UK Corporate Governance Update Summer 2025

On 23 June 2025, the Government published the UK’s Modern Industrial Strategy 2025 setting out their 10 year plan to “increase business investment and grow the industries of the future”. Within this plan it notes that it will simplify corporate reporting requirements and explore how to make it easier for foreign companies to move to the UK. Next steps from a company law perspective will include consultations on:

• streamlining non-financial reporting requirements under the Companies Act 2006 (2006 Act)
• how to design and implement a corporate re-domiciliation regime.

On 3 June 2025, the Financial Reporting Council (FRC) published the revised UK Stewardship Code 2026 (the 2026 Code) following a consultation earlier this year.

Key details

• The overarching definition of “Stewardship” has been amended to give greater flexibility to signatories to determine what they want to achieve from Stewardship.
• Reporting under the 2026 Code will be split into two parts:
  • Policy and Context Disclosure (P&C Disclosure) containing information on the organisation and its governance and resourcing (to be submitted every four years)
  • Activities and Outcome Report (A&O Report) reporting on how the organisation has exercised stewardship throughout the year and how they have applied the Principles of the Code through their activities and resulting outcomes (to be submitted every year).
• The 12 Principles that form part of the UK Stewardship Code 2020 (2020 Code) will be replaced with:
  • five disclosures that form part of the P&C disclosure
  • six principles that form part of the A&O Report.
• The FRC is introducing guidance to assist applicants with reporting. This has been published in draft form initially and the FRC is inviting comments on the draft (to be sent to the FRC by 31 August).
• The 2026 Code will be effective from 1 January 2026.

Next Steps

Signatories should continue to report this year in line with the 2020 Code. For any existing signatories, 2026 will serve as a transition year – signatories should submit the P&C Disclosure and A&O Report but, provided they submit these, they will not be removed as a signatory.

You can read further detail on the 2026 Code in our more detailed briefing.

New identity verification requirements introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA) begin to come into force this year.

What are the requirements?

When the reforms are in force, all directors, persons with significant control, LLP members and those filing documents at Companies House must verify their identity. Identity can be verified directly through a GOV.UK app or website, or in person at a Post Office, or through an authorised agent.

When do they come into force?

• Since 8 April 2025 – all individuals have had the option to voluntarily verify their identity.
• From Autumn 2025 – all new directors of UK companies, PSCs and LLP members must verify their identity and a 12 month transition period will begin for existing directors, PSCs and LLP members (but note not all companies and LLPs will have the full 12 month period as it will link into annual confirmation statement requirements).
• From Spring 2026 – anyone filing documents at Companies House must verify their identity.

You can read more detail in our briefing. Further statutory instruments have been published since the briefing was last updated and it has now been confirmed that identity verification requirements will also apply to all directors of overseas companies with UK establishments.

Please get in touch if you would like to discuss the requirements and how they apply to you.

The Court of Appeal has decided in Saxon Woods Investments Limited v Francesco Costa that a reasonable belief on the part of a director that he is acting in accordance with his duty to “act in the way he considers, in good faith, would be most likely to promote the success of the company …” under section 172 of the 2006 Act is not the correct test. The requirement for good faith requires honesty and the test for whether someone has acted honestly or dishonestly was clarified in the key Supreme Court case of Ivey & Genting Casinos in 2017. Its two fold approach comprises a subjective test of what the actual state of the individual’s knowledge or belief was followed by a test of applying the, objective, standards of ordinary decent people. Although a criminal law case, this approach applies equally in civil law cases where honesty is in question.

Please click here for our more detailed analysis of the case and key takeaways for directors.

On 25 June 2025, the Department of Business and Transport (DBT) published a consultation seeking views on the exposure drafts of the UK Sustainability Reporting Standards (UK SRS) which are based on the standards published by the ISSB Sustainability Standards Board in June 2023 (the ISSB Standards). This follows the previous recommended endorsement of the ISSB Standards by the UK Sustainability Disclosure Technical Advisory Committee (TAC), as reported in our Spring Corporate Governance Update.

The TAC recommended four minor amendments be made to the ISSB Standards and the UK government has accepted all of these amendments (subject to the outcome of this consultation. These are:

• Removal of transition relief in IFRS S1 which permits delayed reporting in the first year (i.e. for disclosures to be made at a different time in the year to the financial statements
• Extension of the transition relief in IFRS S1 which permits a climate first approach (rather than broader sustainability) in the first year of report to the first two years of reporting
• Removal of the requirement to use the Global Industry Classification Standard (GICS) in IFRS S2 (related to emissions) so that any appropriate classification standard can be used
• Removal of the ‘effective date’ clauses in IFRS S1 and IFRS S2 as the effective date will be set in legislation.

The consultation is seeking views on these proposed amendments and other questions including:

• the merits of extending reporting requirements to economically significant large private companies
• whether such large private companies would be ready to report against the UK SRS
• any opportunities to simplify the reporting requirements for those private companies.

