Governance & Compliance 6: AGMs are changing in the UK. Here’s what you need to know

Will Chalk:
Welcome to the latest in our series of AGC Ashurst Governance and Compliance podcasts, where we focus on the latest developments in the world of governance, compliance, and reporting. I'm Will Chalk, a partner in Ashurst's London corporate team focused on corporate governance.

In this edition, we're going to review and update the content of our recent AGC conference where we looked at AGMs and reporting and what listed and AIM companies need to think about in 2026.

I'm delighted to be joined by Maria McAlister, a senior associate in our corporate team who focuses on equity capital markets; John Papadakis, our Executive Incentives Counsel or guru, and a regular to our podcast, back by popular demand, Becky Clissmann, our very own Sustainability Counsel. Thanks all very much for joining me.

Maria, let's start with AGMs and logistics first and foremost. Are you expecting any changes in the manner in which AGMs are held in 2026?

Maria McAlister:
Thanks, Will. I don't think we're expecting any particular change in the manner in which AGMs are held this year. 2025 saw an increase in physical meetings with the number of hybrid meetings decreasing, which we expect will stay the same or perhaps continue into this year.

We saw a couple of AGMs held under studio conditions, which is where shareholders can attend and view the annual general meeting, but there's not actually personal interaction with the directors by attending in that manner. It'll be interesting to see whether any companies take that up into 2026, but I think it's worth noting that it's not a popular choice with the proxy voting agencies, with ISS noting in their most recent guidelines that they'll treat attempts to hold meetings under these conditions in the same way as they would a virtual meeting and seek to or would recommend a vote against any attempt to hold a meeting in that way.

I think we'll also see continued questions in advance of AGMs in 2026 with companies offering that facility and continuing to give clarity around timing for responses. In 2025, a majority of the companies that allowed for questions in advance stated when responses would be provided, with some confirming that responses would be provided in advance of the proxy deadline. So it'll be interesting to see what companies choose to do this year.

Will Chalk:
Of course, the government have committed to clarify the law and the Companies Acts as regards the permissibility of virtual meetings. They've been talking about that for a while. Assuming that legislation comes forward, do you think we're going to see more of them?

Maria McAlister:
It's hard to say. I think the key thing will be when Parliament is actually going to have time to implement change. As I just referenced, this type of format is not popular with the proxy voting agencies, ISS recommending a vote against any amendments to company articles to allow a company to hold meetings in this way. So I don't think for now that we will see an uptick in virtual meetings.

The GC-100 did publish guidance in early December that encourages companies to take advantage of the technology that's available to them to maximise shareholder participation and engagement to ensure that shareholder meetings remain accessible, efficient, and fit for the future. In that guidance, they published eight provisions for holding virtual meetings, which companies may seek to reference when seeking shareholder approval to amend their articles to allow for virtual meetings. So it'll be interesting to see how many companies adopt that guidance when they're seeking to make the change to allow for virtual meetings.

Interestingly, the GC-100 also proposed that companies may seek a time-limited authority for holding virtual meetings with a view to reviewing that over an initial period with shareholders and to seek views on whether or not that encouraged shareholder participation in meetings. But I think for now, the physical meeting will remain the preference.

Will Chalk:
And as you allude to, what none of that does is help with the cost-benefit analysis of those virtual meetings. To the business of AGMs though, any changes this year on that front, do you think?

Maria McAlister:
No, I don't think we see anything of particular significance coming down the track this year.

The Pre-Emption Group published their monitoring review at the end of 2025, noting that they continued to see an uptake in the enhanced authorities that were available in their most recent published guidance (ie. Statement of Principles, published in 2022). And they suggested in that review that those companies that haven't taken up the enhanced authorities thus far haven't missed the boat, and it's definitely something that they could look to do this year and into the future. It does remain something, though, that companies should review carefully and perhaps engage with their key shareholders on before seeking to increase the authorities that they've taken in the past.

For those on AIM applying the 2023 iteration of the QCA Governance Code, it's noticeable that considerably more companies put up their whole board for re-election in 2025.

There are also increased expectations as regards, say-on-pay resolutions, for example, putting remuneration reports and policies to advisory votes and for larger AIM companies putting their remuneration policy to a binding vote, although we've not seen any companies and are not aware of any companies having gone that far at this stage.

Will Chalk:
And of course, the proxy voting agencies have put out their voting guidelines for the 2026 AGM season. Any headlines there?

