Ashurst Governance & Compliance Update – Issue 69

Payment Practices Reporting

1.  Payment practices to be reported on in annual reports 

A draft of the Companies (Directors’ Report) (Payment Reporting) Regulations 2025 has been published and laid before Parliament, together with an Explanatory Memorandum. The Regulations form part of the government's package of measures on this issue – see AGC Update, Issue 56 – Item 7 for a general overview and AGC Update, Issue 60 – Item 2 for the launch of the Fair Payment Code.

When enacted, 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.

Note that the Regulations do not require the disclosure in annual reports of all information required to be disclosed by an in-scope company in its half yearly payment practices filing. These will continue to be required in parallel under the Reporting on Payment Practices and Performance (Amendment) Regulations 2025 (SI 2025/75) – for detail on which, see AGC Update, Issue 62 – Item 5.

The Regulations come into force on 1 January 2026 and will apply in relation to annual reports produced for financial periods beginning on or after that date.

Economic Crime and Corporate Transparency

2.  Extension of ECCTA provisions to LLPs moves a step closer

The draft Limited Liability Partnerships (Application and Modification of Company Law) Regulations 2025 have been published and laid before Parliament pursuant to the Economic Crime and Corporate Transparency Act 2023.

In summary, the draft Regulations:

• apply company law provisions to LLPs including those relating to identity verification, prohibitions on the appointment of disqualified directors and the removal of the requirement to keep certain local registers of information relating to directors and PSCs (set out in Part 2 of the draft Regulations);
• amend the Limited Liability Partnerships Act 2000 in relation to the delivery of statements concerning the prohibition on the appointment of disqualified directors (also set out in Part 2);
• amend the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009 in relation to statements of initial significant control, information that must be provided to Companies House concerning members of LLPs and the prohibition on a member acting for an LLP unless they had their identity verified (in Part 3);
• amend the Limited Liability Partnerships (Register of People with Significant Control) Regulations 2016 in relation to further duties of LLPs to make notifications in relation to persons with significant control (PSC) to Companies House (in Part 4); and
• contain transitional and saving provisions in relation to the abolition of local register provisions being applied to LLPs, notifications to Companies House of a change in an LLP's PSC and the delivery of identity verification statements of existing members of LLPs (in Part 5).

There are different implementation dates associated with different Parts of the draft Regulations, all of them yet to be precisely determined. We will issue further updates in due course. 

The Financial Conduct Authority has published Policy Statement 25/9 which sets out its final Prospectus Rules: Admissions to Trading on a Regulated Market (PRMs). 

The rules represent the last step in creating a reframed prospectus regime. Together with the Public Offers and Admissions to Trading Regulations 2024 (POAT Regulations), which will replace the UK Prospectus Regulation and establish a new framework for the offering of securities to the public and the admission of securities to trading in the UK, the FCA's rules will create a new regime which seeks to make capital raising more agile.

In overview, the FCA's new rules broadly follow the form of the draft rules previously published by the FCA in FCA CP 24/12 and FCA CP 25/2, during its consultation phase (see previous updates which deal with the consultation on the POAT Regulations here and further proposals here). 

A key change for existing issuers will be the increased threshold at which a prospectus is required for further issuances. The current limit of 20% of share capital already admitted to trading has been raised to 75% (with a threshold of 100% applying to closed-ended investment funds). This revision will allow significant secondary capital raisings to be effected without a prospectus. 

The new public offer platform regime will come into force on 19 January 2026, alongside the broader POAT Regulations framework. Further clarity as to the transitional arrangements under the PRMs is expected - it is not yet certain when the FCA will begin to review prospectuses under the new rules for the purpose of admissions after 19 January 2026.

Our update contains further details. 

4.  Digitisation Taskforce publishes Final Report 

The Digitisation Taskforce has published its Final Report in which it delivers its final recommendations for modernising the UK shareholding framework. By way of reminder, the Taskforce was launched in 2022 and published an interim report in July 2023 in which it asked stakeholders for their input and sought feedback across a number of key questions (see AGC Update, Issue 39 - Item 9).

