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Equiniti Bulletin – October 2021

EQ Bulletin – October 2021

05 October 2021

Welcome to our monthly bulletin of what’s happening within the regulatory environment that impacts the share registration and employee share plans space.

Paul Matthews Circle Paul Matthews CEO - EQ Boardroom

The 2021 EQ Conference takes place next week, and we're looking forward to welcoming you to what's sure to be an informative and engaging event. We're also excited to be launching our inaugural research paper, the Shareholder Voice, at the event. If you would like any more information on the event, please speak to your Client Relationship Lead.

This month, we report on the FRC's updated bulletin on illustrative auditor's reports for private-sector financial statements and the annual review of FTSE 100 CEO pay.

As always, if you have any questions on the content of this month's bulletin, please get in touch with your Client Relationship Lead.

Kathy Cong Circle Kathy Cong Managing Director, Prism Cosec

An Insight From Prism Cosec

A rather mixed bag this month with no one dominant theme. Of some interest is the report issued by the High Pay Centre and the Chartered Institute of Personnel and Development which focusses on CEO remuneration during the COVID-19 pandemic.

The Financial Reporting Lab has also issued some reports and survey results focussing firstly on the reporting on risks, uncertainties, opportunities and scenarios and secondly on structured electronic reporting for annual financial reports which will become fully effective from 1 January 2021. Finally with the on-going emphasis on ESG reporting the Financial Reporting Council has published the results of its review of a sample of annual reports relating to emissions, energy consumption and related matters under the Streamlined Energy and Carbon Reporting rules.

Updated Bulletin On Illustrative Auditor’s Reports On Private Sector Financial Statements

The Financial Reporting Council has published an updated version of its bulletin on illustrative auditor’s reports for private sector financial statements. Examples of illustrative auditor’s reports are given in appendices ranging from small companies to publicly traded premium listed companies preparing parent company financial statements. Changes made since the version of the bulletin issued in March 2020 include:

  • The replacement of references to IFRS as adopted by the EU, and article 4 of the IAS Regulation, with references to UK adopted IAS.
  • Amendments to clarify whether statements in the illustrative reports apply to the company, group or parent company.
  • The removal from each illustrative report of the statement that auditors design their procedures in line with their responsibilities to detect material misstatements in respect of irregularities.
  • The insertion of a statement that key audit matters were addressed in the context of the audit of the financial statements as a whole, and the auditors do not provide a separate opinion on these matters, into each of the illustrative reports other than those for a non-publicly traded company preparing financial statements under the small companies regime (Appendix 1) and for a non-publicly traded company preparing group and parent company financial statements under UK GAAP (Appendix 2).
  • An amendment of the section on the corporate governance statement to state that the auditor’s conclusion also applies to the directors’ statement on whether it has a reasonable expectation that the group will be able to continue in operation and meets its liabilities, in the illustrative reports for publicly traded premium listed company preparing group and parent company financial statements under IFRSs (Appendix 6) and for publicly traded premium listed company preparing group financial statements under IFRSs (reported on separately from the parent company financial statements) (Appendix 7A). The section has been removed from the illustrative report for a publicly traded premium listed company preparing parent company financial statements under UK GAAP (reported on separately from the group financial statements) (Appendix 7B).

The full text of the bulletin is available from Bulletin - Illustrative Statutory Auditor's Reports - 2021 (

Annual Review Of FTSE 100 CEO Pay

The High Pay Centre and the Chartered Institute of Personnel and Development have published their annual review of FTSE 100 Chief Executives pay for 2020.

Key findings:

  • The median pay of a CEO in 2020 was £2.69m, a 17% fall from 2019 when median pay was £3.25m and the lowest level since 2009 but 86 times median earnings for UK workers.
  • In 9 companies that utilised public money from the furlough scheme average CEO pay was £2.39m
  • 64% of companies paid an annual bonus to the CEO, down from 89% in 2019
  • 77% paid out on long term incentive plans based on the previous 3 to 5 years compared to 82% who paid in 2019.
  • Annual bonus fell from £1.1m (2019) to £825,000 (2020)
  • Average LTIP payment fell from £2.4m to £1.38m
  • In 2020 the average pay of female CEOs was £2.76m compared to an average of £3.44m for male CEOs
  • Of the 98 companies surveyed only 7 had a female CEO, two companies in the FTSE 100 were excluded due to their being investment trusts.


