Governance Readout

For financial years beginning on or after 6 April 2025, the definition of a company by reference to their turnover, balance sheet and employees will be changing following the introduction of the Companies (Accounts and Reports) (Amendments and Transitional Provision) Regulations 2024. These changes will also remove certain reporting requirements from the directors’ report. 

The regulations increase the financial thresholds, but not the employee thresholds for companies classified as a micro-entity, small or medium sized company.

Entity	Turnover Not more than	Balance sheet total Not more than	Employees Not more than
Micro-entity	£1m (previously £632k)	£500k (previously £316k)	10
Small	£15m (previously £10.2m)	£7.5m (previously £5.1m)	50
Medium	£54m (previously £36m)	£27m  (previously £18m)	250

Thresholds have also been amended where a company is a parent company in the assessment of how the group should be classified.

For directors’ reports relating to the same financial year some elements will no longer be required, including: 

• important events affecting the company since the end of the financial year, 
• likely future developments in the business,
• company branches outside of the UK, 
• employment of disabled persons, and 
• engagement with certain stakeholder groups.

These reporting requirements are viewed as redundant and of limited value to shareholders as they overlap with other reporting requirements.

These changes are being taken ahead of the planned review into non-financial reporting which the UK government has announced is likely to take place in spring 2025.

Company secretaries and Finance teams should consider how these changes impact companies within their groups in terms of planning for the corporate reporting cycle in 2026.

The Pre-Emption Group has released the second report into how UK listed companies have used its guidance on disapplying pre-emption rights in 2023 to 2024 following the update to its Statement of Principles in 2022. 

It appears that companies and investors are embracing the higher levels of flexibility that are now permitted. 

Other findings within the report include:

• Higher number of companies sought disapplication authorities which exceeded the previously allowed authority 
  • 67.1% of the FTSE 350 compared to the previous year’s 55.7%
• 64.1% requested authority for a specified capital investment which is similar to the previous year
• 99.4% of companies saw their associated resolutions passed 

The Financial Conduct Authority (FCA) within Primary Market Bulletin 52 provides three common scenarios related to the identification and disclosure of inside information. The scenarios are set out below. PMB 52 also covers the dissemination of inside information during shareholder calls and meetings and the dissemination of regulatory information during interruptions to Primary Information Provider (PIP) services.

Identifying Inside Information

PMB 52 discusses how companies should approach identifying inside information in the following scenarios:

• Receipt of an approach about a takeover offer
  Assessment should be carried out on a case-by-case basis as to whether the receipt of an offer is subject to inside information. It doesn’t need formal consideration and recommendation by the board for it to be classed as inside information.
  
  
• Preparation of periodic financial information
  Ongoing assessment should be undertaken as to whether the information held when preparing financial results is considered inside information. Where information could be of a precise nature so that it constitutes inside information at an early stage, an issuer will have to disclose the information as soon as possible.
  
  
• CEO resignation and appointments
  Companies should carefully and continuously assess the point at which developments regarding the resignation and replacement of the CEO would constitute inside information. Separate assessments should be carried out for the resignation and for the replacement as events before a formal resignation or appointment could be considered inside information.
  
  Factors that may need to be considered when considering the price sensitivity of the resignation/appointment may be:
  • the length of the existing CEO’s service and market expectations of their retirement,
  • expectations regarding succession planning, and
  • the rationale for the CEO’s decision. 

Dissemination of information during shareholder meetings 

The FCA has noted that it is aware that some companies use non-traditional measures (WhatsApp, Telegram) to interact with groups of smaller private shareholders and hold private calls with investor groups to address certain concerns. Whilst it is recognised that these measures allow smaller shareholders an opportunity to engage with the company’s management, there remains a risk that confidential, non-public or price-sensitive information may be disclosed and so companies should be conscious of comments made, especially as comments about trading in shares could constitute market manipulation. Therefore, amongst the actions suggested by the FCA, companies could avoid having conversations with such groups during closed periods or having a prepared script. 

Dissemination of information during interruptions to PIP services

While the PIP acts as a regulatory information service and is used by issuers to release any announcements required under listing, transparency and disclosure rules, the requirement to disseminate the information resides with the issuer and no obligations pass to the PIP once a request has been submitted to the PIP to disseminate the information.

During the CrowdStrike outage in July 2024, some issuers published regulated information on their websites despite corresponding information having not been released by the PIP, therefore the regulator has stated that companies should always check the announcement has been made via the PIP before publishing on their website. It is also encouraged that companies have an alternative PIP account to meet their obligations should their primary PIP be impacted by an outage.

Computershare’s View

PMB 52 contains some valuable reminders to companies on the application of MAR and the identification and treatment of inside information. Company secretaries should review their MAR compliance manuals, policies and procedures to ensure that this latest guidance is followed. A summary of PMB 52 should also be highlighted with the Board and Disclosure Committee as a reminder of the application of MAR and the identification of inside information in certain scenarios. 

The Financial Reporting Council (FRC) has published its annual review of corporate governance on the quality of reporting against the 2018 Corporate Governance Code. This is the penultimate review that will consider reporting against the 2018 edition of the Code, as the new 2024 Code will apply to financial years starting on or after 1 January 2025 (except for reporting related to Provision 29).

