to XBRL@frc.org.uk by 11 January 2026.

Equity Capital Markets

4.  Primary Market Bulletin 58 addresses errors in draft procedural and technical notes 

The Financial Conduct Authority has published an updated Guidance: Consultation 25/3 – Primary Market Bulletin 58 (PMB 58) to correct clerical errors identified in some of the draft procedural and technical notes it has published for consultation in the context of the implementation of the new public offers and admissions to trading (POAT) regime. By way of reminder, the POAT regime commences on 19 January 2026. 

For detail on PMB 58, see AGC Update, Issue 72 – Item 6 and for background on the POAT regime, see 'New FCA Prospectus Rules: the last piece of the puzzle' and AGC Update, Issue 69 – Item 3.

The closing dates for the various consultations remain unchanged.

Tax enquiries – dealing with HMRC

5. With tax 'enquiry season' fast approaching, what should you be thinking about? 

HMRC issuing a formal enquiry notice to a company is usually the first stage in a tax dispute. This means that HMRC has "re-opened" a tax return and is investigating it, with the possibility of assessing the company to further tax for the period covered by the return. HMRC has broad powers to open an enquiry into every tax return it receives without providing specific reasons or having to establish any particular error. However, HMRC's powers are time limited; it must open its enquiry within a strict 12-month window from the date the tax return was delivered. With no set statutory deadline for closing its enquiries once open, HMRC enquiries can last for many years and cause significant uncertainty for businesses.

Enquiry season

A combination of December being the close of many companies' accounting periods and HMRC's 12-month window to issue an enquiry into a tax year tends to result in a spike in enquiry notices being issued in December. HMRC's increasing use of automated systems to prompt the opening of enquiries and the increased focus on and funding for compliance checks is likely to contribute to this trend. 

Increased funding and focus on compliance 

The UK Government has made no secret of its intention to bolster HMRC’s compliance activities. The 2024 Autumn Budget allocated £1.7 billion and over 5,000 additional compliance staff to HMRC for the next five years, to specifically target the detection and investigation of non-compliance. According to the government's figures, this investment will raise £2.7 billion per year in additional revenue by 2029-30. 

HMRC has also introduced the use of Artificial Intelligence to simplify everyday processes and compliance procedures as a central pillar of HMRC’s Transformation Roadmap, which sets out a comprehensive plan to modernise the UK’s tax system, improve customer experience, and close the tax gap. 

We expect technological developments and additional funding to result in increased scrutiny, and potentially an increased volume of enquiries received by companies. 

Legal and governance issues during HMRC enquiries

The first enquiry notice typically involves HMRC seeking information from a company on an informal basis. HMRC also has formal statutory information powers at its disposal. Whether the request is informal or formal, the process of responding to HMRC enquiries raises a host of legal and governance considerations, and it is worth taking legal advice early in the process. What follows are some of the key considerations:

Legal professional privilege

Communications between a client and their legal adviser for the purpose of obtaining legal advice are generally protected by legal professional privilege. Privileged communications do not have to be disclosed to HMRC, even in the context of a formal enquiry or investigation. However, the boundaries of privilege can be complex and require careful navigation. 

Confidentiality

HMRC may request documents, for example shareholders' agreements or service agreements, that are subject to confidentiality clauses. Advice is needed to navigate these confidentiality clauses, and ensure they are not breached, when responding to HMRC information requests. 

GDPR and data sharing

The General Data Protection Regulation and the UK Data Protection Act 2018 impose strict obligations on the collection, storage and sharing of personal data. When responding to HMRC enquiries, organisations must ensure personal data is being appropriately handled.

HMRC is targeting 90% of customer interaction being digital by 2030, resulting in increased reliance on secure online platforms, digital self-serve options, and AI-powered assistants. These systems are designed to enhance security, but they also introduce new risks around data breaches and unauthorised access. Organisations must ensure their own internal controls and IT systems are robust enough to protect data when responding to HMRC digitally. 

How can we help?

HMRC enquiries can be daunting. With the right legal advice, enquiries can be efficiently and swiftly resolved. At Ashurst, our tax team brings together deep technical expertise and a practical, commercial approach when it comes to:

• Managing HMRC enquiries and reviews: we guide you through the enquiry process from the outset, helping you understand what to expect, advising on what information should be disclosed and employing our expertise to close enquiries that lack a solid technical basis.
• Liaising directly with HMRC: we can handle communications with HMRC to ensure your position is clearly and effectively presented.
• Negotiation and settlement: we frequently negotiate with HMRC, including through ADR procedures, to seek the best possible outcome for your business.
• Litigation support: if necessary, we have the experience to prepare and manage your case through any litigation.
• Wider governance issues: we can provide support and training on governance frameworks and processes such as data protection, legal privilege, confidentiality and their interaction with HMRC enquiries.

