COVID-19: financial reporting in 2021

When we first wrote about the relaxation of financial reporting deadlines in March last year, at no stage did we expect those relaxations would still be needed for the 2021 AGM season. And yet here we are.

On 27 January 2021, the FCA and the FRC published a Joint Statement reminding companies of the measures that provide some flexibility around financial reporting deadlines and confirming that they still apply. The FCA has also published a Summary of these measures.

On the same date, the London Stock Exchange announced that the temporary extensions to reporting deadlines under the AIM Rules continues for the time being (see Inside AIM).

All of these temporary reliefs for delayed publication of financial statements remain in place until further notice.

When do listed companies have to file annual accounts?

Listed companies continue to have an additional two months to file their annual accounts if they want to - so they can be filed within six months of the year end instead of four months.

Companies are not expected to request a suspension of their listed securities if they do not meet the four-month deadline (as is normally required under the DTRs) provided they meet the six-month deadline. Nor will the FCA take any steps unilaterally to suspend the listing for breach of the DTRs (though it reserves the right to take this action (if necessary) for other reasons). Companies will also not face enforcement action for breach of DTR 4.1.3R (which requires a company to make public its annual financial report at the latest four months after the end of each financial year).

The joint statement notes that "given the heightened risk, challenge and uncertainty, audit committees may consider it appropriate to set out in their annual report the work they have undertaken, and the measures they have agreed to ensure high-quality reporting and audit for the period affected. This might include how they have ensured they have all.

What about filing accounts at Companies House?

The deadline for filing accounts with Companies House is currently extended by 3 months - to 9 months for public companies and 12 months for private companies. This extension ends on 5 April 2021, and companies will then have to apply to Companies House for an extension in the normal way. The joint statement notes that companies will be granted a discretionary 3-month extension where they cite coronavirus as a factor impacting the timely completion and/or audit of accounts.

Only one filing extension is allowed for an accounting period and the extension cannot take the filing date later than 12 months after the end of the accounting period.

When do listed companies have to file half yearly reports?

Listed companies continue to have an additional month within which to publish their interim results - so they can be published within four months of the half year instead of three months.

What are the requirements for AIM companies' annual accounts?

AIM companies can apply to AIM Regulation for a three- month extension to the reporting deadline for the publication of their annual audited accounts pursuant to AIM Rule 19.

The request for an extension must be made to AIM Regulation by the nominated adviser, before the AIM company's current AIM Rules reporting deadline.

What are the requirements for AIM companies' half-yearly reports?

AIM companies are allowed an extra month to notify their half-yearly report under AIM Rule 18 - so they have four months from the end of the half year instead of three.

An AIM company wanting to do this:

• must notify its intention to use the extra one-month period via an RIS before its reporting deadline, and
• its nominated adviser must separately inform AIM Regulation.

AIM companies should continue to consider their disclosure obligations under the AIM Rules in conjunction with the advice and guidance of its nominated adviser.

What guidance has been issued?

On 4 December 2020, the FRC updated its guidance for companies on corporate governance and reporting, that highlights some key areas of focus for boards in maintaining strong corporate governance and provides high-level guidance on some of the most pervasive issues when preparing their annual report and other corporate reporting.

The FRC has also published a year-end letter to CEOs, CFOs and Audit Committee Chairs. 

The joint statement notes that "given the heightened risk, challenge and uncertainty, audit committees may consider it appropriate to set out in their annual report the work they have undertaken, and the measures they have agreed to ensure high-quality reporting and audit for the period affected. This might include how they have ensured they have allowed enough flexibility in the year-end timetable to complete all the necessary work to an appropriate standard that will meet investor and stakeholder expectations."

Is there any extension for AGMs?

The temporary ability to postpone AGMs expired on 30 September 2020. Companies can, however, continue to use the greater flexibility about the way in which meetings are held (under the The Corporate Insolvency and Governance Act 2020 (CIGA)) for AGMs held on or before 30 March 2021. For example, companies can hold meetings, and allow votes to be cast, by electronic means.

CIGA provides no scope to extend these measures beyond that date. The Department for Business, Energy and Industrial Strategy are working with stakeholders on further guidance.

See Extension of rules that temporarily ease company meeting for more information.

In Primary Market Bulletin No 28, the FCA encourages companies to engage with shareholders to ensure investors are appropriately informed and aware of the company's actions. If companies are not holding physical general meetings, the FCA considers it good practice to allow shareholders to ask questions and exercise their voting rights effectively.

On 8 June 2020, the FRC published Q&A and guidance on best practice for AGMs. These should be read in conjunction with the Q&A briefing of 17 April 2020.

Don't forget Market Abuse Regulation (MAR)

The FCA reminds issuers that, during this period, it is as important as ever that the market is kept up to date with information. Companies are still required to fulfil their obligations concerning inside information under MAR as soon as possible unless they have a valid reason to delay disclosure. Companies must continue to assess carefully what information constitutes inside information at this time, recognising that the global pandemic and policy responses to it may alter the nature of information that is material to a business's prospects. (See also Market Watch 63 that sets out the FCA's expectations of market conduct in view of increased capital raising events and alternative working arrangements as a result of COVID-19.)