In its Final Report, the Taskforce recommends a staged approach to removing paper share certificates and ultimately moving to a fully intermediated system of shareholding in the UK as follows: 

• Step 1: Paper shares and certificates to be replaced by temporary, wholly digital, shareholder registers, while companies would no longer be permitted to issue new paper share certificates. This should take place by the end of 2027.

• Step 2: Undertake a series of improvements to the current intermediated securities chain model under which ultimate beneficial owners hold their shares indirectly through one of more intermediaries, including depositories and custodians.

• Step 3: All shares moved into the intermediated securities chain. Various ways to achieve this end are contemplated.

The government has accepted the recommendations in the Final Report and has set out in its response how it intends to take these forward.

The FCA has published Primary Market Bulletin 56, its newsletter for primary market participants. Various topics are covered including:

• Optimising data and technology to strengthen detection capabilities in position reporting
  
  The FCA focuses on its approach to optimising data and technology to strengthen its detection capabilities in position reporting in relation to major shareholding positions, directors’ dealing and net short positions. To support its market oversight, the FCA has created the new Market Oversight Data & Intelligence Department, which is tasked with optimising and developing the FCA's data and technologies to ensure a data-led approach to identifying potential harms is adopted. 
  
  As part of its monitoring work, the FCA has developed new alerts using position and transaction reports which allow it to identify late submissions and failures to report. It was this type of monitoring which led to the FCA's enforcement investigation into transactions made by Mr András Sebők - a Person Discharging Managerial Responsibilities in a listed issuer, and subject to notification requirements under Article 19 of the UK Market Abuse Regulation. Mr Sebők made 115 transactions in Wizz Air shares (of which 18 were made in closed periods) without notifying the issuer or the FCA. He was fined £123,500 for breaches of Article 19 of UK MAR (see AGC Update, Issue 59 - Item 15). 
  
  The FCA intends to continue to strengthen its detection capabilities and follow-up with firms and individuals as needed. It also reminds directors, other PDMRs, major shareholders and holders of net short positions in listed and quoted issuers of the importance of meeting their reporting obligations under the relevant rules and to take their obligations seriously.  

• Expiry of certain Transitional Provisions under the UK Listing Rules
  
  The FCA highlights the expiry of a number of Transitional Provisions under the UK Listing Rules, including UKLR TP 1.3R which gave existing issuers (and 'in-flight' applicants) on implementation of the UKLRs in July 2024 sufficient time to provide the FCA with the contact details for key persons and for the service of documents. These Transitional Provisions expired on 29 January 2025 (see our client update here). 
  
  The FCA states that issuers which have not provided their contact details must do so as soon as possible. Issuers or those acting on their behalf can do this by completing the Issuer contact details form.

• Enhancing the National Storage Mechanism
  
  Finally, the FCA has issued a reminder that it publishes an array of primary markets data, including disclosures contained in the National Storage Mechanism, prospectuses, short position data and listed securities data. 
  
  The FCA aims to improve how it makes these datasets available such that market participants can locate and use them more efficiently, noting that an enhanced facility will support the modernisation and further development of UK capital markets. Further detail on the FCA's plans in this respect can be found in Chapter 2 of CP 24/17 - Enhancing the National Storage Mechanism. To this end, it has issued a survey on enhancing the NSM which can be accessed here.

6. Further PMB heralds additional changes of note 

The FCA has published a further Primary Market Bulletin 57.

• In overview, in PMB 57 the FCA:
  • Highlights the rules, guidance and related system changes for the NSM which will come into effect on 3 November 2025.
  • Notes forthcoming updates to its Delayed Disclosure of Inside Information (DDII) and Persons Discharging Managerial Responsibilities (PDMR) transaction notification forms.
  • Finalises five Technical Notes following its consultation in PMB 55 (See AGC Update, Issue 65 – Item 8).
  • Re-consults on Technical Note 710 - Sponsor Services: Principles for Sponsors, on which it previously consulted in PMB 48 and PMB 53 (See AGC Update, Issue 60 – Item 5).
  • Consults on updated draft guidance relating to the application of complex financial history and significant financial commitment rules for prospectuses (Technical Note 638.1- Guidance on application of complex financial history and significant commitment rules), as trailed in Policy Statement PS 25/9 (see item 3 above).

