UK Corporate Governance Update Winter 2025/26

In our autumn 2025 update, we noted the delays in audit and corporate governance reform. On 7 January 2026, the Department of Business and Transport (DBT) reconfirmed in a Written Answer to a Parliamentary question that it no longer intends to publish a draft Audit Reform and Corporate Governance Bill in the current session of Parliament. The next session of Parliament is currently expected to start in May 2026.

On 21 October 2025, DBT published a written statement setting out revised plans to modernise and simplify corporate reporting. The Government plans to exempt most medium-sized private companies and wholly owned subsidiaries from producing a strategic report as part of the annual report and accounts and to remove entirely the requirement to produce a directors’ report. There will also now be an expanded review of the UK’s corporate reporting framework which will take place in 2026 and consider the annual report and accounts in its entirety rather than narrowly looking at non-financial reporting.

On 21 October 2025, HM Treasury also published its “Regulatory Action Plan - Progress Update and Next Steps” which amongst other things, noted that:

• the Financial Reporting Council (FRC) would clarify UK Corporate Governance Code (UKCGC) guidance that remuneration of non-executive directors (NEDs) in shares is appropriate (see below)
• the Investment Association had been asked to discontinue its public register tracking significant shareholder discontent in UK FTSE All Share companies.

Identity verification requirements introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA) came into force on 18 November 2025.

The following individuals must now verify their identity:

• all directors of English companies and all individual members of LLPs
• all persons with significant control (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 is now a transition period of up to 12 months for existing directors, LLP members and PSCs to verify their identity. 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.

Our identity verification briefing sets out further detail on the reforms and timing.

On 25 November 2025, Institutional Shareholder Services (ISS) published updates to its UK and Ireland proxy voting guidelines for 2026.

The most significant change relates to the holding of virtual shareholder meetings. The guidelines now clarify that ISS will generally vote for proposals allowing for the convening of hybrid shareholder meetings if it is clear that it is not the intention to hold virtual-only shareholder meetings and includes a new definition of "physical or in-person shareholder meeting" which is a meeting where participating shareholders and board members meet in a specified physical location together. At such meetings, both shareholders and board members are physically present, enabling direct, in-person interaction. The definition is used in the definition of hybrid meeting which refers to an in-person, or physical, meeting in which shareholders are permitted to participate online. ISS state the changes reflect recent developments where shareholders have been provided with a physical meeting venue but no directors are present.

ISS will therefore only vote for proposals to amend articles of association where a physical meeting is held where both directors and shareholders are present together as well as an online option. The change to the guidelines is interesting given the publication of the GC100 guidance for virtual meetings of shareholders (see below).

On 4 December 2025, Glass Lewis (GL) published its 2026 benchmark policy guidelines for the UK. Key updates include the following:

• Approach to committee size recommendations – GL will typically recommend shareholders vote against, rather than abstain from voting on, the re-election of the audit and/or remuneration committee chair where the committee is of an insufficient size when compared to the requirements set out in the UK Corporate Governance Code.
• Gender diversity – given that the timeline for achieving the FTSE Women Leaders Review targets has now passed, GL will typically recommend against the re-election of the nomination committee chair where the board of a FTSE 350 company does not comprise at least 40% gender diverse directors, absent any mitigating circumstances.
• AIM companies’ board independence – for consistency with the 2023 QCA Corporate Governance Code, the guidelines have been updated to clarify that the boards of AIM companies should be at least half independent and include a minimum of two independent non-executive directors. If more than half of the members are affiliated or inside directors, GL will typically recommend a vote against one or more of the non-independent directors in order to satisfy this threshold.
• Pay for performance – the guidelines now include a description of GL’s new proprietary pay for-performance model. GL has also clarified that while the outcome of this model may impact the analysis of a company’s executive remuneration practices, GL’s recommendations on the remuneration report and policy proposals will continue to result from a holistic assessment of various factors including the company’s remuneration

On 11 December 2025, Pensions UK (formerly the PLSA) published its Stewardship and Voting Guidelines 2026. The Guidelines include a new section on key emerging trends from 2025 which amongst other things highlights AI, cybersecurity and virtual meetings as emerging risks. The Guidelines have introduced new expectations for cyber risk governance, including disclosure of frameworks, incident response, and board oversight and highlight support for hybrid AGM formats to ensure meaningful shareholder engagement (see below for the GC100 guidance on virtual shareholder meetings).

On 8 December 2025, GC100, the association of general counsel and company secretaries of FTSE 100 companies, published its best practice guidance for holding virtual meetings of shareholders. The guidance is available through the Thomson Reuters Practical Law website.