  • The report notes that there is a substantial fall in CEO pay and a narrowing of the pay gap but questions whether this is sufficient given the level of hardship experienced by many as a result of COVID-19 and whether there is a need for CEO pay to go back up to pre-pandemic levels following economic recovery.
  • There is a suggestion that there is further scope for the equalisation of pay, perhaps with a CEO’s earnings being 10 times the earnings of a typical UK worker.

The full report is available from CEO pay report 2021 (

Audit Firm Governance Code

The Financial Reporting Council has issued a consultation on proposals to update and strengthen the Audit Firm Governance Code which applies to the Big 4 and to any other firms which audit FTSE350 companies. It is intended that the revised code will also apply to firms that audit significant numbers of other types of public interest entities (PIEs), as such term is defined in the Statutory Auditors and Third Country Auditors Regulations 2016. The code was created in 2010 and was updated in 2016. The consultation can be viewed at Consultation Document ( and closes on 18 November 2021.

The structure of the proposed new Code will align with the 2018 version of the UK Corporate Governance Code and has an emphasis on long-term sustainability, people, culture, and employee engagement in line with the UK Corporate Governance Code. The current aim of the Code is to:

  1. To promote audit quality.
  2. To help the firm secure its reputation more broadly, including its non-audit businesses.
  3. To reduce the risk of firm failure, which in relation to the largest firms would be of systemic significance.

The new code, while still designed to promote audit quality, has changed the other two main objectives to ensure firms take account of the public interest in their decision-making, particularly in audit and to safeguard the sustainability and resilience of audit practices and of firms as a whole.

Firms are encouraged to adopt the code voluntarily although there is an expectation that the code will be applied once a firm audits 20 or more PIEs or more than one FTSE350 company. The code will operate on a comply or explain basis.

FRC Lab Report On Risks, Uncertainties, Opportunities And Scenarios

The Financial Reporting Lab has published its latest project report on reporting on risks, uncertainties, opportunities and scenarios. The report includes several practical examples from corporate reports illustrating how to better meet investors’ needs and includes high-level insight into how investors would like reporting on resilience to develop.  Investors do not want to read boilerplate disclosures and jargon should be avoided, information provided should be specific to the company.

Amongst other matters detailed in the report some of the key details which investors want to understand in this area, and which companies should consider reporting on includes:

  • How a board identifies, monitors and manages risks, uncertainties and opportunities, how effectively these processes have functioned and how quickly they can be modified to respond to internal and external factors, such as the effects of the COVID-19 pandemic.
  • How a company views the macroeconomic, microeconomic and geopolitical environment and the industry-wide risks and uncertainties faced, and how it monitors external factors and incorporates them into scenario analysis and developing plans for the future.
  • An assessment of the importance of the risks, uncertainties and opportunities faced (including their likelihood and impact) and whether the risk or uncertainty has been considered as part of a viability assessment.
  • How management responds and reacts to risks, uncertainties and opportunities, including information about linkage to the wider strategy, business models and metrics that allow the monitoring of risks and opportunities, what management is doing to mitigate the risk (where relevant) and take forward the opportunity, what they have already done and will do in the short, medium and long term, and how this affects the company's wider viability and resilience.
  • Horizon scanning for emerging risks and how these are integrated into the risk and opportunity process, including information on the different scenarios and situations considered, stress tests performed and how these relate to other areas of reporting and the company’s view of the future.

Common reporting techniques used when reporting on risk such as risk tables and heat maps are acknowledged as having both advantages and disadvantages from an investor perspective. To be more effective sufficient explanatory narrative should be provided and information quantified.

The report notes that investors consider the information reported in many viability statements to be too generic and short-term in nature to support effective stewardship and decision making and that the viability period selected is often inconsistent with other time horizons used elsewhere, including strategic and business cycles, debt repayments, lease periods, goodwill impairment, capital investment periods and technology development periods. While investors value a statement to confirm that a company is ‘viable’, such a statement on its own is not enough – investors need to have the information to conduct this evaluation for themselves.

The report can be downloaded from

Financial Conduct Authority Quarterly Consultation Paper

The Financial Conduct Authority has issued a quarterly consultation paper CP21/27. Some consequential amendments to the Prospectus Regulation Rules (“PRR”) and Listing Rules (“LR”) to align with changes to the FCA Knowledge Base relating to the prospectus regime that were detailed in its 34th Primary Market Bulletin issued on 24 June 2021 are being proposed with feedback requested on the proposed changes by 11 October 2021.