• Enhancing the National Storage Mechanism
  
  In December 2024, the FCA published Policy Statement PS 24/19 on the requirements for submitting regulated information to the NSM, which seek to make it easier for NSM users to locate regulated information. The rules, guidance and related system changes will come into effect on 3 November 2025.
  
  In PMB 57, the FCA notes a number of specific changes to the NSM of which issuers should be aware, including the following:
  • Legal Entity Identifier (LEI) ‘issued’ status: Issuers will be required to have an LEI with a registration status of ‘issued’. LEIs must be renewed annually to remain compliant.
  • Related issuer details: Submitters will also be required to include in the metadata the name and LEI (if available) of any additional related issuers that are the subject of the disclosure.
  • Corrections: The FCA will provide a new facility for submitters to submit corrections to previously filed disclosures via Electronic Submission System (ESS) or via a Primary Information Providers (PIP). Superseded versions of disclosures will remain on the NSM but will be hidden from the default view.
  • Headline codes and categories: The FCA has updated the list of headline codes and categories used to categorise regulated information. Issuers are required to label regulated information accurately when submitting it via a PIP or via ESS.

The facility to upload files to the NSM via ESS will be unavailable during the weekend before the launch, 1 to 2 November 2025.

The FCA highlights that issuers and those subject to DTR 6.2 and 6.3 should review Policy Statement PS 24/19 and the final rules. The FCA will also publish supporting materials before the changes come into effect, including updated NSM submitter and user guides.

• Streamlining submissions of UK MAR notification forms

The FCA flags upcoming updates to the DDII and PDMR notification portal through which it receives notification forms under the UK Market Abuse Regulation. The proposed enhancements are designed to make the forms easier and quicker for submitters to complete, reduce errors and ensure greater consistency in the information the FCA receives. Further details, including guidance and updated materials, will be published in due course.

• Updates to FCA Knowledge Base

UK Listing Rules

In PMB 57, the FCA finalises five Technical Notes following its consultation in PMB 55, being:

1. Technical Note 506.3 – Periodic financial information and inside information

2. Technical Note 507.2 – Structured digital reporting for annual financial statements prepared in accordance with International Financial Reporting Standards

3. Technical Note 520.3 – Delaying disclosure/dealing with leaks and rumours

4. Technical Note 521.4 – Assessing and handling inside information

5. Technical Note 542.3 – Issuer's obligations

The updates principally reflect the implementation of the new UK Listing Rules (UKLRs) which came into force in July 2024 (see AGC Update, Issue 54 – Item 2) and feedback on the sponsor regime. The changes proposed to Technical Note 507.2 - Structured digital reporting for annual financial statements prepared in accordance with International Financial Reporting Standards reflect the fact that a new European Single Electronic Format taxonomy has been published and make the note more succinct, amongst other things. As the FCA did not receive any responses to its consultation, it is finalising these notes without further amendments.

The FCA is also re-consulting on proposed amendments to Technical Note 710 - Sponsor Services: Principles for Sponsors relating to the sponsor regime. In response to feedback which suggested that the draft guidance was ambiguous in respect of when a sponsor service may exist, the FCA has, amongst other things, made amendments to remove any suggestion that the full extent of a sponsor service might only be capable of being confirmed after the fact.

The FCA stresses that it expects companies and other market participants to interpret Listing Rules references in light of the UKLR now in force until the remaining small number of outstanding notes in its Knowledge Base are updated.

