Ashurst Governance & Compliance Update – Issue 76

Narrative and Financial Reporting

1. FRC publishes insights on quality of Wates Principles reporting

The Financial Reporting Council has published its first reporting insights on the Wates Corporate Governance Principles for Large Private Companies since it assumed responsibility for them in December 2024 (see AGC Update, Issue 60 – Item 4).

By way of reminder, various corporate scandals, including that involving BHS, led to introduction of the requirement in 2018 for large private companies (being those with more than 2,000 employees or a turnover of more than £200m and a balance sheet total of more than £2bn) to report on their governance arrangements in their annual report. The Wates Principles, which contains six principles and works on an 'apply and explain' basis, were produced in light of that requirement – the FRC's factsheet, published alongside its report, provides more detail as well as a confirmation that there are no current plans to review or amend the principles. It also notes that Wates is the most popular code of governance for private companies, with the UK Corporate Governance Code in second place. Note that in-scope private companies required to report on their governance arrangements do not need to adopt any code, but many have done so to focus their work on governance and provide a framework for their reporting.

The FRC's report seeks to provide insights that are 'supportive and proportionate and assist companies to improve their reporting' for users by enhancing 'specificity, transparency and the impact' of reporting. It is based on a review of a sample corporate governance statements as well as feedback gathered from stakeholders, providing suggestions to encourage more meaningful reporting relative to each of the principles, whilst highlighting areas where reporting can be clearer and more concise.

Various areas for improvement were identified, including in relation to:

• Company purpose: how it aligns with values, strategy and culture. Purpose should be clearly set out together with an explanation of how it underpins strategic decisions.
• Strategy: how it is monitored and communicated should be clearly set out.
• Culture: reporting could be improved by describing how initiatives have improved staff wellbeing.
• Board composition: good reporting includes details on the role of the chair and the role and importance of any non-executive directors. Where a Board lacks diversity, companies should be transparent about gaps in skills and experience. Boilerplate should be avoided.
• Remuneration: insight into remuneration decisions made and how the sustainable success of the company was considered when making them should be described. Again, boilerplate and generic statements should be avoided.

2. PERG publishes annual report on reporting in private equity

The Private Equity Reporting Group has published its 18th annual report on the private equity industry's conformity with the Walker Guidelines, together with a good practice reporting guide for portfolio companies and a report on the performance of such companies. The three reports, which underpin the private equity industry's efforts to increase transparency and support the UK economy, should be read together. For our review of the 17th annual report and associated publications, see AGC Update, Issue 61 – Item 5.

PERG's findings include:

• A record number of companies published reports and complied with the Walker Guidelines.
• There was a significant increase in the proportion of companies with 'good standards of disclosure' – which is the standard that PERG would expect - with 56% achieving that standard compared with 43% last year. However 11 companies failed to comply fully with requirements and no company prepared disclosures to an "excellent" standard across the majority of disclosure requirements.
• Over 25% of companies still fail to make a statement of compliance with the Walker Guidelines. PERG considers this to be a basic, foundational requirement and a proxy for the 'fair, balanced and understandable' requirement of the UK Corporate Governance Code.
• Although the Walker Guidelines operate on a 'comply or explain' basis, PERG suggests that explanations for non-compliance should be exceptional. Further, it was disappointed in the quality of such explanations this year.
• The number of addendums required to meet all of the disclosure requirements stayed consistent with the previous year (26%) which is a continued improvement compared to previous years (52% in 2023 and 36% in 2022).

As in the past, PERG recommends that private equity firms spend time familiarising themselves and their portfolio companies with the requirements and implications of the Guidelines, putting in place procedures to identify when companies come within scope.

By way of reminder, PERG conducted a full review of the Guidelines in 2024 with the refreshed Guidelines coming into effect in 2026.

Equity Capital Markets

3. FCA consults on changes to the listing applications process and in relation to the POAT regime

The FCA has published Quarterly Consultation Paper 50 in which it consults on various proposed changes to FCA Handbook provisions. These include revisions to FCA processes for listing new securities under the UK Listing Rules (UKLRs) and amendments to the rules for the new Public Offers and Admissions to Trading (POAT) regime.

