UK Corporate Governance Update Autumn 2025

Our Autumn 2024 corporate governance update set out the latest position in relation to audit and corporate governance reform, noting that the King’s Speech on 17 July 2024 had confirmed the new Government’s intention to publish a draft Audit Reform and Corporate Governance Bill (Bill) to strengthen audit and corporate governance in the UK. The Autumn 2024 update noted that the Bill was not expected to be passed into law in the first 12 months of the new Government. Little progress has been made since then. On 4 September 2025, an update on the latest position was set out in a letter from the Department for Business and Trade (DBT) to Liam Byrne MP, Chair of the Business and Trade Committee. Key points to note are as follows:

• the new audit regulator will be called the Corporate Reporting Authority (CRA) (not the Audit and Reporting Authority (ARGA) as had been signposted by the previous Conservative government)
• the CRA will hold directors to account for serious failures of corporate reporting duties such as ensuring that accounts are true and fair
• the Government will propose to extend public interest entity (PIE) status to large unlisted companies with both more than 1000 employees and a turnover of £1bn or more. This is different from the proposal set out in the previous government’s Response document “Restoring trust in audit and corporate governance” from May 2022 which suggested that the tests would be more than 750 employees and £750m in turnover
• the Government will introduce measures to address poor functioning of the audit market, particularly for the largest listed companies but will not pursue the previous government’s managed shared audit and market share cap proposals
• a consultation will be published in the autumn which will include additional questions around PIE status and whether existing rules around majority voting rights in audit firms being held by qualified auditors should be changed.

The letter does not commit to timing of the Bill but a previous letter from DBT to the Committee in July 2025 confirmed that it would not be introduced during the current Parliament which is currently expected to be dissolved in spring 2026. A cross-bench group of MPs has written to the Government in response, urging it to prioritise the Bill and expressing disappointment at the further delay.

In September 2025, the FRC published its annual review of corporate reporting. Its remit covers the annual report and accounts and interim reports of listed companies and the annual reports and accounts of UK-incorporated public companies, large private companies, and limited liability partnerships. The report sets out the findings from the FRC’s review work in relation to the 2024/2025 monitoring cycle and the FRC’s expectations for the next reporting cycle. Key points include:

• a lower proportion of reviews this year resulted in substantive queries and overall the number of restatements required has fallen compared to the three previous years
• the quality of corporate reporting by FTSE 350 companies has been maintained, however, the FRC notes that there remains a gap in reporting quality between companies within the FTSE 350 and other companies. The FRC is undertaking a thematic review into reporting by UK smaller listed companies which will be published before the end of 2025
• inconsistency of information and explanations between the financial statements and other sections of the report and accounts remains a key theme
• TCFD reporting remains in the FRC’s top 10 issues although it had fewer substantive queries this year. This is the first year the FRC has reviewed the extent of compliance with the Companies Act 2006 climate related financial disclosures (CFD) reporting. It reminds companies that all CFD disclosures must be include in the report and accounts as there is no ability to cross-reference to information outside the report and accounts (as there is with the TCFD disclosures required by the UK Listing Rules) and that disclosures are mandatory and not comply or explain
• although the number of queries in relation to the strategic report and other Companies Act 2006 matters decreased, the FRC continues to raise issues in relation to the requirement for the strategic report to be fair, balanced and comprehensive and compliance with distributable profits requirements when paying dividends.

Key expectations for 2024/2025 annual reports and accounts include:

• pre-issuance checks - the company should have a sufficiently robust review process to identify common technical compliance issues
• judgements, risks and uncertainties – there should be clear and consistent disclosures about judgements, uncertainty and risk so that users can understand the positions taken in financial statements
• narrative reporting – the strategic report should include a fair, balanced and comprehensive review of the company’s development, position, performance and future prospects.

As in previous years, companies are reminded to take a step back and consider whether the report and accounts as a whole:

• tells a consistent and coherent story
• is clear, concise and understandable
• includes all material and relevant information
• includes only material and relevant information.

Draft payment practice regulations published

In July 2025, a draft of the Companies (Directors’ Report) Payment Regulations 2025 (Regulations) was published. The Regulations amend existing regulations to introduce new reporting requirements for large companies to report annually within their directors’ reports on their payment practices and performance with respect to suppliers. They will come into force on 1 January 2026 and will have effect in respect of a company's financial year beginning on or after that date. Contracts for financial services are not included.

Consultation on late payments

In July 2025, DBT published a consultation which proposes a number of measures to deal with late payment of invoices including ensuring that audit committees or boards of large companies provide commentary and make recommendations regarding payment performance to directors before data is published or included in the directors’ report. The consultation closes on 23 October 2025.

In July 2025, the Home Office published an optional template to be used as a guide for responding to supply chain transparency requirements in the UK, Australia and Canada. It is designed to reduce administrative burdens for organisations subject to reporting requirements in those jurisdictions and supports the development of one report for all three jurisdictions. The template encourages proportionate risk-based reporting which is grouped by theme into seven overarching requirements including descriptions of risk management processes and due diligence processes in relation to modern slavery, forced labour and child labour in supply chains. The template broadly reflects the structure and content suggested for statements that are published to comply with section 54 Modern Slavery Act 2015 (MSA 2015) in the recently updated UK government guidance, Transparency in supply chains: a practical guide (see our Spring 2025 Corporate Governance update for further details). As noted the template (and the suggested structure in the guidance) is optional and legislation would be required to mandate the content of any statements published pursuant to section 54 MSA 2015. The current UK Government has indicated no intention to legislate in this area.

Identity verification requirements introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA) are due to come into force over the coming months.

From 18 November 2025, the following individuals must verify their identity:

• all directors of English companies and all individual members of LLPs
• all PSCs of English companies and LLPs
• all directors of overseas companies with UK establishments.

New appointees/registrations must verify their identity prior to appointment/registration (as applicable). There will be a transition period of up to 12 months for existing directors, LLP members and PSCs. The length of the transition period will vary depending on confirmation statement date (in the case of directors and LLP members), birth month (in the case of PSCs) and date of registration (in the case of overseas companies with UK establishments).

Identity verification requirements for corporate directors, corporate LLP members and relevant legal entities will come into force at a later date.

You can read further detail on the reforms and timing in our identity verification briefing.

UK Green Taxonomy

On 15 July 2025, HM Treasury announced that it had decided not to take forward plans to introduce a UK green taxonomy. The purpose of a green taxonomy is to support investment into activities aligned with sustainability goals. The announcement follows a consultation launched in November 2024. Feedback received during the consultation highlighted concerns centred around the real world application of a taxonomy and that other policies may be more impactful in achieving sustainability goals (for example, the UK Sustainability Reporting Standards that are due to be introduced).

European Commission adopts ‘quick fix’ delegated regulation

On 11 July 2025, the European Commission adopted a proposal for a delegated regulation to introduce targeted “quick fix” amendments to the first set of European Sustainability Reporting Standards (ESRS) for those companies that have already started reporting under the Corporate Sustainability Reporting Directive (CSRD). The delegated regulation postpones the application of certain disclosure requirements introduced by CSRD. This forms part of the recent push by the European Union to simplify sustainability rules in the EU. You can read further information on the simplification proposals here.

European Commission Recommendation on voluntary sustainability reporting standard

On 30 July 2025, the European Commission adopted a Recommendation on a voluntary sustainability reporting standard for SMEs and micro undertakings (VSME). It aims to support non-listed SMEs and reduce the administrative burden by making it easier for them to respond to requests for sustainability information from large companies which are subject to sustainability reporting requirements pursuant to CSRD.