When the Coalition came into power in 2010 they committed to modernising company law, which included changing the narrative reporting framework. Following two Government consultations, the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 comes into force from 1 October.
‘Better and simpler company reporting’. That was the headline the Department for Business, Innovation & Skills chose when confirming the reforms earlier this year, but how are they delivering on this promise?
Firstly, should the term ‘narrative reporting’ be new to you, it simply refers to the non-financial information in the front section of an Annual Report. This content - which expands on strategy, performance, markets and more - is vital to enabling investors to make informed decisions, a situation identified by the Kay Review as problematic.
When announcing the reforms in June, Business Minister Jo Swinson said: “In order for shareholders to fully hold a company to account they need to have the right information to hand. Annual Reports are a key tool for shareholders to get a good understanding as to how a company is performing.”
The objectives of the updates to the Companies Act 2006 are to simplify and strengthen the non-financial information contained in an Annual Report. This will be achieved through the introduction of the Strategic Report, which replaces the previously required Business Review.
In the Strategic Report, quoted companies will be obligated to report on their strategy and business model, as well as on human rights, environmental, employee, social and community issues.
Diversity is also an important area of expansion, with companies required to disclose the number of women on their board, in senior executive positions and in the organisation as a whole. Finally, greenhouse gas (GHG) emissions reporting is also now needed.
Are you prepared to meet these new needs? Is your company obligated to comply? Why not find out more by talking to Jones and Palmer.