Ashurst Governance & Compliance Update – Issue 80

Corporate Governance

1. FRC publishes new guidance on 'comply or explain' and the UK Corporate Governance Code

The Financial Reporting Council has published updated guidance on 'comply or explain' reporting, which is designed to help investors, proxy advisors and other users of corporate reporting better understand and appreciate the value of companies that choose to depart from provisions of the UK Corporate Governance Code. The FRC is concerned that market sentiment is such that companies believe that full compliance with the Code is preferable to explaining non-compliance despite that potentially allowing a better governance arrangement or outcome to subsist.

The guidance explains that:

• Companies should embrace the flexibility offered by the Code's provisions, apply the governance arrangements that are most suitable to their circumstances and clearly explain any departures from the Code.
• Companies should be transparent about any departures from the Code, being clear about which provisions have been departed from and provide explanations for each departure in a way that readers can follow easily. This will assist investors and other stakeholders in assessing the company's approach to governance.
• In providing explanations, companies should use the following five criteria when explaining departures: explain the context and background to the departure, provide a convincing rationale for the approach taken, describe any risks and mitigating actions, explain if and when the company intends to comply, and ensure that their explanations are understandable and persuasive.
• Shareholders should take into account departures from the Code positively in their voting policies, particularly where they have been explained in a transparent and informative way.

The guidance sets out various examples of good practice, providing in Appendices particular insight on explanations of departures from provision 9 of the Code (chair to be independent on appointment) and on following the Audit Committee and the External Audit: Minimum Standard.

The FRC intends to publish its findings on the quality of comply or explain disclosures in its annual corporate governance review later this year. For an overview of its 2025 review, see AGC Update, Issue 74 – Item 1.

Equity Capital Markets / Market Abuse

2. FCA to review UKLRs in relation to investment entities

The Financial Conduct Authority has indicated that it is launching a review of certain aspects of the UK Listing Rules (UKLRs) to consider how they apply to specific types of investment entities. This is in response to stakeholder feedback that eligibility criteria under the UKLRs for investment entities may be unduly restrictive.

As part of this review, the FCA will also assess how its rules ensure that boards support strong shareholder rights and manage conflicts of interest.

The FCA intends to consult on its proposals and to complete the work by the end of 2026.

3. FCA issues fine for the publication of misleading statements

The FCA has published a final notice fining John Wood Group PLC £12,993,700 for breaches of Listing Rule 1.3.3R and Listing Principle 1 for publishing inaccurate information in its financial results.

Following the poor performance of certain business projects, Wood Group’s accounting judgements were inappropriately influenced by its desire to maintain previously stated financial results. Wood Group did not have adequate systems, controls or procedures to prevent this from happening.

This resulted in Wood Group publishing inaccurate information in its full-year 2022 and 2023 financial results and the half-year 2024 results. The company failed to take reasonable care to ensure that its announcements about those results were not false or misleading.

When these issues came to light from November 2024 onwards, Wood Group’s share price fell by 78% by April 2025. Its shares were suspended in May 2025.

On 30 October 2025, Wood Group published its restated financial results for the full years 2022 and 2023, which included material adjustments arising from the misconduct described above.

The FCA imposed the financial penalty for the following breaches:

• Listing Rule 1.3.3R (misleading information must not be published) by failing to take reasonable care to ensure that its announcements were not misleading, false or deceptive and did not omit anything likely to affect the import of the information; and
• Listing Principle 1 (a listed company must take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations)

In its summary of reasons, the FCA highlighted that Wood Group operated a poor financial culture which resulted in poor practices around accounting judgements. Wood Group's control framework was insufficiently robust to ensure that, where accounting judgements needed to be made in relation to certain projects, they were made appropriately and in compliance with applicable accounting standards. This resulted in inappropriate accounting judgements being made, as well as a lack of transparency with its auditors and relevant board committees.