Key points include the following:

• Principles – there are eight provisions, covering topics such as engagement by shareholders, the company’s website, the notice of meeting and attendance by the directors
• Explanatory statements – if the company is already authorised by its articles to hold virtual meetings and has not yet held a virtual meeting it may wish to consider a statement in the explanatory notes stating that the directors consider that holding virtual meetings is in the best interests of the company and its shareholders. If the company intends to amend its articles or adopt new articles to permit virtual meetings the company should consider proposing a time-limited authority for virtual meetings for a period of up to five years before the company seeks further approval for an indefinite period

The guidance notes that the Government has confirmed its commitment to amend the Companies Act 2006 to clarify that virtual shareholder meetings are permitted. The recommendations included in the guidance seek to ensure that the quality and effectiveness of shareholder engagement in a virtual context are maintained, that transparency is enhanced and that board accountability is preserved.

On 9 December 2025, the Pre-emption Group (PEG) published its third report monitoring the use of the revised statement of principles for the disapplication of pre-emption rights for UK listed companies which was published in November 2022 (2022 statement). The 2022 statement allows listed companies to seek authority to disapply pre-emption rights for up to 20 per cent of issued share capital, split between 10 per cent for general corporate purposes and 10 per cent for an acquisition or a specified capital investment. The report, which covers the period from 1 August 2024 to 31 July 2025, notes the following:

• 77.6 per cent of the 353 FTSE 350 companies that tabled a resolution to disapply pre-emption rights sought an enhanced authority (i.e. one that exceeded the authority permitted under the previous statement of principles published in 2015). This is an increase from 67.1 per cent in the previous year and from 55.7 per cent in the first year of reporting
• 60.8 per cent of companies tabling disapplication of pre-emption rights resolutions did so for a specified capital investment. This is slightly down from 64.1 per cent the previous year
• 72.6 per cent of resolutions seeking disapplication authority for general corporate purposes passed with less than 5 per cent votes against.

When undertaking monitoring, PEG noted that several AGM notices and resolutions had been filed incorrectly and were therefore difficult to locate. This was particularly the case with investment trusts. PEG therefore reminds companies that it is important that these key documents are filed in the correct way and in a timely manner. A small minority of investors continue to disagree with the principles set out in the 2022 statement and PEG may engage with them in the future. PEG continues to encourage reporting of any misuse of disapplication authorities, including cash box structures that raise funds in excess of the disapplication authority granted by shareholders at the most recent AGM.

On 13 November 2025, the FRC published its annual review of corporate governance reporting against the UKCGC. This review is the last one looking at reporting against the 2018 UKCGC and has been produced from a random sample of 100 companies following the UKCGC, being a mixture of FTSE 100, FTSE 250 and small cap companies. The review focuses in particular on concise reporting and encourages listed companies to streamline their content to the most material strategic and governance considerations, noting that there were many instances of boilerplate, repetitive content and generic statements.

The FRC notes that flexibility is a core strength of the UKCGC. It encourages inclusion of a dedicated statement confirming whether all principles of the UKCGC have been applied and the extent that individual provisions have been followed. Where there is divergence from individual provisions it is important that companies provide clear and specific explanations setting out the rationale for the departure and describing the alternative governance arrangements.

On 5 November 2025, the FRC published updated guidance on the UKCGC which provides clarity on how companies can structure remuneration for non-executive directors, making clear that the “comply or explain” principle provides flexibility to companies to structure NED remuneration. The guidance explains that, in line with the UKCGC, boards have flexibility to pay NEDs a portion of their fees in shares, provided they maintain transparency about their rationale and approach. Where companies consider alternative remuneration structures, the guidance emphasises the importance of preserving independence, noting that performance-related remuneration remains inappropriate for independent NEDs.

As we flagged in our Summer Corporate Governance Update, on 3 June 2025 the FRC announced the publication of the UK Stewardship Code 2026 (the 2026 Stewardship Code). The changes introduced by the 2026 Stewardship Code include a streamlined reporting structure and aim to significantly reduce the administrative burden for signatories. The new Code applies from 1 January 2026 and the first applications to it will be accepted in Spring 2026. 2026 is a transition year where the FRC will be supporting signatories to report against the 2026 Stewardship Code.

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

FCR final guidance on the 2026 Stewardship Code

On 30 October 2025, the FRC published final Guidance: UK Stewardship Code 2026 to accompany the 2026 Stewardship Code. The guidance contains non-prescriptive suggestions for the types of information organisations may wish to include in their reporting against the Code. In particular it provides Policy and Context Disclosure Guidance and Activities and Outcomes Report Guidance for Asset Owners and Asset Managers and Service Providers.

