Company law – government announces proposed changes to company law, including non-financial reporting requirements

The Department of Business and Trade (DBT) has announced in a ministerial statement details of changes it proposes to make to company law and to streamline non-financial reporting (NFR) requirements, including laying legislation by the end of 2024 to change the monetary thresholds used for the classification of companies.

Streamlining NFR

The project to streamline NFR was initiated by the previous government, which published a call for evidence in May 2023 (see our blog post here) and set out its proposals for change in March 2024 (see our blog post here).

The DBT has now announced that it will lay legislation before the end of the year to:

• raise the monetary threshold used for the classification of companies as large, medium or small by 50%;
• remove reporting requirements that are viewed as being redundant; and
• implement certain “technical fixes to the UK’s audit framework”.

Strategic reports for medium-sized companies 

The previous government had also consulted on exempting medium-sized companies from preparing a strategic report as part of their annual report and accounts and increasing the maximum number of employees that a company can have in order to be ‘medium-sized’ from not more than 250 to not more than 500 employees (see our blog post on this consultation here).

The new government has published a summary of responses to that consultation. Whilst on balance respondents were in favour of the proposals, there was support for a more holistic look at NFR. The government has therefore decided not to take these proposals forward at this stage but will look at them further as part of a wider review of NFR which it will be launching in spring 2025.

Other company law changes 

The DBT statement also:

• says that it will review shareholder communication in the light of new technology and to clarify the legal position in relation to virtual AGMs; and
• confirms the government’s commitment to speeding up the process for capital raising, by implementing the remaining recommendations of the Secondary Capital Review Report (see our blog post here on the SCRR).

The timing for these proposals is not clear.

The DBT statement was made as part of the launch of a Green Paper on shaping the new UK Industrial Strategy, which aims to tackle the barriers to growth in key sectors. The statement also welcomed the publication of a report of the Independent Expert Panel on corporate re-domiciliation, which supports the adoption of a two-way re-domiciliation regime, allowing both inbound and outbound re-domiciliation in the UK which the expert panel believes will increase the attractiveness of the UK. The government says it will consult on a corporate re-domiciliation regime in due course.