Ashurst Governance & Compliance Update – Issue 75

Narrative and Financial Reporting

1.  FRC publishes thematic review of reporting by smaller listed companies 

The Financial Reporting Council has published a review seeking to improve corporate reporting by smaller listed companies. By way of reminder, the FRC's Annual Review of Corporate Reporting published in September 2025 (see AGC Update, Issue 71 – Item 8) identified that reporting by smaller listed companies was not of the same standard as their FTSE 350 equivalents. 

As part of its analysis, the FRC performed a desktop review of 20 companies with year-ends between September 2024 and April 2025 operating in a range of market sectors. These companies were either listed outside of the FTSE 350 on the main market of the London Stock Exchange or were quoted on AIM with market capitalisations ranging from £100 million to £500 million. In doing so, the FRC focused on the requirements of IFRS Accounting Standards where, as evidenced by its Annual Review, its Corporate Reporting Review team most frequently asked substantive questions of smaller listed companies and where there was most room for improvement. 

Principal areas of focus

Specifically, the thematic review focused on four key areas drawing the following conclusions:

Revenue recognition

• Companies should ensure they have a clearly articulated accounting policy on revenue recognition, which covers all material revenue streams and is consistent with the company’s description of its business model. 

• Improvements could be made to explanations of the timing of satisfaction of performance obligations, determination of the transaction price, agent versus principal considerations, and the associated judgements

Cash flow statements

• Misclassification of cash flows between operating, investing and financing is one of the most common reasons for FRC enquiries. This often stems from the lack of clear explanation of specific transactions and the rationale for the treatment of the related cash flows.
• Companies should ensure consistency between the amounts disclosed in the cash flow statement and the information disclosed elsewhere.

Impairment of non-financial assets 

• The FRC underlines that it is important that transparent disclosures on impairment reviews of non-financial assets, such as goodwill, reflect a company’s reasonable and supportable expectations about its future cash flows and market conditions.
• Good quality reporting requires clear explanation of significant judgements and estimates, key assumptions and sensitivity analysis. The FRC states that is must be consistent with the narrative throughout the annual report. 

Financial instruments

• The FRC expects companies to disclose tailored accounting policies for more complex financial instruments, clearly describing the bases for initial classification and subsequent measurement.
• Company specific accounting policies and transparency about the nature of financial instruments is key in understanding companies’ exposure to financial risks. The FRC believes that financial instrument disclosures provide valuable insight into companies’ liquidity and longer-term viability.

The thematic aims to help companies improve their reporting quality in these areas through better understanding of requirements and by providing greater detail on the common triggers for FRC enquiries. It includes hypothetical, illustrative examples based on real casework, contrasting good quality reporting with less informative disclosures.

Key expectations for reporting 

The thematic concludes with the FRC's expectations for reporting by smaller listed companies:

• Ensure consistency between the information about revenue provided in the accounting policy, the related notes and the strategic report.

• Pay particular attention to the matters included in the revenue recognition accounting policy, which should include clear explanations of the timing of satisfaction of performance obligations, determination of the transaction price, agent versus principal considerations, and the associated judgements.

• Appropriately classify cash flows as operating, investing or financing, to exclude non-cash transactions from the cash flow statement, and ensure consistency between the amounts disclosed in the cash flow statement and the information disclosed elsewhere.

• Clearly explain significant judgements and estimates and key assumptions, and ensure consistent narrative throughout the annual report, when events and circumstances have triggered an impairment loss on non-financial assets.

• Disclose the nature and extent of risks arising from the financial instruments, such as liquidity and credit risks, and provide tailored accounting policies for more complex financial instruments that clearly describe the bases for the initial classification and subsequent measurement. 

• Ensure clear and concise reporting by removing irrelevant detail, keeping accounting policies up to date and avoiding duplication through the use of cross references.

Economic Crime and Corporate Transparency

2.  Companies House updates forms and guidance in light of ECCTA 

Companies House has published updated guidance and forms to reflect the introduction of identity verification and changes to requirements concerning company registers as required by the Economic Crime and Corporate Transparency Act 2023.

Updated guidance includes:

• When you need to verify your identity for Companies House.

• Provide identity verification details for a person with significant control (PSC).

• Companies House personal codes for identity verification.

• Apply to protect your details on the Companies House register.

• Filing your company's confirmation statement.

• Incorporation and names.

• Life of a company: event driven filings.

• Life of a limited liability partnership.

• Overseas companies in the UK: registration and filing obligations.

• People with significant control (PSCs).

• Your personal information on the Companies House register.

• Removing your personal details from the Companies House register.

Certain publications relating to company registers and LLP registers have been withdrawn.

Updated forms include:

• Register a private or public company (IN01).

• Confirmation statement (CS01).

• Change a company name (NM01).

• Appoint a director (AP01) or corporate director (AP02).

• Appoint a secretary (AP03) or corporate secretary (AP04).

• Change the details of a director (CH01) or corporate director (CH02).

• Change the details of a secretary (CH03) or a corporate secretary (CH04).

• Terminate an appointment of a director (TM01) or secretary (TM02).

• Register a single alternative inspection location (AD02).

• Move your company's records to a single alternative inspection location (AD03).

• Give notice of individual person with significant control (PSC01), a relevant legal entity with significant control (PSC02) or other registrable person with significant control (PSC03).

• Give notice of change of details for person with significant control (PSC04) or for relevant legal entity with significant control (PSC05).

• Give notice of change of details of other registrable person with significant control (PSC06).