Public Offers and Admissions to Trading Regulations regime 

As part of its consultation process on the new Public Offers and Admissions to Trading Regulations regime (the POATRs regime), the FCA requested feedback on draft guidance on the complex financial history and significant financial commitment rules. In PMB 57, the FCA has published updated draft guidance, as a technical note, for further consultation (Technical Note 638.1 - Guidance on application of complex financial history and significant commitment rules). The FCA notes that the guidance in the draft Technical Note is based on the Prospectus Regulation Rules (the PRR) and the UK Prospectus Regulation currently in force. When finalised, the guidance is intended to be used by companies preparing prospectuses under existing law and the PRR currently in force. The FCA will update the Technical Note to refer to the new PRMs that will take effect in January 2026, though the FCA does not expect to make material changes to its approach (subject to responses to its consultation).

In light of the changes flowing from the new POATRs regime, the FCA will adopt a phased approach to consulting on corresponding revisions to its Knowledge Base guidance. The FCA plans to consult on these changes in future editions of PMB. The FCA stresses that until the new POATRs regime and any corresponding new guidance comes into force, the current guidance continues to apply.

Next steps

The FCA welcomes comments on its proposals relating to the Technical Notes by 12 September 2025.

7. FCA launches beta version of new Handbook website 

The FCA has launched a beta version of its new FCA Handbook website. While the structure and content of the website remains the same, the new version is intended to provide improved functionality, making it easier to navigate, understand the connections between rules and compare different versions of Handbook text to see what has been added or deleted over time.

Users are still able to access the existing Handbook website and both versions of the website will be updated as normal. The FCA expects to roll out the new Handbook website later in the year.

Governance of AI

8.  IoD publishes guide to AI Governance in the Boardroom 

The Institute of Directors has published updated guidance on AI Governance in the Boardroom, which is intended to help company directors navigate the complex risks that AI presents whilst enabling the opportunities within their businesses.

The guide sets out questions for boards to ask to ensure effective governance and oversight of the adoption of AI, covering:

• Regulatory and geo-political horizon scanning.

• Transparency on AI usage.

• Integration into risk and control frameworks.

• Establishing board accountability.

• Data governance.

• AI literacy and culture.

It encourages boards to think beyond compliance, and focus on the strategic imperative of AI and how robust governance is a crucial enabler to unlock its benefits. 

According to Matt Worsfold, Partner in Ashurst's Risk Advisory consultancy who focuses on Data & Analytics: "The guide comes at a crucial time – AI is no longer a technology issue and now reaches all the way into the boardroom. As AI adoption gathers pace, and businesses shift from experimentation to implementation, board literacy on AI has become more important than ever. This guide acts as a comprehensive and invaluable tool to support directors in discharging their accountabilities on risk oversight, whilst addressing some of the key topics around the impact that AI will have on business models, the workforce, shareholders and customers."

By way of reminder, in February 2025 the government published its AI Cyber Security Code of Practice. For more detail, see AGC Update, Issue 62 – Item 8.

Narrative and Financial Reporting

9.  FRC publishes annual audit firm inspection results 

The FRC has published its Annual Review of Audit Quality.

The report covers the inspection and supervision results of audit firms across the UK Public Interest Entity (PIE) market. These results are based on a risk-based sample of the audits undertaken and are published alongside individual reports for Tier 1 audit firms – i.e. BDO, Deloitte, EY, Forvis Mazars, KPMG and PwC.

The latest inspection results indicate continued improvement in audit quality, especially among Tier 1 firms, although areas for improvement for specific firms are called out. In addition, despite significant investments by the largest firms to enhance audit quality, there is considered to be a risk that the gap between audit quality delivered by Tier 1 firms and other firms in the PIE market is increasing. Although some non-Tier 1 firms demonstrate the ability to deliver high-quality audits, many still struggle to meet consistently adequate standards and maintain robust quality management systems.

Relatedly, the FRC is consulting on draft amendments to the Public Interest Entity (PIE) Auditor Registration Regulations, focusing on three key areas:

• Enhancing proportionality to reduce regulatory burden.