UKLR listing process

The FCA is consulting on simplifying further the listing applications process in UKLR 20, in alignment with the new approach to listing applications, due to come into effect on 19 January 2026. Under the new approach, the FCA will only process listing applications for applicants applying to list new securities. Further issues of securities already recorded in the Official List will be automatically listed, obviating the need for an issuer to submit a further listing application to the FCA.

The FCA also addresses minor corrective and clarificatory amendments to certain other UKLR provisions in response to stakeholder feedback.

POAT regime

In addition, the FCA is proposing amendments to the Prospectus Rules: Admission to Trading on a Regulated Market sourcebook (the PRMs), the Disclosure Guidance and Transparency Rules sourcebook and the Glossary of definitions. The proposals seek to clarify specific provisions and to deliver effectively the policy intent consulted on in Consultation Papers CP 24/12 and CP 25/2, as finalised in Policy Statement PS 25/9 (for more detail, see our client update here). They include corrections of drafting errors, stylistic changes and clarificatory updates to explain the scope of specific obligations.

Comments on the proposed changes relating to the UKLRs and the POAT regime should be submitted by 19 January 2026.

4. Finance Bill 2026: relief from SDRT for chargeable securities in newly listed companies

The Finance Bill 2026 has been published and, as heralded in the recent 2025 Budget, introduces a new relief from SDRT for chargeable securities in newly listed companies – see clause 82 of the Bill which adds a new section 89C to the Finance Act 1986.

The relief applies, with exceptions, to agreements to transfer chargeable securities for a three-year period from the admission of that company’s shares to the Official List provided that the listing took place on or after 27 November 2025. The relief also applies, with modifications, to shares in a special purpose acquisition vehicle.

AGMs in 2026

5. Glass Lewis publishes proxy voting policy guidelines for 2026

Glass Lewis has published its 2026 proxy voting policy guidelines for the UK and revised its global Shareholder Proposals & ESG-Related Issues which discuss its approach to shareholder proposals and other initiatives.

It is notable that the language in the guidelines has been amended to refer to the views of 'the Benchmark Policy' rather than Glass Lewis itself so as 'to better convey Glass Lewis' role as a service provider to a diverse, global client base with a wide range of viewpoints and objectives'.

Key changes and updates to the 2025 guidelines include:

• Approach to committee size and attendance: Glass Lewis will typically recommend that shareholders vote against, rather than abstain from voting on, the re-election of the audit and/or remuneration committee chair where the committee is of "insufficient size".
  
  The guidelines now clarify that, for the purposes of director attendance, key committees are considered to be the audit, remuneration and nomination committees.

• Gender diversity: Given that the deadline for achieving the targets of the FTSE Women Leaders Review will have passed at the end of 2025 (for the latest FTSE Women Leaders Review, see AGC Update, Issue 63 – Item 8), Glass Lewis will generally recommend against the re-election of the nomination committee chair where FTSE 350 boards are not comprised of at least 40% women, absent mitigating circumstances.
• AIM company board independence: In line with the 2023 iteration of the QCA Corporate Governance Code (see The 2023 QCA Code in overview), the 'AIM-Quoted Companies' section of the guidelines has been updated to clarify that the boards of AIM companies should be constituted of at least half independent directors and include a minimum of two independent non-executive directors. If that is not the case, Glass Lewis will recommend a vote against one or more of the non-independent directors.
• Pay for Performance: The guidelines have been updated to add a description of Glass Lewis’ new proprietary pay-for-performance model, including score ranges, the individual tests comprised in the balanced scorecard, and information on the selection of peers. Further, while the outcome of this model may impact the analysis of a company’s executive remuneration practices, Benchmark Policy recommendations on the remuneration report and policy proposals will continue to result from a holistic assessment of the company's remuneration structure, disclosure and practices as a whole, as well as other relevant external factors.
• Remuneration committee independence: The Benchmark Policy's commentary on remuneration committee independence has been updated to clarify that chairs should only serve on the remuneration committee if they were independent on appointment and continue to have no additional factors that may compromise their independence outside of their chair role.
• Vesting/Holding periods: The 'Vote on Remuneration Policy' section of the guidelines has been updated to clarify that market practice in relation to vesting/holding periods for long-term incentives, as set out in the UK Corporate Governance Code 2024 and by the Investment Association, typically calls for vesting and holding periods of at least five years for long-term incentives. In addition, long-term incentives should have a minimum three-year vesting/performance period.