• Give notice of ceasing to be a person with significant control (PSC07).
  

• Give notice of PSC statements (PSC08) or updates to PSC statements (PSC09).

Updates have also been made to the equivalent forms for LLPs.

3.  DBT publishes guidance for Persons with Significant Control 

The Department of Business and Trade has published guidance on the PSC register for people with significant control over companies, UK Societas, limited liability partnerships and eligible Scottish partnerships, following the implementation of changes to the PSC regime on 18 November 2025.

The revised guidance reflects:

• The removal of the need to maintain a local PSC register.
• The removal of references to the former option to hold PSC information on the central register at Companies House, instead of in a local PSC register, following the revocation of those provisions of the Companies Act 2006.
• The removal of the Annex from the non-statutory guidance for companies that formerly set out prescribed wording to include in a PSC register. Such prescribed wording is now set out in Companies House Forms PSC01 to PSC09 (with those forms having been republished on 18 November 2025 to reflect the updated regime).

Equity Capital Markets

4.  Modernising AIM: London Stock Exchange Feedback Statement published

The London Stock Exchange has issued a Feedback Statement to its April 2025 Discussion Paper: Shaping the Future of AIM, distilling responses and setting out a roadmap for reform. For further information on the April 2025 Discussion Paper, see AGC Update, Issue 64 – Item 9.

A core theme is the repositioning of AIM as a distinct growth market - clearly differentiated from the Main Market, in the context of recent UK Listing Rule reforms and the forthcoming implementation of the new Public Offers and Admissions to Trading regime (see Item [7] below).

Derogations with immediate effect

With immediate effect, AIM Regulation will consider derogation requests in respect of specific areas on a case-by case basis and/or revise its existing guidance. This includes allowing prospective AIM companies to adopt dual class share structures which align with the current Main Market requirements (applying equivalency where appropriate), supporting founder-led models. 

To facilitate M&A activity, derogations will be considered in the context of reverse takeovers, including: (i) treating an acquisition as a substantial transaction (pursuant to AIM Rule 12) rather than a reverse takeover (pursuant to AIM Rule 14) where a nominated adviser can demonstrate that an acquisition does not result in a fundamental change of business; (ii) not imposing a suspension where it can be demonstrated that appropriate alternative disclosure can be made; and (iii) permitting alternative disclosure in an admission document in the place of the full Schedule 2 requirements where both parties to a reverse takeover are publicly traded companies.

As regards directors' remuneration, nominated advisers will not be required to provide a fair and reasonable view to the extent that they are satisfied that there are reasonable protections in place. 

Next steps and further consultations

A consultation on changes to the AIM Rules and a new technical note for nominated advisers will follow in H1 2026. The technical note is expected to recast the nominated adviser role towards a more proportionate, risk-based model. Prospective development areas on which feedback is invited include streamlining the admission document, reassessing the value of the working capital statement, re-evaluating AIM Rule 11 (General disclosure of price sensitive information) in view of the overlapping disclosure obligations under UK MAR and considering the introduction of trading halts to help support fundraises. The detail on AIM’s next stage of development will be important, particularly as regards any change to expectations in relation to corporate governance, where we expect the QCA to be involved. 

For the Feedback Statement's headlines, please click here.

5.  HMT publishes policy note and draft statutory instrument for T+1 settlement 

HM Treasury has published a policy note on mandating T+1 settlement in the UK from 11 October 2027. Under this settlement cycle, securities transactions will settle one business day after the trade date, rather than the current two days.

By way of reminder, in February 2025, the Technical Group of the UK Accelerated Settlement Taskforce published its implementation plan for moving to faster settlement of securities trades on financial markets, recommending that the UK should move to a T+1 standard settlement period by the end of 2027. The government proceeded to accept all the recommendations made by the Technical Group and confirmed that it would legislate to mandate T+1 as the standard settlement period from 11 October 2027 (see AGC Update, Issue 62 – Item 7). 

Together with the policy note, HMT has published a draft version of the Central Securities Depositories (Amendment) (Intended Settlement Date) Regulations 2026, illustrating how the government plans to deliver T+1 as the standard settlement period in the UK - and thereby supporting stakeholder readiness. Comments on the draft statutory instrument should be submitted by 27 February 2026. Pending any technical comments received on the draft, the government intends to lay the final statutory instrument in advance of 11 October 2027, to allow for appropriate legislative processes to take place as well as providing early certainty for the sector. 

The FCA has published new and updated forms and checklists to reflect the implementation of the new Public Offers and Admissions to Trading (POAT) regime in January 2026.

By way of reminder, on 19 January 2026, the POAT Regulations 2024 come into force, replacing the UK Prospectus Regulation. On the same date, the FCA's new Prospectus Rules: Admission to Trading on a Regulated Market come into effect, replacing the Prospectus Regulation Rules sourcebook. New rules in the Market Conduct sourcebook for firms operating multilateral trading facilities (including AIM) and consequential amendments to the UK Listing Rules (UKLRs) will also come into force at the same time.

Issuers are now able to submit for review draft documentation under the new framework, for approval on or after 19 January 2026. This can be done as usual via the Electronic Submission System. 

To reflect the impending amendments to the UKLRs – namely the simplification of the further issuance listing process - the FCA has also made available revised forms and UKLR checklists.

For background on: (i) the UKLR amendments, see 'Further FCA proposals for the new Public Offers and Admissions to Trading Regulations regime'; and (ii) the POAT regime, see 'New FCA Prospectus Rules: the last piece of the puzzle' and AGC Update, Issue 69 – Item 3.