For a single company, the new requirements will apply where the company has 750 or more employees and turnover equalling or exceeding £750m.  Where the company is a parent company, it will be necessary to apply these size thresholds to the group that it heads on an aggregate basis.  The regulations permit reporting exemptions for subsidiaries.

The Regulations, which amend the Companies Act 2006, only apply to UK incorporated companies (public and private) meeting the relevant size criteria.  For in-scope companies with equity share capital admitted to trading on a UK regulated market for the whole of their financial year beginning on or after 1 January 2025, these changes will apply to periods commencing on or after 1 January 2025.  For other in-scope companies, they will apply to periods commencing on or after 1 January 2026.

The Regulations introduce the following new corporate reporting requirements:

Resilience statement

An annual resilience statement, to be included in the strategic report, in which companies in scope must explain the steps they are taking to build or maintain their business resilience over the short, medium and long term, including by:

• summarising the company’s strategic approach to managing risk and building or maintaining business resilience, including how risk and resilience are considered within the company’s business planning and investment cycle, and within relevant internal governance processes.
• describing the principal risks that the directors consider could provide a threat to the company’s operational or financial resilience over the short to medium term, and explaining how such risks are being managed.
• summarising why the directors have decided to adopt the going concern basis of accounting (that the company will be able to meet its liabilities as they fall due over an assessment period of 12 months or more), including any significant judgements or mitigating action taken to reach this conclusion.
• providing a directors’ assessment of the company’s prospects over the medium term (with this period to be defined and explained by the company), including consideration of the likelihood that the company will be able to continue in operation and meet its liabilities as they fall due over that period.
• reporting on an annual reverse stress test, which identifies a combination of adverse circumstances that could cause the company’s business plan to become unviable, and identifies any mitigating action put in place in light of the exercise.
• summarising any long-term trends or factors which could threaten the company’s business model or operations, and any plans the directors may have in place, or be considering, in response.

Additional information about distributable profits and purchase of own shares

There are two new requirements to provide information relating to distributable profits and purchase of own shares:

• disclosure of a distributable profits figure in the notes to the company’s accounts – this must state the company’s accumulated realised profits, or at least a minimum figure for such profits if it would involve unreasonable expense or delay to calculate the total accumulated realised profits. As this information will be included in the notes to the accounts, it will be subject to audit.
• distribution policy statement in the directors’ report – this must explain the company’s policy on the amount and timing of distributions to shareholders over the short and medium term (including dividends and share buy-backs), and any risks or constraints to the implementation of that policy. The statement must also address how the policy has been implemented in the year.

Material fraud statement

An annual material fraud statement, to be included in the directors’ report, providing a summary by the directors of:

• their assessment of the risks of material fraud occurring at the company (that is, fraud on a scale or of a nature that could influence the investment decisions of shareholders).
• the main measures in place and any new steps taken to prevent and detect material fraud.

Audit and assurance policy statement

A triennial audit and assurance policy statement, to be included in the directors’ report, and to include:

• a description of the company’s internal audit and assurance capabilities, and its plans for obtaining internal assurance over information in the company’s annual accounts and reports over the next three years (including any voluntary disclosures).
• an explanation of whether the company plans any external (third party) assurance of any information in its annual accounts and reports (beyond the annual statutory audit) over the next three years.
• an annual update covering how the audit and assurance policy has been implemented (and potentially updated) in the year.

The Financial Reporting Council (FRC) plans to consult separately on detailed non-statutory guidance to companies about good practice in complying with the new reporting statements required by the regulations. The FRC is expected to publish draft guidance for consultation by the end of 2023 or early 2024.  A webinar to discuss these requirements will be held by the FRC on 27 July 2023.  To gain stakeholder views on the new corporate reporting requirements, the FRC will be hosting four roundtables throughout September. These roundtables will cover the FRC’s role in relation to the new reporting requirements and detail key elements of the Statutory Instrument.

A press release with links to a factual overview of the draft regulations is available on the DBT website.  The draft regulations, accompanying explanatory memorandum and impact assessment are available on the legislation.gov.uk. Details of the forthcoming  roundtables are available on the FRC website.