The updated guidelines will apply to meetings held from 1 January 2026. For an overview of the changes to the Glass Lewis guidelines last year, see AGC Update, Issue 59 – Item 4 and for the changes to the voting guidelines of ISS for 2026, see AGC Update, Issue 75 – Item 8.

6. Pensions UK publishes stewardship and voting guidelines for 2026

Pensions UK (formerly the PLSA) has published its Stewardship and Voting Guidelines for 2026. By way of reminder, the guidelines for 2025 were published for members only, see AGC Update, Issue 62 – Item 2.

The 2026 guidelines retain the broad structure of previous years but include enhanced narrative, updated voting recommendations and a new section on key emerging themes from the 2025 voting season.

Key changes in the 2026 report include:

• Cybersecurity and AI: Strengthened narrative on what good company behaviour looks like and strengthened voting recommendations. This reflects the increasing number of cybersecurity incidents and how their impact has been more damaging as well as the significant increase in AI-related resolutions during the 2025 season.
• Governance: A change in narrative to reflect that while governance scrutiny is rising, shareholders have less influence leading to a greater focus on potential collaborative stewardship options and emerging industry initiatives.
• Climate and sustainability: The narrative has been revised to consider policy developments throughout 2025 as well as the global political backlash against ESG. The guidelines reaffirm the importance of acting on financially material environmental risks while recognising that investor expectations must remain evidence-based and resilient amid shifting sentiment.
• Social factors and workforce: This section has been refreshed to reflect the increasing prominence of social issues, from workforce wellbeing and fair pay structures to supply-chain labour practices. Updated expectations aim to help schemes identify where poor management of social risks may translate into material financial impacts.
• Equality, Diversity and Inclusion (EDI): The guidelines reinforce Pensions UK’s commitment to EDI as a driver of stronger outcomes. Investors are encouraged to scrutinise transparency on workforce and board diversity, data disclosure and progress against clear objectives.
• Emerging trends: A new framing section highlights the most significant developments from the 2025 voting season, including declining support for Say-on-Climate votes, dissent on governance flashpoints, and the expanding risk focus on AI and cyber. Its purpose is to give schemes a forward-looking view of where stewardship priorities are likely to shift in the future.
• Pass-through voting: The guidelines introduce 'pass-through' voting as one option for schemes seeking to exercise shareholder rights directly where appropriate and operationally feasible.

7. Pre-Emption Group publishes annual monitoring report on the use of its 2022 Statement of Principles

The Pre-Emption Group has published its Annual Monitoring Report 2024-2025. This is the Group's third report which monitors how FTSE 350 companies apply guidance on disapplying pre-emption rights in accordance with its Statement of Principles - revised in 2022 to reflect the recommendations of the UK Secondary Capital Raising Review. For an overview of the revised principles, see our update here and for the Pre-Emption Group's 2023-2024 Monitoring Report, see AGC Update, Issue 59 – Item 3.

The report examines the implementation of the 2022 Statement of Principles by the 364 FTSE 350 companies which held annual general meetings between 1 August 2024 and 31 July 2025. It shows strong uptake of the 2022 Statement of Principles, with widespread shareholder support for enhanced disapplication authorities.

Key findings in the report include:

• 77.6% of companies sought an enhanced disapplication authority (up from 67.1% in the 2024 monitoring period).
• The average vote against disapplication authority resolutions was 5.1% (up from 4.7% in 2024).
• 60.8% of companies tabled a resolution in relation to a specified capital investment (down from 64.1% in 2024).
• 99.1% of companies had all disapplication resolutions passed by shareholders (slightly down from 99.4% in 2024).
• A small minority of companies continue to table resolutions for the disapplication of pre-emption rights for a specified capital investment which include a six-month time limit. The Pre-Emption Group notes that this is not good practice.
• Five companies (all of which were close-end investment funds) sought a 20% disapplication authority for general corporate purposes (down from nine in the previous year). While not following the Statement of Principles, all these resolutions passed with less than 5% votes against.

There remains a small minority of investors that disagree with the 2022 Statement of Principles, in part due to the increased limits of disapplication authority they allow. As it indicated last year, the Pre-Emption Group states that it may undertake engagement with these investors if the levels of dissent remain elevated. Likewise, the Group continues to encourage reporting of any misuse of disapplication authorities, including cash box structures that raise funds beyond shareholder-granted authority.

