Corporate Governance snapshot: Preparing your annual report and AGM notice in 2025

The annual report in 2025

It will no doubt be a relief for those involved in the annual report that there are no significant changes which need to be factored into its production this year.

• Impact of the introduction of the UKLRs in July 2024: Companies will need to ensure that any cross-references in the annual report to the Listing Rules are updated to reflect the UK Listing Rules (UKLRs) coming into force at the end of July 2024. There are no transitional provisions relating to the annual report, so the numbering of the new UKLRs should be used where needed. The key provisions relating to the contents of the annual report previously set out in Listing Rule 9.8 are now found in UKLR 6.6 and the previous LR 9.8.4 cross-reference table setting out where the disclosures required by LR 9.8.4 could be found, becomes a UKLR 6.6.4 cross-reference table for the disclosures required by UKLR 6.6.4. Companies will also need to amend the pro-forma board and executive management diversity data tables to match the requirements now set out in UKLR 6.6.6(10) and UKLR 6 Annex 1.
  
  Companies which have a controlling shareholder will also need to ensure that they amend their annual report disclosures to reflect the new UKLR regime and the fact that there is no longer a requirement to have a relationship agreement in place. Instead under UKLR 6.6.1(13), the annual report needs to include either a statement that the company continues to be able to carry on its main business activity independently from the controlling shareholder at all times, or an explanation why not, where it does not do so.
  
  For more details on the changes introduced by the UKLRs, see our snapshot here.


• Compliance with the Audit Committee Minimum Standard: In May 2023, the Financial Reporting Council (FRC) published the Audit Committees and the external audit: Minimum Standard (Minimum Standard) and in January 2024 the Minimum Standard was incorporated by the FRC into the revised UK Corporate Governance Code (2024 Governance Code). Although companies do not need to report against the 2024 Governance Code in the annual report published in 2025 (see below for details on the application of the 2024 Governance Code), FTSE 350 companies have been expected to comply with the Minimum Standard since its publication (or explain their non-compliance). Accordingly, in-scope companies should ensure that they include the disclosures relating to the work of the audit committee, the selection criteria used, and process followed, in any tender process which took place during the year, and the activities of the audit committee to meet the requirements of the Minimum Standard.
   
• FRC guidance: The FRC published its annual review of reporting on the UK Corporate Governance Code in November 2024 (see our blog post here). Key findings in the review include that reporting on culture assessment and monitoring should focus on the board’s actions (provision 2); reporting on shareholders and stakeholder engagement should explain the outcomes of those activities (provision 4 and now principle C) and that good principal risk reporting shows how risks have changed over time (provision 28). The review also provides some guidance on monitoring and reviewing the effectiveness of the risk management and internal control systems ahead of provision 29 of the 2024 Governance Code coming into force.
  
  The FRC published its annual review of corporate reporting in September 2024 (see our blog post here). The review noted that climate-related reporting issues appeared in the top ten most common issues raised in the context of FRC Corporate Reporting Reviews for the first time.
  
  From August to October 2024, the FRC consulted on an updated draft of its guidance on the going concern basis of reporting, to replace the current version of this guidance published in 2016. The revised guidance is expected to be published by the FRC in early 2025 and will be available for use immediately.
  
  The FRC has also indicated that it will shortly publish a thematic review of the climate-related disclosures required by the Companies Act 2006 (2006 Act) which should be considered in due course.

The AGM in 2025

For those involved in preparing for, and running, the AGM in 2025, again there is good news as there are no major developments which will impact this work. There are however some issues of note to be aware of:

• Pre-Emption Group Guidelines: In November 2024 the Pre-Emption Group (PEG) published its second annual monitoring report on the use of the guidelines it published in November 2022 (see our blog post here). The review covered 347 FTSE 350 company AGMs held between 1 August 2023 and 31 July 2024. Its key findings include:
   
  • 96.3% of the companies reviewed tabled a resolution seeking authority to disapply pre-emption rights at their AGM; 
  • 67.1% of the companies which tabled a disapplication resolution sought an enhanced disapplication authority in line with the updated guidelines (ie authority which exceeds the level permitted under the previous guidelines), up from 55.7% in the first review period; and
  • only two companies (both in the FTSE 250) failed to pass their proposed disapplication resolution. 
    
    Given the apparent support in the market generally for the enhanced authorities, companies which did not take the opportunity to amend the scope of their disapplication authority resolutions in 2024 may wish to do so at the 2025 AGM

• Updated proxy voting guidelines: The ISS and Glass Lewis have both published updates to their proxy voting guidelines for 2025 (see our blog posts here and here).
  
  The most significant change in both sets of guidance is to reflect the changes made by the Investment Association (IA) in October 2024 to their Principles of Remuneration. Other changes to the guidelines include clarifications around the chair’s tenure and in relation to board diversity.
   
• IA Principles of Remuneration for 2025: The updated Principles published by the IA in October 2024 are significantly less prescriptive than before, and their publication has provided an opportunity for companies to take stock of whether their existing incentive arrangements continue to remain fit for purpose. The new Principles open up the possibility of more diverse approaches to the quantum and form of executive pay which companies should consider. There is also greater flexibility in how a company can mechanically choose to settle share awards and so it would be a good time to review hedging strategies. For more details, see this blog post published by our Remuneration and Incentives team.
   
• Dormant assets: amendments to the articles of association?: In Summer 2024, the Treasury published a dormant assets scheme participant pack for use by publicly traded companies wishing to participate in the scheme.
  
  The dormant assets scheme enables participating companies to transfer the value of dormant assets that cannot be reunited with their owners to an authorised reclaim fund. The Dormant Assets Act 2022 provides for the proceeds from dormant shares in publicly listed companies and the unclaimed proceeds from corporate actions relating to these shares to be included in the scheme. 
  
  The participant pack includes draft wording for articles of association which allow the company to sell dormant shares and transfer the sale proceeds to the authorised reclaim fund operated under the scheme. 
  
  It is fairly standard for listed companies to have provisions in their articles of association to deal with unclaimed shares and so companies may wish to consider whether the changes to the articles as drafted in the participant pack are an improvement on the provisions already in their articles. As many companies have updated the untraced shareholder provisions in their articles in recent years, we are not expecting many companies to adopt the drafting proposed by the Treasury as a means of dealing with untraced shareholders.