This review looked at the disclosures made by 100 of the FTSE 350 and Small Cap companies. The FRC maintains that good governance is flexible and emphasises the importance of clear and detailed explanations where companies depart from the provisions of the Code. However, fewer companies departed from the Code in the year under review. Only 28 companies departed from at least one code provision compared to 63 in 2023 and 78 in 2022.

Findings of note also include:

• Risk management and internal control systems
  No company reported early adoption of the changes to Provision 29, although some did reference preparatory work in relation to those changes. Yet it was observed that fewer than half of the companies reviewed reported appropriately on the effectiveness of their systems.
  
  
• Cyber and IT risk 
  89% of companies included cyber security as a principal risk and 27% included IT as a standalone principal risk.
  
  
• AI
  It was noted there had been a significant increase in reporting on AI with 73% of companies discussing such matters and 26 companies listing it as an emerging risk. 

ShareSoc, the advocacy group for individual investors, has updated its recommendations and guidance for attendees of general meetings. The updated guidance considers recent developments including the utilisation of digital facilities to hold meetings.

The group argues that individual shareholders provide unique and valuable perspectives to companies as they aren’t acting as agents for others, therefore general meetings must be well managed, made accessible and attractive to individual shareholders.

• Electronic vs physical 
  It is acknowledged that allowing for electronic attendance helps make a meeting accessible to the largest number of investors. The group believes there is still value in allowing shareholders to meet directors in person and that asking questions in person is easier. ShareSoc is not supportive of fully online meetings and recommends the use of ‘hybrid’ meetings as a way of appealing to all.
  
  
• Director attendance 
  ShareSoc considers that all directors, especially the Chair should attend the meeting in person, unless incapacitated by ill health or family emergencies. Online attendance is not considered appropriate and should only be used in exceptional circumstances.
  
  ShareSoc also feels that directors should make time to mingle and chat to shareholders prior to and following the meeting so that more detailed questions or issues may be raised. 
  
  
• Length and conduct of the meeting 
  Meetings should not go beyond two hours, and the chair should exercise their discretion to limit questions and the length of any speeches, including to avoid the meeting being taken over by ‘disruptive shareholders’. ShareSoc advises that shareholders should not normally ask more than three concise questions and if there are technical or complex questions these should be pre-submitted.
  
  ShareSoc has stated that the Q&A portion of the meeting should take place prior to voting.
  
  
• Meeting location and timing
  ShareSoc believes that the meeting location and time should be convenient for the majority of shareholders, avoiding holiday periods and not overlapping with other meetings. A helpful time such as anything after 11am should be selected.
  
  ShareSoc would also like to see more meetings held at a company’s offices or operational locations, potentially offering shareholders a tour or demonstration of operations or products. 

Computershare’s View

On the whole we take a neutral stance to market discussions on whether companies should or shouldn’t offer in-person or virtual elements to their meetings, as we support clients with a range of preferences and needs based on what they have determined is best.

There are certainly more conversations being had at any time since the introduction and subsequent removal of the temporary legislation that permitted closed-door meetings and made virtual meetings easier to hold during Covid. This is likely as a result of a number of organisations including the UK Government considering the feasibility to address some longstanding ambiguity contained within legislation as to the nature of a ‘place’ of meeting.

Companies considering introducing digital elements to promote engagement, or as a fundamental part of their format of their meeting, should consider the impact of those decisions on their investors and may wish to even engage with them in the early planning stages. Companies could also provide a rationale for their decisions within the meeting materials or on their website.

We’d be happy to talk to you about solutions that may be suitable to your individual needs and encourage you to speak to your client team representatives at the earliest opportunity. 

Both Glass Lewis and ISS have published their proxy voting guidelines for 2025.

Amendments to the Glass Lewis guidelines, which apply to shareholder meetings held after 1 January 2025, include director tenure, diversity, oversight of pension contributions, hybrid incentive plans, dilution limits, multi-class share structures and SPACs. The Guidelines also clarify existing policies governing virtual shareholder meetings, restricted share plans, the overall approach to executive remuneration, remuneration committee engagement and conflicts of interest.

The changes to the ISS guidelines, which apply to meetings held on or after 1 February 2025, principally reflect updates to the Investment Association’s Principles of Remuneration highlighted in our last Governance Readout, as well as updates to the QCA Corporate Governance Code and clarification around FCA reporting requirements in relation to board diversity.

Computershare’s View

Company secretaries and investor relations teams should take account of both policies and their potential impact on investor voting decisions based on their company’s shareholder base, and tailor disclosures and engagement accordingly.

Georgeson has recently published memos based on the upcoming changes to the ISS 2025 policy updates and Glass Lewis 2025 updates which are applied in the new year for the 2025 season. These changes are reflective of the recent updates to FCA listing rules and changes to the Principles of Remuneration of The Investment Association.

Whilst these specific updates are not expected to have a significant impact on proxy advisors’ vote recommendations for most companies, issuers should be conscious that board diversity changes can impact the Chair of the nominating committee as both advisors have strengthened their wording on this subject.

Remuneration Committee Chairs should also consider Glass Lewis’s more explicit guidance on remuneration, especially pension contributions and hybrid plans.