Separately, it is worth noting that the Pre-Emption Group has not yet commented on the new prospectus regime and associated issuance thresholds which comes into force on 19 January 2026. For more, see our update: New FCA Prospectus Rules: the last piece of the puzzle.

8. GC100 publishes guidance for virtual meetings of shareholders

The GC100 has published guidance for virtual only meetings of shareholders.

Recognising that the government’s digitisation reforms present an opportunity to modernise shareholder meetings, and noting that the government has committed to 'clarify' the law in relation to virtual meetings in the Companies Act 2006 as soon as Parliamentary time allows, the GC100 states that it has engaged with government officials, investor bodies, and industry stakeholders to develop guidance for listed companies wishing to hold meetings in this way. The GC100 states that the recommendations seek to ensure that the quality and effectiveness of shareholder engagement in a virtual context are maintained, that transparency is enhanced and that board accountability is preserved.

The GC100 notes that some companies' articles of association already permit them to hold fully virtual shareholder meetings. For those with constitutions which do not permit such meetings, the GC100 further notes that any clarification of the legislation is not expected to override existing company articles which means that companies without appropriate constitutional provisions will need shareholder approval to amend their articles before conducting meetings virtually. To this end, the appendix to the guidance sets out issues which companies might consider in seeking shareholder support for such meetings.

The guidance is written with annual general meetings in mind but uses the term 'general meetings' to cover all types of shareholder meetings. Specifically, it consists of eight provisions to help companies organise and conduct virtual meetings so as to enable shareholders to question and hold the board to account in relation to the business of the meeting. To ensure that the guidance remains practical and easy to use, the GC100 refers companies, where appropriate, to the FRC's Good Practice Guidance for Company Meetings and 2024 UK Corporate Governance Code Guidance.

The GC100 states that it will continue to engage with stakeholders and review the guidance as market practice evolves.

Corporate Governance

9. High Court assesses the proper purpose test in the context of access to shareholder registers and a mini tender offer

The High Court (in Aviva plc v Litani LLC [2025] EWHC 3134(Ch)) has recently considered an application by Aviva plc that a request by Litani LLC for a copy of its register of members was not being sought for a 'proper purpose'.

Section 116 of the Companies Act 2006 provides that any person may require a copy of a company's register of members to be provided to them on payment of a fee. Any such request must contain, among other things, the purpose for which the information is to be used. Where a company receives such a request, it must within five working days either (i) comply with the request, or (ii) apply to the court for a direction that the request has not been made for a proper purpose.

Litani made a request under section 116 for a copy of Aviva's register of members. Its stated purpose was to use the information to make an offer to purchase Aviva shares from certain retail shareholders at a discount of up to 17.5% below market value, with a maximum acceptance set at 1% of Aviva's share capital; a so-called 'mini tender offer'. Litani's request outlined details of a 14 day cooling off period for shareholders who accepted the offer, information about the paying agent who would be appointed to hold and distribute proceeds to accepting shareholders, and details of engagement with the UK Takeover Panel which determined that the UK Takeover Code would not apply to the mini tender offer. After the proceedings commenced, Aviva launched its own small shareholder dealing service which allows shareholders holding up to 1,500 shares to sell their shares at market value, albeit that a fee would be charged for using the service.

In seeking a direction from the court in relation to an access request, the onus is on the company to show to the satisfaction of the court 'on the balance of probabilities, that access is not sought for a proper purpose'. The Act does not define 'proper purpose' – the court must, on the evidence, identify the party's purpose and decide whether it is not proper considering all relevant factors presented to it.

The court rejected Aviva's application, finding that Aviva had not evidenced that Litani's access request was improper. The court found that:

• Whilst Litani's purpose was 'avowedly commercial', that was not a reason in itself to determine its purpose was not proper, noting that 'it is necessary to find something with a flavour of the genuinely exploitative or unscrupulous' to make such a determination.
• Despite Litani's offer terms being 'commercially disadvantageous' to shareholders who accept it, the court did not consider that it would be 'commercially exploitative, oppressive or immoral' for an offer on Litani's proposed terms to be made to Aviva shareholders.
• The existence of Aviva's own share dealing arrangement for smaller shareholders on better terms did not mean Litani's purpose was not proper noting that 'the point of the Act is to prevent the pursuit of purposes held not to be proper…not to eliminate all but the most economically advantageous commercial choice' and 'it is for shareholders to decide for themselves how to realise the value of their own property'.

