Explanatory note

These Regulations require certain companies to provide additional statements to be included in the strategic report and the directors’ report. The provisions apply to a company with a high level of employees and turnover.

The Regulations commence on 1st January 2025. In general, the Regulations have effect in respect of a financial year of a company which commences on or after 1st January 2026. In the case of a company whose equity share capital is admitted to trading on a UK regulated market, for the whole of the financial year of the company which commences on or after 1st January 2025, the Regulations have effect in respect of that financial year and each subsequent financial year.

Part 2 inserts section 413A which requires relevant companies to include an additional note to the accounts concerning distributable profits and other relevant matters or a minimum amount recorded under section 413A(7). Part 2 also inserts sections 414CC,CD and CE which define a company with a high level of employees and turnover and place a duty on the company’s directors to include a resilience statement in the company’s strategic report. In addition, regulation 5 amends the offence provision which is set out in section 414D(2).

Part 3 inserts sections 416A–C, which place a duty on the company’s directors to include three additional statements in the directors’ report. The statements comprise an audit and assurance policy statement, a material fraud statement and a policy statement concerning distributions and purchase of own shares.

Section 416A inserts the audit and assurance policy statement which must be included in the directors’ report in every third financial year with an update in the intervening financial years. Subsection (3)(a) refers to the Glossary of Terms (Auditing and Ethics), dated December 2019, and subsection (3)(b) refers to the International Standard on Assurance Engagements (ISAE) (UK) 3000 Assurance Engagements Other Than Audits Or Reviews Of Historical Financial Information, dated July 2020. The documents were issued by the Financial Reporting Council in its role of competent authority responsible for the oversight of statutory auditors. Each of the documents, together with any updates, and the documents which are referred to in section 416A(3)(b)(ii) is available from the Department for Business and Trade at Old Admiralty Building, Admiralty Place, London SW1A 2DY and are published alongside Explanatory Memorandum and the Regulations on www.legislation.gov.uk.

Part 4 amends the Index of Defined Expressions which are set out Schedule 8 to the Companies Act 2006 (the “Companies Act”).

Part 5 provides for a review of those sections, which are inserted into the Companies Act, by the Regulations. The first review must be carried out before 1st January 2030 with subsequent reviews at intervals not exceeding five years.

A full impact assessment of the effect that this instrument will have on the costs of business and the voluntary sector is available from the Department for Business and Trade at Old Admiralty Building, Admiralty Place, London SW1A 2DY and is published with the Explanatory Memorandum on www.legislation.gov.uk.