Legal development

Ashurst Governance & Compliance Update – Issue 77

By Will Chalk

15 January 2026

Narrative and Financial Reporting

1. DBT publishes guidance on payment practices reporting in annual reports

By way of reminder, the Companies (Directors' Report) (Payment Reporting) Regulations 2025 (SI 2025/1152) have introduced a requirement for companies considered 'large' for accounting purposes to report annually, within their Directors' Reports, on their payment practices in relation to qualifying contracts with suppliers. The obligation to do so applies in relation to financial periods beginning on or after 1 January 2026. For more detail, please see AGC Update, Issue 73 – Item 11.

By way of update, the Department for Business and Trade (DBT) has published guidance to assist companies in meeting this requirement. The guidance sets out which companies are required to report, how the obligations work within group structures, and what needs to be reported. Worked examples explain how to deal with more complex issues such as the use of supply chain finance and payments for which no invoice has been issued.

2. FRC consults on draft plan for 2026-27

The FRC has published its Draft Annual Plan and Budget 2026-27 for consultation, setting out its proposed priorities and intended expenditure for the coming year.

The FRC's areas of focus in 2026-27 are proposed to include:

working with corporates to embed the recent changes to the UK Corporate Governance Code;
supporting the DBT in its plans to modernise and simplify the corporate reporting framework;
providing advice to the government's UK Sustainability Technical Advisory Committee for the endorsement of international standards related to sustainability reporting;
supporting the DBT in streamlining the corporate governance aspects of non-financial reporting;
working with Companies House to implement software-only filing by 2027; and
completing a review of digital reporting requirements for listed companies.

Responses to the consultation should be submitted by 6 February 2026.

AGMs in 2026

3. ISS publishes review of 2025 AGM season

ISS has published its 2025 Proxy Season Review. Highlights of the UK aspects include:

Remuneration

ISS state that executive pay remained a central focus of investor scrutiny and corporate governance debate. Key themes include:

Increased dissent on remuneration reports, reversing the recent trend of declining opposition. However, median dissent across the FTSE 350 continued to edge lower. Dissent was attributed to salary increases and perceived misalignment between variable pay outcomes and company performance. Relatedly, Fidelity International has warned UK company chairs against approving excessive pay as part of a broader crackdown on corporate governance standards.
Continued adoption of hybrid LTIPs, with companies citing international pay competitiveness (particularly relative to the US) as well as pay compression concerns. These plans combine restricted shares with performance-based awards at board level.
Strong shareholder support for remuneration policies, including those proposing higher long-term incentive opportunity. Investor backing (typically with more than 95%+ of the vote) suggests continued acceptance of greater at-risk pay where justified by competitiveness arguments.
Major UK banks rebalanced pay structures toward variable incentives following the removal of the bankers’ bonus cap in 2023. Shareholders were generally supportive of this shift.
Increased alignment with the QCA Code, with some AIM-quoted companies submitting both remuneration reports and remuneration policies for the first time under new Principle 9 of the 2023 iteration of Code.

Other trends

Director elections remained one of the most contested resolution types, with dissent typically reflecting concerns over remuneration decisions, individual director tenure, or opposition from a significant shareholder.
Selective dissent on disapplication of pre-emptive rights, though largely driven by company-specific circumstances rather than a broader shift in voting behaviour. For an overview of the Pre-Emption Group's latest monitoring report, see AGC Update, Issue 76 – Item 7.
Ongoing shareholder activism, including requisitioned resolutions from investors such as Saba Capital Management and ShareAction, contributing to continued engagement pressure on boards.

For changes to ISS's 2026 proxy voting guidelines, see AGC Update, Issue 75 – Item 8. By way of reminder, we have recently published our annual horizon piece: 2026 AGM and reporting season: what to expect together with a related podcast.

Economic Crime and Corporate Transparency

4. The PSC regime: DBT publishes guidance for companies and LLPs

The DBT has published draft updates of its statutory guidance for companies and LLPs focused on the meaning of "significant influence or control" under the regime for persons with significant control. These have also been laid before Parliament.

The draft updates make changes to reflect the abolition of the requirement for companies and LLPs to maintain a local PSC register, as well as making other minor clarificatory amendments.