The FCA considers that a listed company should have in place procedures, systems and controls that provide clear, consistent and transparent reporting throughout the company. This should include procedures, systems and controls which ensure that:

• The financial performance of contracts is assessed in accordance with the appropriate accounting standards, and that those standards are adequately complied with.
• Accounting judgements made in relation to individual projects are clear, consistent and well supported, and any inconsistencies or discrepancies are identified and resolved in a timely fashion with appropriate challenge from senior staff.
• There are adequate policies and procedures in place to ensure consistent decision-making, especially around provisions and contingencies and dispensations.
• Auditors are provided with sufficient information on a timely basis to enable them to assess properly relevant accounting judgements being made as appropriate.

The fine imposed had been reduced by 30% on the basis that Wood Group accepted the FCA's findings and had cooperated significantly with the investigation. It was also noted that it had developed a remediation and governance action plan which it had taken steps to implement.

4. FCA proposes minor changes to Prospectus Rules and UKLRs

The FCA has published Quarterly Consultation Paper No. 51 in which it proposes clarificatory amendments to the new FCA Prospectus Rules: Admission to Trading on a Regulated Market (PRMs) and minor changes to the UKLRs, amongst other things.

PRMs

• Prospectus exemption for transferable securities offered or allotted to existing or former directors or employees

The FCA is proposing to amend PRM 1.4.12R which provides an exemption from the prospectus requirement for admissions to trading of transferable securities that are offered, allotted, or to be allotted to existing or former directors or employees (subject to certain requirements). The policy rationale for the exemption is to facilitate long term incentive schemes or employee share schemes, which incentivise directors and employees to hold securities of their own company; it is not intended to apply to admissions where the issuer uses an allotment to a director or employee for the purpose of an onward transfer to a third party as part of an arrangement to raise funds or satisfy an obligation for the benefit of the company.

As trailed in PMB 58, the FCA has identified instances where the exemption (derived from the equivalent provision that sat in the UK Prospectus Regulation) has been relied upon in circumstances that are contrary to the policy intent. The FCA therefore intends to amend PRM 1.4.12R so that it is not available where an issuer intends for the securities to be placed with a third party via an offer or allotment to a director or employee.

• Protected forward-looking statements

As part of the new protected forward looking statements (PFLS) regime, which uses a higher, recklessness liability standard for certain types of forward-looking information, PRM 8.2.3R currently requires the content specific accompanying statement for a PFLS to appear immediately next to the PFLS to which it relates. Content-specific accompanying statements must identify the forward-looking statement as a PFLS and include the principal assumptions upon which the PFLS is based, amongst other things, so as to enable investors to evaluate the quality of particular PFLS disclosures.

The FCA notes that this requirement could impair prospectus readability where, for example, the same PFLS disclosure is repeated throughout the prospectus, as the content specific accompanying statement would need to appear each time, affecting the flow of the text.

To address this, and with a view to providing greater presentational flexibility, the FCA is proposing to amend PRM 8.2.3R to clarify that the content specific accompanying statement does not need to be repeated each time the corresponding PFLS appears in the prospectus, provided that the accompanying statement appears immediately adjacent to at least one instance of the PFLS, with a cross-reference to the statement sufficing in other instances of the same PFLS disclosure. This would allow the content specific accompanying statements in a prospectus to be included in a separate section of the document – for example, an appendix - provided that the content specific accompanying statement appears immediately next to an instance of the corresponding PFLS in that separate section.

• Supplementary prospectus and withdrawal rights

The FCA is proposing amendments to PRM 10.1.16R and PRM 10.1.17R to align their scope of application with PRM 10.1.14R, thereby achieving consistency across these provisions. Each of these provisions includes requirements to inform investors that a supplementary prospectus may be published and that the investor may have withdrawal rights.

• Prospectus submission and approval requirements

The FCA proposes the removal of the requirement for cross-reference lists to be included in the 'no change' confirmation letter provided by issuers under PRM 9.2.16R.

The FCA is also proposing to amend PRM 9.4.3R to clarify that where an issuer is including a PFLS disclosure in a draft prospectus, a cross reference list for PRM 8 should be submitted with the first draft of a prospectus.

