Legal development

Ashurst Governance & Compliance Update – Issue 81

By Will Chalk

09 April 2026

Payment Practices

1. DBT publishes response to consultation on late payments

The Department for Business and Trade has published a response to its consultation on measures to tackle the late payment of invoices. For detail on the consultation, see AGC Update, Issue 70 - Item 5. The measures to be taken forward are set out below.

More powers for the Small Business Commissioner (SBC)

The SBC will be given the power:

to investigate businesses suspected of poor payment practices or inaccurately reporting payment performance;
to settle payment disputes outside of the court process; and
to fine businesses, including significant potential fines for large companies that persistently pay their suppliers late or fail to comply with late payment legislation

Further measures to tackle late payments

Reporting by late payers: Boards or audit committees of any persistently late-paying large companies will be required to publish commentary on why payment performance is poor and what actions they are taking to address this.

The proposed requirement on audit committees to make recommendations regarding payment performance to company directors before the data is submitted to government and included in the director’s report will not be taken forward.

For a reminder of the requirement for large companies to report in their annual report on their payment practices for financial periods beginning on or after 1 January 2026, see AGC Update, Issue 73 – Item 1.
Maximum payment terms will be limited to 60 days, with strictly limited exemptions.
A statutory deadline for disputing invoices will be introduced. Businesses that do not raise disputes within the time limit will need to pay compensation to their supplier.
Mandatory statutory interest on late payments at 8% above the Bank of England base rate will be required in all commercial contracts. Parties to such contracts will not be able to agree an alternative rate.

The Reporting on Payment Practices and Performance Regulations 2017 (SI 2017/395) will be amended to require large companies to report on statutory interest payments in their filings, including the value of interest that a company is liable to pay and the value of interest that has actually been paid.

Note that the Regulations will not be amended to reduce the filing obligation from twice to once a year.

Retention payments under commercial contracts

The government intend to ban the practice of deducting and withholding of retention payments under the terms of a construction contract.

Next steps

The measures will require a combination of primary and secondary legislation to enact. No timetable has been announced.

Equity Capital Markets

2. FCA publishes updates to the Public Offers and Admissions to Trading regime

The FCA has published Handbook Notice 139 setting out amendments to the FCA Handbook (and other FCA material). Among these are updates to the FCA Prospectus Rules: Admission to Trading on a Regulated Market sourcebook (PRMs), further to the FCA's Quarterly Consultation Paper No. 50, including the introduction of a National Storage Mechanism (NSM) filing requirement for notifications made in accordance with existing PRM obligations. AGC Update, Issue 73 – Item 3 contains further details.

By way of reminder, PRM 1.5.2R and PRM 1.6.4R create obligations for issuers to notify a Primary Information Provider (PIP) - also referred to as a Regulatory Information Service - of the admission to trading of transferable securities. The FCA's updates include a requirement for issuers to ensure that any notifications made in accordance with PRM 1.5.2R and PRM 1.6.4R are filed with the NSM. In practice, PIPs typically file all required notifications with the NSM voluntarily. The FCA revisions are therefore not expected to impose any material additional burden on issuers or PIPs.

As part of the rule changes, a new headline code will be added to the Disclosure Guidance and Transparency Rules sourcebook to specify the way in which such filings should be categorised in the NSM.

3. FTSE Russell announces change to FTSE UK Index Series criteria

FTSE Russell has announced the alignment of the minimum free float requirement for both UK incorporated and non-UK incorporated companies within the FTSE UK Index Series. Effective from the June 2026 index review, both UK and non-UK incorporated companies with a minimum free float of 10% will be eligible for inclusion in the FTSE UK Index Series, subject to satisfying all other inclusion criteria. This is a notable shift for non-UK incorporated companies which currently face a 25% minimum free float threshold.

The move follows a market consultation and builds on a series of methodological updates to the FTSE UK Index Series, including revisions to the Sterling denominated price requirement and fast entry thresholds which were announced in March 2025 and implemented at the September 2025 index review. See AGC Update, Issue 78 – Item 8 for further details.

The FTSE UK Index Series Ground Rules will be updated to reflect this change in due course.

Employment Rights

4. Government to introduce mandatory ethnicity and disability pay gap reporting

The government has published its response to the consultation it launched in April 2025 on ethnicity and disability pay gap reporting (in relation to which see AGC Update, Isue 64 – Item 2) stating that it intends to mandate such reporting for employers with 250 or more employees. Draft clauses have also published for inclusion in the Equality Act 2010 – these have been produced in collaboration with businesses which are already reporting on a voluntary basis. The announcement follows the publication of government guidance on Equality Action Plans – see AGC Update, Issue 80 – Item 11.

Ethnicity pay gap reporting

Headlines from the consultation response include:

Employers will be required to report a binary comparison between white (including 'white other') and all other ethnic groups combined. They will also be required to provide data on five stated ethnic groups where minimum employee thresholds (yet to be determined) are met.
Employers will not be required to provide a more granular comparison beyond the five broad ethnic groups. They will instead be encouraged to provide more detailed analysis on a voluntary basis where possible.
The questions for ethnicity data calculations will be those set out in the Government Statistical Service (GSS) harmonised standard which is used for census purposes and is reviewed every five years by the ONS.
To enable the flexibility needed to make future changes, ethnicity classifications will be set out in secondary legislation.

Disability pay gap reporting

Headlines from the response include:

Employers will be required to report a binary comparison between disabled and non-disabled employees, using the definition of disability set out in the Equality Act 2010.
The government is also considering the appropriate minimum threshold for employees in each salary quartile and whether 10 employees, as proposed in the consultation, will be sufficient.