For our update on the changes to local and central company registers, see AGC Update, Issue 70 – Item 2.

Equity Capital Markets

5. Updates to FCA Knowledge Base for new Public Offers and Admissions to Trading regime

The FCA has published Primary Market Bulletin 61 in which it focuses on updated guidance in its Knowledge Base to reflect the new public offers and admissions to trading (POAT) regime which comes into effect on 19 January 2026. For our overview of the regime and latest developments, see AGC Update, Issue 69 – Item 3.

In this PMB, the FCA:

provides feedback on its consultation relating to guidance on the POAT regime set out in Primary Market Bulletin 58 (see AGC Update, Issue 72 – Item 6);
confirms that on 19 January 2026 it will finalise seven procedural notes and 39 technical notes and delete seven guidance notes from the Knowledge Base; and
consults on proposed changes to one technical note in relation to the POAT regime, being Primary Market/TN/717.3: Sponsors: Record Keeping Requirements.

The FCA also provides information on forthcoming changes to its helpdesk service for the Official List, amongst other things.

Updates to Knowledge Base for the POAT regime following PMB 58

By way of reminder, the new technical notes, which together with updates to existing guidance take effect on 19 January 2026, are as follows:

In PMB 58, the FCA also explained that it would consult on amendments to further affected existing technical notes after the implementation of the new POAT regime. Following its review, the FCA has identified one technical note that it will seek to amend at this time - Primary Market/TN/717.3: Sponsors: Record Keeping Requirements. The FCA requests comments on its proposals on this technical note by 16 February 2026.

Pending further updates, the FCA highlights that it expects firms and other market participants to interpret purposively any remaining references in its Knowledge Base to the previous rules in light of the coming into force of the new regime.

Working capital guidelines

Whilst the FCA consulted in PMB 58 on revising the working capital guidelines in Primary Market/TN/619.2: Guidelines on disclosure requirements under the Prospectus Rules: Admission to Trading on a Regulated Market (PRM) and Guidance on specialist issuers, it is now considering alternative approaches to its guidance on working capital statements and intends to engage further with market participants on this in 2026. The working capital guidelines will therefore remain, at this stage, as set out in TN 619.1, albeit having been updated for the POAT regime.

6. Aquis Stock Exchange consults on Growth Market Rulebooks for new Public Offers and Admissions to Trading regime and publishes rule updates for new Aquis Support Services

Aquis Stock Exchange has launched a consultation setting out proposed changes to its Growth Market Rulebooks to accommodate the implementation of the new POAT regime. A key change is the replacement of the Aquis admission document with the requirement to publish an MTF admission prospectus, allowing issuers to offer shares to the public within the framework of the existing Aquis admission process. The consultation is now closed. The revised rules will be effective from 19 January 2026.

Aquis Stock Exchange has also confirmed revisions to its Growth Market Rulebooks further to its consultation on the introduction of a new service - Aquis Support Services- which aims to help companies admitted to trading comply with their continuing obligations under the Growth Market Rulebooks (see AGC Update, Issue 71 – Item 3). The revised rules will take effect on 19 January 2026.

Employment Rights

7. Employment Rights Act 2025 receives Royal Assent - What do employers need to know now?

The much heralded Employment Rights Act has received Royal Assent. Our Employment team has published an overview of not only what employers need to know but also what they need to do and on what timeline.

We will provide further updates on relevant consultations and regulations as they develop.

Market Abuse

8. FCA fines Carillion finance directors for market abuse

By way of reminder, Carillion plc went into liquidation in 2017. It remains one of the biggest corporate failures in the UK history and was, in part, responsible for the significant changes made and still proposed to the country's audit and corporate governance regime (for more on which see Item 9 below).

In July 2022, the Financial Conduct Authority sanctioned both the company and three of its former executives for market abuse and breach of the FCA's Listing Rules. For more detail, see AGC Update, Issue 24 – Item 1. The executives referred their respective decision notices to the FCA's Upper Tribunal.