Maria McAlister:
Yes, that's right. So we've seen most of the proxy voting agencies publish their guidelines now. There's not a great deal of change from last year, but I would note that Glass Lewis have got a particular focus this year on committee formation. They've noted in their guidelines that they expect to recommend a vote against rather than abstention from voting on the re-election of audit committee and remuneration committee chairs where the committees are of an insufficient size and also a vote against the re-election of the nomination committee chair where FTSE 350 boards are not comprised of at least 40% of women, absent mitigating circumstances.

Will Chalk:
So thanks, Maria. Turning to you, John, on exec rem, in 2025 there was more dissent on the exec rem front relative to the previous year. What do you think the reasons for that are?

John Papadakis:
Actually, I think 2024 was an anomaly. Compared with previous years, shareholder opposition to remuneration policies was unusually low. The primary driver appears to be a renewed focus on pay and performance. Investors and proxy advisers expect a clear link between pay and performance, and the policies also have to be consulted on and communicated clearly to shareholders to mitigate the risk of significant dissenting votes.

Will Chalk:
So you think it was a lack of clarity around communication as much as anything else?

John Papadakis:
I think that really is the key: they're really focusing on full communication of the remuneration policy.

Will Chalk:
So looking to the 2026 AGM season, the IA (Investment Association) has recently written to remuneration committee chairs. What are your key takeaways from that letter?

John Papadakis:
I think the first thing to say is that there's been no change to the IA principles that were published in 2024.

The IA letter focused on encouraging improved implementation of the principles. In particular, first of all reinforcing the point about communication. When reporting on remuneration, they have to give the reasons for the remuneration decisions in a well-substantiated and company-specific form. Stock justification phrases such as 'attracting and retaining talent' just won't cut it. I think secondly, with the increase in hybrid plans, which are plans which cover time-based and performance-based awards, the IA is reiterating that these plans are only appropriate where the company has a significant US footprint or is competing for global talent. The main proxy advisers such as ISS and Glass Lewis are slightly less prescriptive about the use of hybrid plans, but they're all broadly aligned on the need for clear justification of the use of those plans as opposed to a single structure plan.

For this year, I think the message is pretty clear that there'll be increased scrutiny on how Remcos balance executive pay with wider stakeholder interests. They'll be looking for more transparency and clear disclosure of the reasoning in the remuneration report.

Will Chalk:
So let's look at net narrative reporting more generally.

For main market companies, the headline issue is the first year of reporting on the 2024 iteration of the UK Corporate Governance Code. Here, we'd certainly point companies in the direction of the FRC's Annual Review of Corporate Governance Reporting, which calls out many of the issues requiring attention this year, including more outcomes-focused governance reporting, enhanced reporting on the role of the board when it comes to stakeholder engagement, how culture has been embedded, and of course, preparations for the first year of reporting, which will be in 2027 in relation to Provision 29 of the Code, which we know applies a year later than the rest.
Those involved in the production of going concern and viability statements should also note the existence of revised FRC guidance on this front.

John, in theory, at least, there's also a bit of additional Rem reporting under the 2024 Code.

John Papadakis:
Yeah. Under provision 38 of the Code, which deals with malus and clawback arrangements, a more detailed description of those arrangements is now required. I think a lot of companies have already started moving down that route, but it's now set out in the Code that the disclosures have got to cover the circumstances in which malus and clawback could be used, the period in which they can be used, and why that is best suited to the company. And if they were used in the last reporting period, there's got to be a clear explanation of that use.

Will Chalk:
And for those with slightly later year ends, there's an element of deregulation on the horizon.

John Papadakis:
Yeah. You're probably alluding to the regulations that came into force for the financial years beginning after 11th May 2025. So for most companies, the current financial year, those regulations removed a number of disclosure requirements that were required under or derived from EU law on directors' remuneration reporting for fully listed companies. A lot of those requirements, the EU requirements, overlapped with other requirements under the disclosure regulations or the Corporate Governance Code, which is why they've been kind of pared down. For example, there's no longer any need to include a director versus employee pay change comparison chart in the report, but at the same time, there's still the requirement for a comparison of CEO's pay to employees' pay. Similarly, the disclosure of remuneration decision-making processes is no longer required under the regulations, but is still required under the Code.

Will Chalk:
Thanks, John.

For AIM companies, more generally, it's the enhanced disclosure expectations of the 2023 QCA code, which has a fair bit more expected of companies in relation to the issues of corporate purpose, culture, risk management, and remuneration disclosure.

For all companies, including private companies, there's some deregulatory good news with the removal of certain requirements for directors' reports, albeit notably in relation to a number of those disclosures, they are duplicative of other requirements elsewhere in the annual report.

There's also increased thresholds which dictate the size of the company for accounting and therefore reporting purposes, those changes being relevant for reporting periods beginning on or after 6th April 2025.

