Restoring trust in audit, corporate governance and reporting – Draft legislation withdrawn
Mon 16 Oct 2023
The Government has withdrawn draft legislation, which was published in July 2023, that set out additional corporate reporting requirements as a result of the original consultation published back in March 2021 Restoring trust in audit and corporate governance on strengthening the UK’s audit, corporate reporting and corporate governance systems.
The Government has announced the withdrawal after its consultation with companies raised concerns about imposing the additional corporate reporting requirements that included providing an annual Resilience Statement, an Audit and Assurance Policy statement and a material fraud statement, as well as disclosing distributable reserves and dividend policy information.
The draft legislation, which was intended to be applicable to public interest entities and certain other entities (such as private companies, LLPs, AIM companies) meeting the size thresholds of having more than 750 employees (on a global basis) and annual turnover of at least £750 million, was expected to be effective from 1 January 2025 for listed entities and from 1 January 2026 for non-listed entities.
What is the background to this draft legislation?
The draft legislation published in July 2023 had been long-awaited since the start of the Government’s consultation looking to reform the audit, corporate governance and corporate reporting systems in the UK. For further details, please refer to our previous blog articles: BEIS White Paper – Government’s response to the consultation: Restoring trust in audit and corporate governance – Update on the original proposals and what this means for corporate reporting? (part 2) and BEIS consultation: Restoring trust in audit and corporate governance – Focusing on the proposals for corporate reporting.
What does this mean for corporate reporting now?
The Government’s intention is to develop a “new reform package [that] will deliver a more targeted, simpler and effective framework for both business and investors [and it] will be setting out options to reform the wider framework shortly to reduce the burden of red tape on businesses.”
The Government has also announced that it will remain “committed to wider audit and corporate governance reform, including establishing a new Audit, Reporting and Governance Authority (ARGA) to replace the existing Financial Reporting Council (FRC) and [it] will bring forward legislation to deliver these reforms when Parliamentary time allows.”
At this stage, therefore, we do not know what the new reform package may look like and when any corporate reporting changes may be brought in for UK businesses.