By way of update, the FCA has now published final notices in relation to two of the three executives, Richard Adam and Zafar Khan, imposing financial penalties of £232,800 and £138,900 respectively for breaches of Article 15 of the Market Abuse Regulation (prohibition on market manipulation), Listing Rule 1.3.3R (misleading information must not be published), Listing Principle 1 (procedures, systems and controls) and Premium Listing Principle 2 (acting with integrity). Both fines have been reduced, in part to take account of co-operation during the FCA’s investigation, as well as during investigations by other bodies. Nevertheless, the FCA found both acted recklessly and were knowingly concerned in breaches by Carillion of MAR and the Listing Rules.

The final notices have been published following the withdrawal by both individuals of their respective statutory references to the Upper Tribunal. Neither final notice makes any change to the substance of the 2022 decision notices and the FCA reiterates its view of the seriousness of the misconduct.

The Upper Tribunal hearing of the appeal by Carillion's former chief executive officer, Richard Howson, is scheduled to start on 16 February 2026.

Audit and Corporate Governance Reform

9. Confirmation of delay to Audit Reform Bill

In response to a question asked in the House of Commons, the government has confirmed the delay to the publication of a draft Audit and Corporate Governance Bill.

By way of reminder, in July 2024 the King's Speech set out plans for such a Bill (see AGC Update, Issue 54 – Item 1) which would include proposals to replace the Financial Reporting Council with a successor body with new and enhanced powers and extend Public Interest Entity status to the 'largest private companies'.

Labour MP, Blair McDougall has now confirmed that:

'The Department does not now intend to publish a draft Audit and Corporate Governance Reform Bill in this session of Parliament…… Priority is being given to measures that reduce administrative costs for business, including through the Department’s work on modernising corporate reporting.'

The next King's Speech is anticipated to take place in May 2026; audit reform plans are still expected to feature.

Sustainability

10. ISSB makes amendments to climate-related disclosures in IFRS S2

The International Sustainability Standards Board (ISSB) has made amendments to the greenhouse gas disclosure requirements in IFRS S2 which deal with climate-related disclosures. The amendments follow the ISSB's April 2025 consultation – see AGC Update, Issue 66 – Item 7).

The changes made to IFRS S2:

Clarify that reporting entities can limit measurement and disclosure of Scope 3, Category 15 GHG emissions to financed emissions (as defined in the standard).
Allow the use of alternative classification systems to the Global Industry Classification Standard to disaggregate information on financed emissions.
Clarify the jurisdictional relief to use a measurement method other than the Greenhouse Gas Protocol for measuring GHG emissions.
Permit the use of Global Warming Potential or 'GWP' values that are not from the latest Intergovernmental Panel on Climate Change Assessment Report.

The amendments to IFRS S2 are effective for reporting periods beginning on or after 1 January 2027, although companies reporting voluntarily under S2 can choose to apply the reliefs earlier.

Jurisdictions that adopt the IFRS sustainability disclosure standards can also decide whether to adopt the reliefs. The UK has been waiting on the ISSB's changes before it makes an endorsement decision on the ISSB's standards (known as UK SRS) (see the item below).

The ISSB has also issued consequential amendments to align financed emissions metrics in three SASB Standards with the amended requirements in IFRS S2.

11. UK Government update on progress to finalise UK SRS

The DBT has written to the FCA regarding progress to finalise the UK SRS.

The letter explains that the final standards will not be published before the FCA's anticipated January 2026 consultation on amendments to the UK Listing Rules (UKLR) to adopt the UK SRS for use by listed companies. Respondees to the UK government's June 2025 consultation on the draft UK SRS asked for clarity on how the reliefs in the UK SRS would interact with the FCA rules, including whether the transitional relief would apply, for example, from the date of the original application for a listed company (see UK government consults on adopting ISSB sustainability reporting standards and mandating Transition Plans to develop a sustainability reporting framework). In response, the government has stated that it will remove references in the UK SRS to specific times from which the reliefs would apply. Instead, the timing of the application of reliefs will be set out in the Companies Act 2006 or the FCA Handbook or rules of other relevant authorities. The government will clarify how the statement of compliance applies to those who make use of the reliefs.

The letter also states that the government will review the December 2025 amendments made to IFRS S2 by the ISSB (see the item above) with a view to incorporating them into the final version of the UK SRS S2. The government aims to endorse and publish the UK SRS early in 2026.

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