In terms of key publications for reporting teams, generally, we've already mentioned the FRC's Annual Report on Corporate Governance reporting. There's also the Annual Review of Annual Reporting more generally, of particular relevance, I suppose, to finance teams, but with lessons for those producing strategic reports and overseeing company distributions, as well as a Thematic Teport on reporting by smaller listed companies, given that's the constituency with whom the FRC corresponds most frequently as part of its review work.

So Becky, focusing on sustainability, can you bring us up to speed on developments concerning the UK SRS? And maybe as always, start by explaining a new acronym for our listeners.

Becky Clissmann:
Absolutely love an acronym!

So listeners will remember that the ISSB published sustainability reporting standards, S1, on the general requirements for sustainability disclosures and S2, which covers climate-related disclosures in 2023. And the UK has been working towards adoption of S1 and S2 since they were published. The UK version of these standards will be known as the UK Sustainability Reporting Standards or UKSRS. So there's your acronym.

In terms of what's been going on, so there was a call for evidence by the FRC in 2023, and then at the end of last year, we had the technical advice from the Government's Technical Advisory Committee. And then in June this year, the Government published a consultation proposing only six relatively minor amendments to S1 and S2 to make them relevant for use in a UK setting. So we're expecting the Secretary of State to endorse the UK SRS early this year, and that will happen now that the ISSB has agreed changes to its own version of S2 that they consulted on during 2025. And once that endorsement has happened, the UK SRS can be used on a voluntary basis by reporting entities.

Will Chalk:
Okay. So new UK versions of international standards in fairly short order, it sounds. What then happens next?

Becky Clissmann:
Yes. So what happens next? After the UKSRS are endorsed, both the FCA and the Government will start working on making disclosures using those standards mandatory. So that will be for companies who are subject to the UKLR (UK Listing Rules) of the FCA. And for companies outside the FCA's regulatory perimeter, that'll be what the government's working on.

Just to say, we're not actually clear at the moment on which companies will be in scope of the government's consultation. They previously mentioned in the June '25 consultation, it would be for 'economically significant entities' outside the FCA's regulatory perimeter. And so we think that's likely to cover at least those in scope of the current CFD regime.

Will Chalk:
It could be larger, that's larger AIM companies as well as economically, well, very significant private companies as well.

Becky Clissmann:
Yeah, absolutely. So that's what we're thinking.

So for listed companies, we expect that the FCA will consult on referencing the UKSRS in the UK Listing Rule disclosure requirements and also strengthening its expectations for transition plan disclosures that will probably reference the transition plan task force disclosure framework, which again was published back in 2023. And that should happen in Q1 of this year. And we then could see changes to the Listing Rules later this year, and that would apply then to reports being published in 2027. So for companies that are not subject to the UK Listing Rules, this process is likely to take a bit longer. And announcements that were made towards the end of 2025 indicated that we're likely to have two consultations on this this year. So the first of those would be a consultation on removing redundant reporting requirements, and that would include relocating certain requirements such as SECR, that's the Streamlined Energy and Carbon Reporting, to a different part of the annual report. And that is likely to happen probably earlier in the year.

The second consultation, which is the biggie, if you like, that's a consultation on modernising corporate reporting that would follow the 2024 non-financial reporting review. And that will cover remuneration, corporate governance reporting and digital reporting, as well as folding in the mandatory reporting using the UKSRS. And then for anyone wondering about climate transition plans, which I mentioned a moment ago, they were the subject of a related consultation that was published alongside the June 2025 UKSRS consultation. It was quite a high-level consultation and it only looked at the sort of concept of mandatory reporting. It wasn't consulting on specific proposals. So to take that forward, it would need a further consultation on something more concrete. And we're not clear at the moment from the consultation or even the subsequent statements that have been made when that might take place, but the expectation is that it will be folded into this modernising corporate reporting consultation that we're expecting. So lots likely to happen this year and lots of changes on the horizon.

Will Chalk:
Becky, John, Maria, thanks so much for joining me and for getting through such a vast amount of subject matter so succinctly.

Thank you all for listening to our podcast. You can find links to relevant publications on the subject matter we've just discussed in the show notes. That includes a link to the landing page for that AGC Conference that I referred to, so you can find the session materials and a recording of proceedings. You'll also be able to access our overview of our expectations for AGMs and reporting, which goes into all of this content in more detail from those show notes as well.

And just to make the point again, our regular AGC, Ashurst Governance and Compliance updates cover issues like these and more. So do let us know if you'd like to be added to the distribution list.

And there's more to come. We'll be publishing our Board Priorities for 2026 later in January, which you'll be able to find on our website. And please do share the podcast with interested colleagues and let us know what you think so we can improve them in the future. Bye for now.