The guidance was published in draft form in June 2025 and this final version has been updated to reflect stakeholder feedback on the earlier draft.

FCR report on preparing for the 2026 Stewardship Code

On 11 November 2025, the FRC published Report: Preparing for the UK Stewardship Code 2026 to support signatories as they prepare to report against the Code (FRC Press Release). The report provides practical insights and examples of effective reporting against the UK Stewardship Code 2020, which will remain relevant as existing signatories transition to the 2026 Stewardship Code's new streamlined reporting structure.

In particular, this guidance gives examples of reporting in the following areas: (i) Engagement Reporting; (ii) reporting on the selection and oversight of external managers; (iii) reporting on voting in listed equities; (iv) reporting on stewardship in non-public equity asset classes; and (v) the Service Provider Code.

On 13 November 2025, the European Parliament (EP) adopted its negotiating mandate on the European Commission’s proposal for an Omnibus directive simplifying sustainability reporting and due diligence requirements introduced by the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) (the Simplification Directive). Read more here.

The EP and European Council reached a provisional agreement on the text of the Simplification Directive on 9 December 2025 and the EP adopted its first reading position on the text on 16 December 2025. The text can be found here.

The agreed position set out in the Simplification Directive significantly increases the thresholds for entities to be considered in-scope, and the disclosure burden under CSRD will be simplified even further through proposed amendments to the European Sustainability Reporting Standards in the next six months. The Simplification Directive also introduces protections for companies which are not within scope of the CSRD or CSDDD, but are within the value chain of reporting entities. Please see our briefing here for more details of the changes.

The approved text must now be adopted by the European Council and will come into force 20 days after publication in the Official Journal. Member states will then be required to transpose it within 12 months, with the exception of Article 4.

On 10 November 2025, the EC published a "quick fix" delegated regulation in the Official Journal (the Quick Fix Regulation).

As part of the Omnibus I package to simplify EU rules across a number of areas including sustainability reporting, the stop-the-clock directive delayed the application of the CSRD for wave two and three companies by two years.

However, the stop-the-clock directive did not delay the reporting requirements for wave one companies. This means that, without this new “quick-fix”, wave one companies would have been required to report additional information for financial years 2025 and 2026.

The Quick Fix Regulation:

• delays by two years the requirement for wave one companies to report on the anticipated financial effects of sustainability-related risks until 2027.
• extends to all wave one companies (not only those with up to 750 employees) the phase-in provisions relating to ESRS E4 (biodiversity and ecosystems), ESRS S2 (workers in the value chain), ESRS S3 (affected communities), and ESRS S4 (consumers and end-users).
• extends to all wave one companies the safeguard provision, which provides that where an undertaking uses temporary exemptions for a complete topical standard, it is still required to report summarised information on the relevant topic if it has concluded that the topic is material.

The Regulation entered into force on 13 November 2025 and applies retrospectively to financial years beginning on or after 1 January 2025. Further details can be found here.

On 5 November 2025, the Companies (Directors’ Report) Payment Regulations 2025 (Payment Regulations) were published. The Payment 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 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. DBT has published guidance in relation to the new reporting requirements which includes some worked examples.

On 3 December 2025, the FRC published their insights on companies’ reporting against the Wates Corporate Governance Principles for Large Private Companies. The FRC identified that in many instances reporting against Principles One (Purpose and Leadership), Two (Board Composition) and Five (Remuneration) continues to lack meaningful insight, and suggested the following improvements:

Principle One (Purpose and Leadership): reporting against Principle One is generally of lower quality compared to reporting against other principles, often appearing generic or simply mentioning in the existence of a purpose and strategy without any specific detail or examples. The FRC has found there is a lack of discussion on the outcomes of any actions undertaken by the board (e.g. reporting on culture could be improved through reflecting on how any initiatives have improved staff wellbeing (such as increased positive responses to any staff surveys)).

Principle Two (Board Composition): Balance and diversity - companies may consider providing insight into the range of skills, expertise, and professional backgrounds currently represented on the Board, and be transparent about gaps in skills and experience. Companies that do not currently have independent NEDs are encouraged to disclose any plans to recruit one, or to explain how effective challenge is achieved in the absence of a NED.

Principle Five (Remuneration): Better reporting against this principle provided insight into the decisions made regarding remuneration and how the sustainable success of the company was considered. This does not necessarily mean disclosing specific figures, but rather the rationale behind any remuneration decisions.
The FRC also noted that stakeholders found that the fragmented approach to preparing different sections of the annual report can impact the coherence and consistency of corporate governance disclosures, and encouraged companies to use cross-referencing and checking for duplication to make it easier for the reader to navigate and engage with the annual report.