UKLRs

• Notification requirements in relation to further issuances of securities

As set out in the FCA's February forbearance statement (for more detail, see AGC Update Issue 79 – Item 3), the FCA notes that since the implementation of the PRMs and certain amendments to the UKLRs in January, it has been made aware of overlapping notification requirements in relation to further issuances of securities. The FCA is therefore consulting on amending the UKLRs to reduce the regulatory burden on issuers and clarify its requirements.

The amendments to the UKLR would remove UKLR 6.4.4R(4), which requires issuers to notify a RIS of any new issue of equity securities or a public offering of existing equity securities as soon as possible (and the rule in UKLR 6.4.5R which allows for notifications under UKLR 6.4.4R(4) to be delayed in certain situations). The notification requirement in PRM 1.6.4R which requires issuers to notify a RIS of the admission to trading of new securities within 60 days of the admission would be retained. The FCA is also proposing to amend corresponding provisions in other UKLR chapters.

Next steps

The FCA is inviting comments on the consultation by (i) 23 March in respect of the UKLR proposals and (ii) 20 April in respect of the PRM proposals.

Diversity, Equity and Inclusion

5. Parker Review publishes 2026 annual report

The Parker Review Committee has published its annual report on workplace ethnicity representation for 2026. The review sets out the position as at December 2025 across the FTSE 350 and in 50 of the UK's largest private companies.

Themes which have emerged from the 2025 data set include:

• Continued progress in overall ethnic minority representation at both board and senior management levels, particularly within the FTSE 100.
• Sustained engagement from FTSE 350 companies despite broader political and economic shifts. It is suggested that this becomes more important year-by-year with increasing ethnic diversity of the UK population and workforce.
• Mixed findings across ethnic minority groups and types of company and seniority meaning more work to do.

By way of reminder, the recommendations of the Parker Review Committee are currently:

• There should be at least one ethnic minority director on each FTSE 100, FTSE 250 and large private company board by 2021, 2024 and 2027 respectively.
• FTSE 350 companies should set a target by December 2023, to be achieved by December 2027, for senior management who self-identify as being in an ethnic minority.
• Companies should develop mechanisms to identify, develop and promote people from ethnic minorities and set objectives for pipeline development.
• A company's annual report should describe its policy on ethnic diversity. Companies that do not meet recommendations by the relevant date should explain why in their annual report.

Headline findings include:

• 98% of FTSE 100 companies had at least one ethnic minority director on their board (up from 95% in 2024), whereas only 82% of FTSE 250 companies had such representation, which is the same as in 2024. Of the 36 private companies which responded to the review, 58% had one ethnic minority director, up from 48% in 2024.
• Of those companies providing information in relation to senior management and which had set a target:

• The average percentage of UK-based senior management positions in the FTSE 100 held by ethnic minority senior managers was 11% (unchanged from 2024) and the average target was 15%.
• The average percentage in the FTSE 250 was 10% and in companies that set targets was 11%. The average target was 11%.
• The average percentage in large private companies was 10% and the average target was 15%.

For an overview of the 2025 annual report, see AGC Update, Issue 63 – Item 9.

AGMs in 2026

6. QCA publishes research on virtual AGMs and Growth Companies

The Quoted Companies Alliance has published a research paper on the legality of and attitudes to the use of virtual AGMs in AIM companies, which includes data on small and mid-cap market trends in the 2025 AGM season.

The paper also includes an overview of the legal and policy issues related to the use of virtual-only AGMs and an annex which focuses on 'good practice' when utilising technology in AGMs.

For further context, our publication, 2026 AGM and reporting season: what to expect can be found here. An overview of the GC100's guidance on virtual-only AGMs published in December 2025 can be found in AGC Update, Issue 76 – Item 8.

Narrative and Financial Reporting

7. IOSCO updates statement on non-GAAP financial measures

IOSCO has published an updated statement on the disclosure of non-GAAP financial measures. The statement aims to provide issuers with a frame of reference for good presentation of financial measures other than those prescribed by GAAP.