Future legislation will be needed to adopt the UK SRS and make reporting against them mandatory for UK companies. However, the Financial Conduct Authority (FCA) can introduce new reporting requirements for listed companies and it has indicated previously that it intends to consult separately on disclosure requirements for listed companies.

The consultation will be open for 12 weeks from 25 June to 17 September 2025.

At the same time as the consultation on the UK SRS was published, DBT published another consultation on developing an oversight regime for the assurance of sustainability-related financial disclosures and the Department for Energy Security and Net Zero published a consultation on climate related transition plan requirements. The three consultations together are stated to form the first step in developing a UK sustainability reporting framework that is fit for the long term. It also indicates that there will be a consultation published that will focus on streamlining the UK’s current non-financial reporting framework under the 2006 Act.

FRC Report on digital reporting in 2024/5 reports

On 28 April 2025, the FRC published its annual report on digital reporting in annual reports for the year 2024/2025.

Since 2021, certain companies admitted to trading on UK regulated markets have been required under FCA rules to produce their annual financial report in a structured digital format called iXBRL enabling that information to be machine-readable. The aim of the FRC’s review is to enhance the quality and accessibility of financial reports through recommendations based on the findings gathered during the process. The FRC’s review is based on a market wide analysis of digital reporting using analysis tools as well as a detailed assessment of 25 annual reports filed with the FCA during 2024.

The report notes that a number of basic errors and issues previously observed by the FRC have been resolved but there are a number of quality issues in more complex areas. Key issues include creating custom tags (extensions) where these are not necessary, not anchoring extensions correctly, missing tags and failing to put the report on the company’s website.

The FRC is now further reviewing digital reporting by carrying out a sample of reviews alongside the FRC’s normal monitoring of annual reports in order to support better quality data.

FRC feedback statement on opportunities for digital reporting

On 15 May 2025, the FRC published a feedback statement summarising responses to its discussion paper on opportunities for digital reporting in the UK, published in August 2024. The paper notes that the UK is moving into a new phase of digital reporting, given various changes such as the post-EU Exit legislative landscape and the impact of the Economic Corporate Crime and Transparency Act 2023 on filing requirements at Companies House. Responses covered areas such as the trade-offs between UK specific reporting requirements and maintaining comparability between all UK companies and internationally as well as the need for improved guidance and support materials tighter with concerns about costs, proportionality and burdens for smaller entities.

Although there are no specific decisions to be taken this year as a result of responses, the responses will inform current policy thinking and ongoing service development.

Amendment regulations and guidance note

Regulations (Regulations) amending the directors’ remuneration reporting regime for UK listed companies came into force on 11 May 2025. The Regulations amend the 2006 Act and related regulations to revoke or repeal most of the requirements relating to reporting of directors’ remuneration that were introduced in 2019 to implement parts of the revised Shareholder Rights Directive (EU) 2017/828. This is because most of the requirements overlapped with existing UK reporting requirements. The Regulations also make change to the audit regulatory framework to correct inconsistencies and gaps that arose during the process of assimilating relevant EU audit legislation following Brexit.

DBT has published a guidance note to provide clarification on when the changes apply. As set out in the guidance note, the changes to the directors’ remuneration reporting framework apply to the following key areas:

• Remuneration reports – those reports published for a financial year beginning on or after 11 May 2025. Reports no longer need to include a table showing annual change in salary, benefits and bonus for directors and employees of the company and the “single total figure” pay table will no longer need to include fixed and variable pay totals columns
• Remuneration policies – new policies approved by shareholders on or after 11 May 2025
• Payments to directors outside the remuneration policy – from 11 May 2025, payments outside the existing remuneration policy must be made in accordance with the revised procedure for shareholder approval set out in the Regulations. This means that shareholders can approve the payment rather than approving an amendment to the remuneration policy itself.

Updated GC100 and Investor Group guidance

On 5 June 2025, the GC100 and Investor Group published a revised version of its Directors’ Remuneration Reporting guidance to reflect evolving best practice and the changes set out in the Regulations. Key changes include new guidance on the following:

• Engagement with shareholders and consideration of shareholders’ views
• Environmental, social and governance measures in variable pay
• Consideration of general workforce pay
• Potential windfall gains.

The Guidance also clarifies the overlapping requirements of the UK Corporate Governance Code on significant votes against any resolution, employee consultations and workforce pay and conditions.

On 10 April 2025, the Institute of Directors (IoD) announced the launch of a Commission to explore the role of non-executive directors (NEDs) in the UK. The IoD states that the purpose of the Commission is to:

• evaluate whether NEDs are adding value to boards of directors and corporate governance more generally
• identify the main challenges and obstacles that face NEDs, and consider how (and if) they can be overcome
• make recommendations to boards and policy makers concerning the more effective deployment of NEDs.

The Commission will run until July 2025 and will report its findings in the Autumn.