AGMs in 2026

6. ISS Governance publishes 2026 benchmark voting policy consultation

ISS Governance has published its 2026 benchmark voting policy comment period seeking views on amending its UK and Ireland policies and its global policies.

For its UK and Ireland proposed policy changes, ISS Governance has sought views on, as regards General Meetings, a change to the policy on shareholder meetings to establish a clear definition of 'in-person' meetings. This is to address practice by a small number of companies that have sought to introduce more restrictive in-person shareholder meetings, potentially reducing shareholder participation or limiting opportunities for engagement with the board.

ISS Governance expects to announce its final 2026 benchmark policy changes in late November 2025 and apply the revised policies to shareholder meetings on or after 1 February 2026.

Stewardship

7. Final guidance to UK Stewardship Code 2026

The FRC has published final guidance to support the UK Stewardship Code 2026. By way of reminder, the 2026 iteration of the Code was published in June 2025 and applies from 1 January 2026 – 2026 will serve as a 'transition year' during which existing signatories will maintain their signatory status; for detail see AGC Update, Issue 67 – Item 1.

The FRC states that the guidance is optional and not prescriptive and offers suggestions for the types of information organisations may wish to include in their reporting to help explain their approach to stewardship. It is intended to reflect the flexible nature of the Code, which recognises that organisations differ in size, structure, and investment strategy, and therefore exercise stewardship in different ways. 

The FRC has also published a report: Preparing for the UK Stewardship Code 2026: applying insights from current reporting. This is intended to provide practical insights and examples of effective reporting from the 2020 Code to help asset owners, asset managers, and service providers transition to the updated Code's new streamlined reporting structure.

The report showcases examples of what the FRC considers to be high-quality reporting from recent successful signatories, illustrating how stewardship approaches can be communicated transparently across different asset classes and organisational contexts. 

Remuneration

8. Investment Association letter to RemCo Chairs sets out Key Themes for 2026 

The Investment Association has written an open letter to the Chairs of remuneration committees in which it provides an update on the implementation of the IA's Principles of Remuneration and emerging views on issues which are likely to be important to IA members in the 2026 AGM season. For an overview of the IA's Principles of Remuneration, see AGC Update, Issue 57- Item 1.

The letter confirms that the Principles of Remuneration remain unchanged for 2026, with the expected focus being on stronger implementation ahead of AGM season.

Committees are expected to provide company specific, well-substantiated rationales for pay proposals and avoid using generic statements (e.g., “competitiveness against peers”). The IA believe that benchmarking as a sole justification for remuneration is not appropriate and peer comparisons should be well-explained, with the most important factor being to demonstrate how increases in quantum of remuneration clearly link pay to performance.

IA members remain cautious on hybrid long-term incentive structures. They expect these schemes to be appropriate only for companies with a significant US footprint or where they are competing for global talent, and they must be supported by strong strategic rationales. Early investor consultation is encouraged. 

Retrospective changes to in-flight awards are strongly discouraged. Any discretion used by remuneration committees to amend performance criteria or underpins should be exceptional, well-evidenced, subject to consultation and supported by shareholders.

Once shareholding guidelines are met, a proportionate approach to bonus deferral is acceptable. A reduced portion may be deferred into shares, but removal of deferral is not expected by investors given that bonus deferral is an important mechanism in operating malus and clawback.

For independent non-executive directors, fees may partly be delivered in shares purchased at the market rate. However, the IA reiterates that performance-related pay remains inappropriate for NEDs, a sentiment echoed by the FRC (see next item). 

The IA will introduce initiatives to facilitate shareholder engagement, including a member contact directory and collective consultation meetings (details on both to follow). For 2026, investors will continue to scrutinise how remuneration committees balance executive pay with wider stakeholder interests in a challenging economic climate.

9. FRC guidance on non-executive director remuneration updated

The Financial Reporting Council has announced that it has revised its guidance to the 2024 UK Corporate Governance Code as regards the remuneration of non-executive directors. 

The updated guidance recognises that companies may encourage non-executive directors to build personal shareholdings to foster alignment with shareholders and reinforce long-term commitment, whilst emphasising that any approach must be tailored to the specific circumstances of each company.