Workforce reporting

Employers will also be required to report on the overall breakdown of their workforce by ethnicity and disability, as well as the percentage of employees not disclosing their personal data for these characteristics.

Action plans

The government plans to extend the scope of Equality Action Plans to include a requirement for employers to report on the measures they are taking to address race and disability workplace inequality and their ethnicity and disability pay gaps.

Pay gap calculations

The same reporting requirements currently used for gender pay gap reporting will be used.

The government will also consider how to use guidance to encourage voluntary reporting of additional data on recruitment, exit interviews, contract types and reasonable adjustments.

Reporting deadline

Mandatory ethnicity and disability pay gap reporting will use the same snapshot date of 5 April, each year for data collection and reporting dates as for gender pay gap reporting.

Employers will also report their ethnicity and disability pay gaps online, in a similar way to the gender pay gap reporting obligations.

Implementation

No timetable for the implementation of ethnicity and disability pay gap reporting has been provided at this stage.

5. New guidance for gender pay gap reporting published

The Office for Equality has published new guidance for employers on Gender Pay Gap reporting and on creating an Equality Action Plan, with the latter building on the outline Action Plan published last month (for more on which see AGC Update, Issue 80 – Item 11).

We will publish more detail on the guidance in a future AGC Update.

Narrative and Financial Reporting

6. FRC Quarterly consultations published

The Financial Reporting Council has published two calls for stakeholder feedback to support the development of UK audit policy as follows:

First, it is asking stakeholders to share their views on the International Standard for Auditing for Less Complex Entities to inform its ongoing engagement with the International Auditing and Assurance Standards Board (IAASB).
Second, it is re-consulting on its proposals to revise two auditing standards (ISA (UK) 250 and ISA (UK) 270) to ensure auditors take a proportionate approach to a key area of their engagements. These proposals are designed to deliver standards that support high-quality audit without placing unnecessary burdens on auditors or the entities they audit.

Economic Crime and Corporate Transparency

7. Government consults on corporate civil enforcement reforms

The Insolvency Service has published a consultation seeking views on proposed reforms to the corporate civil enforcement regime including in relation to director disqualification.

Matters on which the consultation seeks views include:

A requirement on the court to disqualify all directors (including shadow directors), who were acting during the period a company caused harm that resulted in its winding up, when making a winding up order on public interest grounds.
A new administrative process that places restrictions on directors who have acted negligently or incompetently. Restrictions could last up to three years. The restrictions would require, among other things, a minimum level of paid-up capital in, and at least one further director to be appointed to, the company of the director subject to the restrictions.

Behaviours which could lead to such a restriction include failure to adhere to company filing requirements on two or more occasions, failure to file returns with HMRC and failing to keep adequate accounting records.

Responses to the consultation should be submitted by 17 June 2026.

Corporate Re-domiciliation

8. DBT issues re-domiciliation consultation

The Department for Business and Trade has published a consultation paper seeking views on the implementation of a corporate re-domiciliation regime, enabling foreign-incorporated companies to change their places of incorporation to the UK while maintaining their legal identity.

The regime is broadly based on the report of the UK Independent Expert Panel published in October 2024, which considered how a regime might be established – for more detail, see AGC Update, Issue 57 – Item 9.

The consultation, which focuses solely on re-domiciliation by entities to the UK, seeks views on a number of issues including the principles which should underpin the regime (which largely align with those of the Expert Panel), eligibility criteria, the need for a solvency statement, the status of directors, controllers and shareholders and other formalities to effect any re-domiciliation. The proposals contemplate that, once re-domiciled, an entity should comply with UK law which would include requirements as to director verification, the disclosure of beneficial interests and the publication of accounts.

The consultation closes on 19 June 2026. Primary legislation would be needed to bring the regime forward with no timetable suggested as to when that might happen.

Sustainability

9. ISSB publishes Exposure Draft on proposed amendments to three further SASB Standards

The International Sustainability Standards Board has published an Exposure Draft which proposes amendments to three further SASB Standards and consequential amendments to the Industry-based Guidance on Implementing IFRS S2.

The Exposure Draft forms part of the ISSB's 2024–2026 work plan to enhance the SASB Standards to support entities applying IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures) on either a voluntary or mandatory basis.

The SASB Standards are an important source of guidance for entities applying IFRS S1, when identifying sustainability-related risks and opportunities and determining what information to disclose. The ISSB decided in July 2024 to prioritise 12 SASB Standards for comprehensive review, of which nine were addressed in the July 2025 Exposure Draft (see AGC Update, Issue 70 – Item 9). This latest Exposure Draft addresses the remaining three prioritised industries: Agricultural Products, Meat, Poultry & Dairy, and Electric Utilities & Power Generators. The ISSB also proposes consequential amendments to the IFRS S2 Industry-based Guidance to maintain alignment with the climate-related content in the SASB Standards.

The changes proposed in the Exposure Draft for each of the three industries include:

Revisions to industry descriptions.
Updating and adding new disclosure topics (including on food loss, food waste, labour conditions, and deforestation).
Introducing new metrics and technical protocols (e.g. relating to revised GHG emissions, energy management and water discharges) and removing or replacing outdated or US-centric metrics.

The amendments aim to improve interoperability with other sustainability-related standards and frameworks (including those of the Global Reporting Initiative (GRI), the EU Sustainability Reporting Standards (ESRS), and the Taskforce on Nature-related Financial Disclosures (TNFD), and align the disclosure topics and metrics relating to nature and human capital with the ISSB's research projects on those topics.

The consultation closes on 24 July 2026. The ISSB will then issue final drafts and set an effective date for the amended SASB Standards and the IFRS S2 Industry-based Guidance between 12 – 18 months after they are issued.

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

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