In addition, the court decided that:

• the purpose would not be undermined by the fact that the majority of Aviva shareholders would not receive the Litani offer, despite their data being shared;
• lack of transparency about Litani's ownership did not affect the propriety of its purpose, noting that the test is not one of 'good character';
• the relevant time for determination of the propriety of purpose is the date of the hearing, not the date the request was first made; and
• it was not for the court to express a view about the 'desirability or otherwise of mini-tender offers', it being noted that such offers are lawful in the UK.

10. QCA publishes report on take-up and application of QCA Corporate Governance Code

The Quoted Companies Alliance has published a report 'Supporting Growth Flexibly', which sets out findings from a review of take-up of the QCA Corporate Governance Code and how it is applied by the quoted companies that adopt it. The report highlights that the QCA Code remains the preferred governance framework for small and mid-sized quoted companies in the UK and is widely applied across AIM, Aquis Stock Exchange and companies in the transition category on the LSE's Main Market.

Key findings include:

• 92% of AIM-quoted companies currently adopt the QCA Code, rising to 97% of AIM-quoted UK companies. On Aquis, the proportion is 73%.
• The transition to the 2023 version of the QCA Code has begun: 26% of AIM-quoted QCA Code followers have moved to the new version of the Code in the last year. Our overview of the 2023 iteration of the QCA Code is here.
• AIM companies are making greater use of the QCA Code’s flexibility: 20% of followers state they do not fully apply the Code, twice the proportion of two years ago.
• The smallest companies are most likely to take advantage of that flexibility: more than 30% of companies with a sub-£5m market cap explain how they depart from the QCA Code; deviation is half that rate for those with a market cap in excess of £100m.

Sustainability

11. EU sustainability reporting Omnibus Content Directive agreed

Following the EU Parliament's adoption of its negotiating position on the First Omnibus' Content Directive, the trilogue negotiations between the EU Parliament, the EU Council and the Commission have resulted in a provisional agreement.

Key changes agreed to the Corporate Sustainability Reporting Directive ((EU) 2022/2464) (CSRD) include increases to qualification threshold criteria and removal of the requirement for the Commission to adopt reasonable assurance standards.

Key changes agreed to the Corporate Sustainability Due Diligence Directive ((EU) 2024/1760) (CS3D) include increases to threshold criteria, removal of the requirements to develop and publish climate transition plans and removal of the provisions regarding a harmonized EU civil liability regime.

The EU Council and EU Parliament must now endorse and formally adopt the provisional agreement, and the final text of the Content Directive will then be published in the EU Official Journal.

Also, EFRAG (previously the European Financial Reporting Advisory Group) has published its technical advice to the European Commission on the draft revised European Sustainability Reporting Standards (ESRS). The next step is for the Commission to prepare a Delegated Act revising the first set of ESRS based on EFRAG’s technical advice. This is expected within six months after the entry into force of the Omnibus Content Directive.

For more information on these developments, see our alert: EU sustainability reporting Omnibus reaches destination as Content Directive agreed.

Companies House at Christmas

12. Christmas and New Year opening arrangements published

Companies House published its Guidance: Christmas and New Year opening times at Companies House, setting out the availability of its contact centre and filing services over the 2025/2026 festive period including:

• Companies House phone lines and its contact centre will be closed from 25 to 28 December 2025, as well as 1 January 2026, and will close early on 24 and 31 December.
• Orders for certified copies must be placed before 11am on 19 December. Orders placed after 11am will still be processed but Companies House cannot guarantee when they will be dispatched.
• Online services will be available throughout the holiday period, however users will need a company authentication code to file information online. Companies House advises users to allow plenty of time if they need to request an authentication code as it will be sent to the company by post.
• Companies House will not accept postal delays as a reason to appeal a late filing penalty.

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Other authors: Shan Shori, Expertise Counsel; Becky Clissmann, Sustainability Counsel; John Papadakis, Counsel; Marianna Kennedy, Senior Associate