The proposed changes include:

  • Making some minor amendments to PRR 1.1.5G by removing references to the Committee of European Securities Regulators (“CESR”) and the European Securities and Markets Authority (“ESMA”) and their replacement with amongst other things the new technical note Primary Market/TN/619.1 (which adapts as FCA Guidance ESMA's guidelines on disclosure requirements under the Prospectus Regulation), Q&As on Guidelines on Alternative Performance Measures and Guidelines on Risk Factors.
  • Making minor consequential amendments to the LR, including deleting the definition of ESMA Prospectus Recommendations (the LR's term for the CESR Recommendations); inserting a definition (technical note on PR disclosure and specialist issuers) for the new technical note Primary Market/TN/619.1; and amending the definition of mineral expert’s report and updating LR 13.4.8R (Acquisition of a scientific research based company or related assets) in each case, replacing references to the ESMA Prospectus Recommendations with a reference to the appropriate part of Primary Market/TN/619.1.

The consultation paper can be downloaded from CP21/27: Quarterly Consultation Paper No. 33 ( .

Public Interest Intervention Notice – Enterprise Act 2002

On 5 September 2021 a public interest intervention notice was issued by the Secretary of State for Business, Energy and Industrial Strategy on the grounds of national security interest under the provisions of section 42 of the Enterprise Act 2002. The notice relates to the proposed merger of The Perpetuus Group (Perpetuus Energy Limited, Perpetuus Advanced Materials plc and Perpetuus Carbon Technologies Ltd) and Taurus International Ltd on the grounds that:

  1. two or more enterprises will cease to be distinct; and
  2. at least one-quarter of all graphene plasma goods and/or services which are supplied in the United Kingdom are supplied by Perpetuus Group.

The Secretary of State believes that it is or may be the case that the national security public interest consideration specified in section 58(1) and (2) of the Enterprise Act 2002 is relevant to a consideration of the relevant merger situation and the Competition and Markets Authority has been asked to investigate and report by midnight on 7 February 2022.

Further details can be found at Proposed acquisition of The Perpetuus Group (Perpetuus Energy Limited, Perpetuus Advanced Materials plc and Perpetuus Carbon Technologies Limited) by Taurus International Ltd and others: public interest intervention notice - GOV.UK (

UK Electronic Reporting: Survey Results And Resources

The Financial Reporting Lab (the Lab) released a survey in May 2021 that asked companies and service providers to comment on their preparations for the introduction of structured electronic reporting for annual financial reports (DTR 4.1.14) as part of the UK implementation of a wider cross-EU initiative (ESEF). The Lab has recently issued the results of the survey which indicate that UK companies have begun to put the right steps in place to meet the requirements, but still have some important outstanding actions and a list of resources to help companies with transferable securities admitted to trading on UK regulated markets understand and meet the requirements which come into force for financial years starting on or after 1 January 2021.

The survey can be downloaded from

The resources list can be downloaded from

Review Findings On Streamlined Carbon Energy Reporting

The Financial Reporting Council has recently published the findings of its review of reporting on emissions, energy consumption and related matters under the Streamlined Energy and Carbon Reporting (SECR) rules which came into effect from 1 April 2019. The review considered how a sample of companies and Limited Liability Partnerships (LLPs) had complied with the SECR requirements, identified examples of emerging good practice and outlined its expectations for future reporting. The sample comprised ten FTSE 350 companies, ten AIM companies, five large private companies and two large LLP’s.

The review noted that there was largely compliance with the minimum statutory disclosure requirements more needs to be done to make the disclosures relevant and understandable for users in that the reports did not amongst other matters:

  • include enough information on the methods used to calculate emissions and energy use consumption.
  • more thought is needed about how to integrate these disclosures with narrative reporting on climate change, where relevant, and make them easier for users to navigate.
  • in some instance it was unclear whether the ratios selected were the most appropriate for the entities’ operations.

The review noted that there is scope for improvement and includes details of expectations for future reporting which include:

  • the presentation of all the required information in a form which is clear, understandable, and easy for users to navigate, using cross-references where relevant information is provided across several parts of the annual report.
  • the provision of an adequate explanation of the methodologies used to calculate emissions and energy use.
  • providing an explanation or reconciliation where ratios provided cannot be recalculated from, or are apparently inconsistent with, other disclosures in the annual report and accounts.
  • a description of the extent of any due diligence or assurance over emissions and energy use metrics.
  • provide clear explanations which help users to understand and compare major commitments, such as ‘net zero emissions’ targets which may require the disclosure of additional emissions-related information, beyond the minimum required by SECR.

The review can be downloaded from FRC SECR Thematic Report 2021

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