The guidance (specifically paragraphs 322 to 324 inclusive) makes clear that, in line with the Code, boards have flexibility to pay non-executive directors a portion of their fees in shares, provided they maintain transparency about their rationale and approach in particular through the medium of their annual report. 

Where companies consider alternative remuneration structures, the guidance emphasises the importance of preserving director independence, noting that performance-related remuneration remains inappropriate for independent non-executive directors.

The FRC are clear that the change to the guidance does not change the UK Corporate Governance Code. 

Directors' Duties

10. Director perceptions of Section 172: Research findings

The Department for Business and Trade (DBT) has published qualitative research which focuses on the perception of executive directors and company secretaries of large companies of Section 172(1) of the Companies Act 2006 (duty to promote the success of the company), the introduction of the requirement to publish a s.172(1) statement in their annual accounts, and the impact that these have had on company decision-making. 

Ipsos conducted interviews with 24 executive directors and company secretaries of large companies between March and June 2025. Headline findings include:

• Awareness: Interviewees were broadly aware of s.172(1), with those from a legal background displaying a deeper understanding of the duty’s purpose. They generally acknowledged s.172(1)'s principles of considering stakeholder interests and making decisions for the long-term benefit of the company but often had not engaged with the text of s.172(1) in further detail.
• Understanding: Regardless of their level of understanding of s.172(1), all interviewees understood that their primary obligation was to run the business for the benefit of the shareholders whilst having regard to a range of stakeholder interests, but that this was ultimately to shareholder interests.
• Impact on decisions: Findings suggest that s.172(1) has had minimal impact on the way companies make decisions. Consideration of stakeholder factors was generally driven by what was material to the decision being made, rather than because of s.172(1). Despite the limited active influence of s.172, it was perceived to have reinforced sound corporate governance practices, and there was no expressed desire to change or remove s.172.
• Attitudes to reporting requirements: Interviewees understood the reason why the requirement to prepare a s.172(1) statement had been introduced, but some questioned the practical value in it. While some saw it as an opportunity to present a positive story about company decision-making, others felt it was an unnecessary addition to the annual report and questioned whether investors read the statement.
• Preparation of the s.172(1) statement: Statements were generally prepared by the company secretary or, in the case of larger companies, by their team. Statements were reviewed and signed off by the board. In some cases, external auditors reviewed and commented on the statement, though they did not audit the content.
• Impact and value of the s.172(1) statement: The reporting requirements do not appear to have changed the decisions made by companies, though some interviewees suggested that it had helped to encourage greater considerations of different stakeholders in decision making processes.
  
  Several interviewees suggested the requirements had led to improved information gathering to demonstrate how different stakeholders had been considered. Companies had initially struggled to write their statement as decision-making processes were not always captured in a way that translated easily into a s.172(1) statement. This had led to some companies changing processes for capturing board decision-making to support easier statement writing.

Payment Practices Reporting

11. Regulations requiring payment practices reporting in annual reports finalised 

The Companies (Directors' Report) (Payment Reporting) Regulations 2025 (SI 2025/1152) have been published.

By way of reminder, the Regulations will amend the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (S.I. 2008/410) and introduce new reporting requirements for companies considered 'large' for accounting purposes to report annually, within their directors' reports, on their payment practices and performance with respect to suppliers. For a reminder of the changed financial thresholds used to classify the size of companies, see AGC Update, Issue 60 – Item 7.

In relation to qualifying contracts, the Regulations will require the directors' report to include (among other things):

• The company's payment period with its suppliers specified in its standard payment terms.
• Details of any variations to those payment terms, as well as details of any notification or consultation conducted by the company with its suppliers before making the variation.
• The average number of days taken to make payments.
• The percentage and total of payments which are not made within the company's payment period.

For more detail on the Regulations, see AGC Update, Issue 69 – Item 1.

The Regulations come into force on 1 January 2026 and apply in respect of an in-scope company's financial year beginning on or after that date. They operate in parallel to the requirements in relation to half-yearly payment practices filings which themselves have been enhanced recently – see AGC Update, Issue 62 – Item 5.

Sustainability

12. Delegated Regulation postpones certain CSRD reporting requirements for Wave One companies

Commission Delegated Regulation (EU) 2025/1416 (known as the Quick Fix Regulation) was published in the Official Journal of the European Union and is now in force. It amends Delegated Regulation (EU) 2023/2772, which set out the first EU Sustainability Reporting Standards (ESRS Regulation) to postpone certain disclosure requirements for the largest companies in scope of the Corporate Sustainability Reporting Directive ((EU) 2022/2464) (CSRD) (Wave One companies), who published their first CSRD reports in 2025 and who were not covered by the Stop the Clock Directive (see EU Parliament adopts Stop-the-clock Omnibus Proposal and process to simplify ESRS starts).