While the substance of the statement is broadly the same as the statement that was published by IOSCO in 2016, a new section VI has been added which addresses the interaction between the statement and other, new accounting standards (such as IFRS 18).

8. FRC announces measures to support small business growth

The FRC has announced a package of measures to make audits more proportionate and efficient for small and medium-sized enterprises, helping to support their growth and access to capital.

The FRC’s measures are designed to ensure audits for SMEs are more practical, proportionate and appropriate for smaller, less complex businesses.

To do that, the FRC will:

• Publish new guidance to support auditors apply auditing standards in a way that is relative to the complexity and size of the business.
• Launch a new programme of engagement with auditors of SMEs to support understanding of this new guidance.
• Develop a Technology Sandbox within the FRC’s Innovation and Improvement Hub which will enable smaller audit firms to get support when adopting AI and new technology to improve audit quality.
• Establish a new working group with the Recognised Supervisory Bodies to promote more consistency in how audits of SMEs are supervised.
• Engage with stakeholders on the International Less Complex Entities auditing standard, providing UK stakeholders with the opportunity to influence its future development.

The announcement is a result of a market study as part of which the FRC engaged with more than 500 stakeholders, including SMEs, investors and auditors to understand how the audit market is working in practice and where improvements can be made.

Economic Crime and Corporate Transparency

9. Government publishes updated statutory PSC guidance

The government has published revised statutory guidance on the meaning of 'significant influence or control' over a company or limited liability partnership in the context of the persons with significant control (PSC) regime.

The amended guidance reflects the reporting regime for PSCs introduced by the Economic Crime and Corporate Transparency Act 2023, which replaced the duty to keep a local PSC register on 18 November 2025 (see AGC Update, Issue 70 – Item 2).

10. Economic crime information sharing – government publishes call for evidence

The Home Office has published a call for evidence on information sharing in relation to economic crime. The call for evidence refers to the provisions of the Economic Crime and Corporate Transparency Act 2023 that permit, and relate to, the direct and indirect sharing of customer information between private sector businesses regulated under the Money Laundering Regulations or businesses in the anti-money laundering regulated sector respectively for the purposes of the prevention, detection or investigation of economic crime.

The call for evidence is open until 18 May 2026.

Employment Rights

11. Government publishes introductory guidance on equality action plans

The government has published introductory guidance on actions which employers can include in their voluntary plans from April 2026 with more detailed guidance to follow. Related enabling legislation has also been introduced into Parliament.

By way of reminder, from April 2026, employers with 250 or more employees will have the option to produce and publish a voluntary action plan alongside their gender pay gap data. These will become mandatory from spring 2027, subject to secondary legislation being brought forward.

According to the government, the purpose of action plans is to support employers in taking effective action to improve workplace gender equality - i.e. advancing equality of opportunity between male and female employees. As set out in the Employment Rights Act 2025, action plans will show the steps relevant companies are taking to:

• reduce its gender pay gap; and
• support employees experiencing menopause.

For the latest on the Act, see our update here.

Companies House

12. Companies House issues statement on WebFiling issue

The Chief Executive of Companies House has published a statement on a security issue relating to the Companies House WebFiling service of which it became aware on 13 March 2026. Specifically, the issue potentially allowed users with an authorised code who were logged in to the WebFiling service to access and change certain elements of another company’s details without their consent.

In particular, company information which is not normally published on the Companies House register (including dates of birth, residential addresses and company email addresses) may have been visible to other users logged into the system. It may also have been possible for unauthorised filings (such as accounts or changes to directors) to have been made on another company’s record.

The statement notes that the issue has been resolved and there are no reports of any data having been accessed or changed. However, Companies House has asked all companies to check their registered details and filing history to make sure they appear correct. Companies House has also published an update providing more detail on the incident.

Authors: Will Chalk, Partner; Shan Shori, Expertise Counsel; Becky Clissmann, Sustainability Counsel; Marianna Kennedy, Senior Associate.

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