EQ Monthly Bulletin - April 2024

Economic Crime and Corporate Transparency Act 2023

Companies House has published a blog that gives some further information on their new powers to challenge company names. The blog highlights that in addition to the existing restrictions on filing companies with names that are the same as, or too similar to existing company names, using certain restricted terms (such as implying a connection to the Government or using sensitive words), the Economic Crime and Corporate Transparency Act now allows Companies House to reject names that could imply:

• The name is intended to facilitate fraud (section 53A Companies Act 2006).
• The name is comprised of or contains a computer code (section 57A Companies Act 2006).
• The name is likely to give the false impression that the company is connected to a foreign Government or an international organisation whose members include two or more countries or territories (or their governments (section 5A Companies Act 2006)).

If a company fails to change its name within 28 days, Companies House can determine a new name for the company, which can include changing its name to its registered company number. Companies House can also supress a name from the register whilst in dialogue with the company on the veracity of the name.

The full blog can be accessed here  Our new powers to challenge and change company names – Companies House (blog.gov.uk)

Economic Crime and Corporate Transparency Act (Financial Penalty) Regulations

The Economic Crime and Corporate Transparency Act 2023 (Financial Penalty) Regulations 2024 have been published and will come into force on 2 May 2024. The regulations permit the Registrar of Companies to impose a maximum financial penalty of £10,000 on a person if satisfied beyond reasonable doubt that the person has committed misconduct amounting to a relevant offence under section 1132A of the Companies Act 2006 2006, which was inserted by the Economic Crime and Corporate Transparency Act 2023 as an alternative to a criminal prosecution. The full text of the regulations are available from The Economic Crime and Corporate Transparency Act 2023 (Financial Penalty) Regulations 2024 (legislation.gov.uk).

The intention is that the Registrar of Companies will publish guidance on how this new power will be implemented before penalties are imposed.

Non-financial reporting review

The Department for Business and Trade has published its feedback from its non-financial reporting review call for evidence in May 2023.

The main findings from the responses were:

• Over 80% of respondents agreed that non-financial information was useful.
• Companies consider preparation costs to be too high, but users consider the cost to be worthwhile.
• All respondent groups agreed that current reporting thresholds, exemptions and exclusions are too complex.
• 59% thought that the micro-entity, small, medium-sized and large company reporting thresholds were no longer appropriate. The impact of the level of inflation was a key theme.
• Suggestions that the Directors’ Report should be streamlined or abolished, mainly due to duplication.
• The Directors’ Remuneration Report could be streamlined.
• Strong support for greater comparability in sustainability-related reporting and the UK’s pursuit of International Sustainability Board standards.

The report can be viewed here: Non-Financial Reporting Review: call for evidence - summary of responses (publishing.service.gov.uk)

The Department has also announced that the Government will be legislating on changes to the corporate reporting framework, including:

• Lifting the monetary thresholds that determine company size by 50%.
• Removing several low-value, obsolete or overlapping requirements for the content of the Directors’ Report and Remuneration Report and Policy.
• Easing companies’ ability to share digital annual reports with their members, instead of paper copies.

There will be a further consultation to include exempting medium-sized companies from producing strategic reports and increasing the employee size threshold from 250 to 500.

The full announcement can be accessed here: Prime Minister to announce major reform package to boost apprenticeships and cut red tape for thousands of small businesses - GOV.UK (www.gov.uk)

Gender Diversity on AIM Boards

Addidat and Indigo Independent Governance have produced a report focussing on the gender diversity of AIM companies board of directors.

The report highlighted the following:

• Little changed in 2023, with 15.6% of women on AIM Boards (one in six) from 13.7% in 2022 (one in seven).
• Percentage of AIM companies with no female directors has fallen from 42% to 37%.
• Utilities sectors has the highest average board positions held by females at 23%.
• The average proportion of women on AIM boards decreases by market capitalisation.
• The average proportion is highest, 29%, for companies with market capitalisation between £750m and £1bn.
• Gender benefits are seen when there are at least two women on a board.
• 26% of AIM boards have at least two female directors, a 5% increase.
• 73% of AIM boards have no women in at least one senior position (Chair, Chief Executive Officer, Chief Financial Officer, Senior Independent Director), 22% have one, 5% have two or three.
• Only 8% of AIM companies meet the FTSE 350 40% female diversity target, a 1% improvement on the previous year.

The report can be accessed via this link: PowerPoint Presentation (indigogovernance.com)

Transition Plan Taskforce

The Transition Plan Taskforce (TPT) has published its final guidance on seven sector-specific deep dives (asset managers, asset owners, banks, electric utilities and power generators, food and beverage, metals and mining, and oil and gas) and sector summary guidance, along with supporting resources which includes guidance on how to undertake a transition planning cycle.

The UK Government is expected to launch a consultation on TP disclosure requirements for large public and private companies. The Financial Conduct Authority plans to consult on rules and guidance for listed companies to disclose in line with the UK-endorsed ISSB standards and the TPT framework. No dates are available for either consultation at present.

The press release can be accessed here: Latest transition plan resources published today - Transition Taskforce

The sector guidance is available from: Sector Guidance | Transition Plan Taskforce (transitiontaskforce.net)

The Explore the Disclosure Recommendations can be accessed via this link: Explore-the-Disclosure-Recommendations.pdf (transitiontaskforce.net)