The Quick Fix Regulation, which applies retrospectively to financial years beginning on or after 1 January 2025, will:

• Postpones until FY2027 requirements for Wave One companies to report on the anticipated financial effects of certain sustainability-related risks.
• Extends until FY 2027 the temporary exemptions in Appendix C to the ESRS Regulation for Wave One companies with up to 750 employees,
• Allows Wave One companies with over 750 employees who could not previously take advantage of the 'phase-in provisions' regarding ESRS E4 (biodiversity and ecosystems), ESRS S2 (workers in the value chain), ESRS S3 (affected communities) and ESRS S4 (consumers and end-users) to benefit from them until FY 2027.

EFRAG recently consulted on exposure drafts of the revised ESRS with a view to the simplified standards being adopted by Commission no later than 6 months after the Content Directive, which will make the substantive changes to the CSRD, enters into force (see AGC Update, Issue 70 – Item 10 and Where has the EU's Omnibus got to now?). 

The Quick Fix Regulation is a pragmatic step which seeks to deal with the anomalous situation that would have required Wave One companies to increase their CSRD disclosures for FYs 2025 and 2026 even though they may no longer face reporting requirements once the Content Directive is adopted.

13. ISSB decides to develop nature-related disclosure requirements based on TNFD framework 

The International Sustainability Standards Board (ISSB) has announced that it will introduce disclosure requirements on nature-related risks and opportunities. These requirements will be additional to those already reflected in the requirements in IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures.

During 2026, the ISSB will consult on how to introduce these standards through a mix of application guidance or amendments to its existing standards, industry-based guidance, additional sources of guidance or a new standard. The ISSB will draw on the TNFD Framework and guidance with a view to producing an exposure draft of its requirements by the Convention on Biological Diversity COP17 in October 2026. 

In response, the TNFD has announced that it will complete the technical work it has in progress, including the development of additional sector guidance, by Q3 2026. It will then pause any further technical guidance and focus on supporting the ISSB’s work programme. David, Craig, Co-Chair of the TNFD noted that the "announcement by the ISSB is an important step towards nature being considered and embedded in an integrated way into the global foundations of corporate reporting".

14. TNFD publishes guidance on Nature in Transition Plans

The TNFD has released Guidance on Nature in Transition Plans (November 2025), setting out how organisations should incorporate nature into forward looking transition plans aligned with the Kunming Montreal Global Biodiversity Framework (GBF). The GBF, which has been signed by over 200 national governments, set four goals and 23 targets to halt and reverse biodiversity loss by 2030 and live in harmony with nature by 2050. TNFD considers integrating nature into transition plans can support the significant shift that is needed to achieve these goals.

The guidance is the final version of the TNFD's 2024 draft guidance (see AGC Update, Issue 58 – Item 7) and follows the TNFD's 2023 disclosure recommendations and guidance on identifying, assessing, disclosing and managing organisations' nature-related dependencies, impacts, risks and opportunities (DIROs) (see TNFD makes major contribution to sustainability reporting landscape). 

The guidance builds on the Glasgow Financial Alliance for Net Zero (GFANZ) and the Transition Plan Taskforce (TPT) recommendations for climate Transition Plans (TPs) and seeks to help organisations communicate how they plan to respond and contribute to the transition implied by both the Paris Agreement and the GBF.

Notwithstanding the current geopolitical headwinds, investors continue to seek decision useful information on how companies will manage nature related DIROs and finance delivery of their plans to halt and reverse nature loss. To meet those demands, the TNFD notes that over 700 organisations around the world have committed to voluntarily report against their disclosure framework.

Companies in sectors with significant impacts on nature or that are particularly dependent on nature should:

• Complete or deepen a TNFD Locate, Evaluate, Assess, Prepare (LEAP) assessment to identify and prioritise material nature related DIROs by location.
• Set science based targets for nature (drawing on the SBTN methodology) and select metrics to measure progress against those targets.
• Build an Implementation Strategy, which considers how actions to address nature-related DIROs will be financed, and develop a place based engagement strategy.
• Consider existing governance structures and incentives and existing disclosures to ensure that they support nature-based transition planning.

Authors: Will Chalk, Partner; Shan Shori, Expertise Counsel; Becky Clissmann, Sustainability Counsel; John Papadakis, Counsel; Marianna Kennedy, Senior Associate; Sophie Suri, Counsel; Sara Mardell, Partner

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