• Clarifying processes to improve operational efficiency.

• Increased activity in the areas of restructuring, reorganisation and private capital ownership of PIE-Registered audit firms.

And as part of its year-long campaign to help SMEs access audit services, the FRC is also consulting on the introduction of a Practice Note to help auditors apply International Standards on Auditing proportionately to smaller entities.

10. FRS 102: FRC publishes consultation on proposed amendments

The FRC has published for consultation its proposed amendments to FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland).

By way of reminder, FRS 102 requires all entities to follow the presentation requirements for the balance sheet and the profit and loss account set out in UK company law (or the corresponding requirements in Republic of Ireland). FRS 102 sets out the requirements that must be followed when a permitted adapted format is applied which, although not expressly mentioned, closely resemble a balance sheet and income statement prepared under IFRS Accounting Standards as currently set out in IAS 1.

IFRS 18 (Presentation and Disclosure in Financial Statements) is a new standard that replaces IAS 1 for annual reporting periods beginning on or after 1 January 2027. The FRC has therefore proposed amendments to FRS 102 to reflect amendments made to IAS 1 both in 2020 and 2022, and the subsequent replacement of IAS 1 with IFRS 18.

Comments on the consultation should be submitted by 10 October 2025.

Money Laundering and Terrorist Financing

11. National Risk Assessment of Money Laundering and Terrorist Financing 2025 published 

HM Treasury has published the National Risk Assessment (NRA) of Money Laundering and Terrorist Financing 2025. The NRA is, in effect, the UK’s stock-take of its collective knowledge of money laundering and terrorist financing risks, building on assessments published periodically since 2015.

The NRA sets out:

• the UK’s Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) frameworks and how the government has responded to the risks identified in the NRA published in 2020 (in Section 2);

• the overarching money laundering risks faced by the UK. The NRA explains the main crime threats that generate illicit funds and the main money laundering typologies. This section (Section 3) is stated as being relevant to all sectors;

• the overarching terrorist financing risk faced by the UK. This section explains the nature of the terrorist financing threat in the UK and outlines the mechanisms through which such financing can occur, including the mechanisms that are typically used by different types of terrorist organisations (Section 4);

• money laundering and terrorist financing risk to the UK found in those sectors regulated under the Money Laundering Regulations (MLRs). This section also covers an analysis of risks identified in related sector-specific activities not currently covered by the MLRs (Section 5); and

• risks in sectors not in scope of the MLRs and activities that have 'cross-cutting' relevance for sectors which are in scope of the MLRs (Section 6).

The NRA highlights shifts in the AML and CTF risks since the 2020 iteration of the assessment including:

• Heightened global instability, leading to increased convergence between money laundering and sanctions evasion; and

• The emergence of new financial technologies, including AI, electronic money institutions, and cryptoassets.

AGMs in 2026

12.  ISS publishes annual voting policy benchmarking survey

Institutional Shareholder Services has published a survey seeking views for the purposes of developing its voting policies for 2026 and beyond. Institutional investors, public companies, corporate directors, and all other interested market constituents are invited to respond.

Areas on which ISS seeks views this year include:

• Multi-class shareholder structures - Whether non-ordinary shares, such as those with more than one vote per share or other superior rights, should be considered the same as ordinary shares for the purposes of ISS's policy on multi-class capital structures.

• Overboarding – The number of board seats it is appropriate for a non-executive director and for a CEO to hold. The survey also seek views on whether CEOs should be permitted to hold the role of a Chair in another listed entity.

• Incentives - Whether a time-based equity structure is acceptable for part or all of executive long-term incentive awards. 

• Incentives - Whether it is acceptable for companies to adopt hybrid incentive plans as part of their long-term executive remuneration, even if associated with an overall increase in remuneration opportunity.

• AI issues – The survey includes questions on governance frameworks, board oversight, and AI-related disclosure.

The survey closes on 22 August 2025. Once the responses have been considered, ISS expects to seek feedback on the final policy changes proposed later in the year. 

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