Corporate Law Update: 5 - 11 September

This week: 

• The Government launches a landmark consultation on modernising the UK’s corporate reporting framework

• The Supreme Court holds that loss of bargain damages were recoverable for non-repudiatory breach of contract

Government launches major consultation on modernising the UK’s corporate reporting framework

The Government has published its much-anticipated landmark consultation on modernising corporate reporting in the UK.

The consultation paper, which runs to 70 pages and four annexes, seeks views on changes to several aspects of company reporting, with a principal purpose of simplifying corporate reporting legislation and affirming the purpose and intended audience of a company’s annual report and accounts.

Alongside reforms to corporate reporting, the consultation also seeks views on aspects of UK company law, including the procedure for declaring dividends, permitting virtual general meetings, and embedding electronic communication as a default method of contact between companies and their shareholders.

The key aspects of the consultation are explained below.

• Purpose of reporting. The Government has asked for views on what disclosures are useful and whether there are currently any information gaps in reporting. It seeks views on whether reporting requirements for private companies and public companies should be aligned.

• A new reporting framework. The UK’s corporate reporting regime would be replaced with a new streamlined framework. The Companies Act 2006 would set out only high-level obligations, with specific disclosure requirements sitting in accounting standards. There would be four main accounting standards: UK GAAP standards for use by large companies, SMEs and micro-entities, and a separate standard for companies reporting under UK IAS.

• Company sizes. Small and medium-sized companies would merge into a single “SME” band. (The “micro-entity” category would remain.) As a result, a greater range of exemptions would become available to medium-sized companies (including exemption from audit).

• “Very large” companies. A new category of “very large” company could be created, unifying disparate enhanced reporting obligations that currently employ a variety of different thresholds and definitions for determining which companies are in scope.

• Employee headcount. The “employee headcount” size criterion for determining company size could be amended to allow companies to pro-rate for part-time employees.

• True and fair view. The true and fair view standard would be aligned for UK IAS and UK GAAP, resulting in a single standard for large companies. SMEs and micro-entities would no longer be subject to a “true and fair view” obligation and instead simply comply with accounting standards.

• Exemptions within groups. Currently, some exemptions available to small and medium-sized companies cannot apply if the company is part of an “ineligible group”. This block would be removed, allowing SME subsidiaries in currently ineligible groups to use these exemptions.

• Subsidiary audits.Wholly-owned subsidiaries would no longer need to obtain a parent company guarantee to qualify for exemption from audit, instead simply filing their parent company’s audit report alongside their own accounts. The Government is also considering whether (subject to conditions) to extend this to non-wholly-owned subsidiaries.

• Strategic reporting. The existing, prescriptive content regime for the strategic report would be replaced by a new “principles-based” framework. This would feature five baseline narrative disclosures – business model, performance, resources and relationships, strategy, and principal risk exposures – the detail of which would vary with the complexity of the company’s business.

• Removal of specific disclosures. Below a threshold yet to be determined, several specific categories of disclosure would be abolished, including KPIs, main trends and factors, environmental matters, employees, social matters, community matters, respect for human rights, anti-bribery and corruption, and director/senior manager breakdown by sex. Companies would not simply stop reporting this information, but rather would make disclosures under the new baseline requirements to the extent financially material to the company’s operations.

• SECR. Streamlined energy and carbon reporting requirements would remain. However, following the abolition of the directors’ report, companies would be free to site these disclosures in whichever part of their annual report they deem most appropriate.

• Sustainability reporting. Following its recent consultation on sustainability reporting, the Government intends to consider how UK Sustainability Reporting Standards (UK SRS) should be reflected in the Companies Act 2006. Companies would be free to site sustainability disclosures in whichever part of their strategic report they feel deem appropriate.

• Cyber risks. The paper seeks views on whether companies that fall into the proposed new “very large” category should be required to make specific disclosures on cyber security risks.

• Assurance over strategic reporting. Companies would have freedom to decide what external assurance to seek over their strategic narrative reporting but could be required to disclose what assurance they have obtained.

• Corporate governance. Reporting on corporate governance would shift from the company level to the group level. The Government is also seeking views on a simplified definition of “corporate governance” for these purposes.

• Remuneration reporting. The paper proposes several changes to simplify the existing regime for reporting on directors’ remuneration. These include refining methodologies for calculating remuneration, potentially abolishing the requirement to state (in the remuneration report) how the remuneration policy is being implemented in the forthcoming year, and removing the annual shareholder vote on the remuneration report.

  The Government also proposes to abolish a significant amount of reporting content, including the results of shareholder votes on directors’ remuneration, CEO-employee pay ratio reporting, details of malus and clawback policies, and engagement with shareholders and employees on pay proposals. (It is, however, worth noting that publicly traded companies may still be required to report on some or all of these matters under corporate governance codes (such as the FRC’s UK Corporate Governance Code).)

• Relocating content. The paper seeks views on the value of permitting some existing content of the annual report, such as corporate governance information, to be published instead in other places, such as on the company’s website or a dedicated online portal. The Government cites the existing gender pay gap portal as an example model.

• Payments to governments. The Reports on Payments to Governments Regulations 2014, which require companies within extractive industries to disclose amounts paid to governments, would be revoked.

• Dividends and distributions. The UK’s current regime for distributions, under which dividends must be justified by reference to distributable profits, would be replaced by a new solvency-based regime (similar to that used in jurisdictions such as Jersey).

• Communicating with shareholders. The default method of communication with shareholders would shift to electronic communication, with shareholders being entitled to opt into receiving hard copies of documents.

• Virtual AGMs. In line with previous promises, the Government intends to legislate to expressly permit AGMs to be held virtually (and, specifically, to state that the “place” of an AGM can be a virtual location). The paper mentions only AGMs, but we would expect the changes to apply to all general meetings of companies.

• Auditor changes. Companies would come under a new obligation to notify Companies House when they appoint an auditor or when their auditor ceases to hold office.

The consultation proposals would build on previous changes announced by the Government, which include exempting most medium-sized companies and wholly-owned subsidiaries from producing a strategic report and abolishing the separate directors’ report.

The proposals do not cover climate-related financial disclosures, as the Government is currently conducting a separate post-implementation review in this area.

The last day to respond to the consultation is 30 November 2026.

Read the Government’s consultation on modernising corporate reporting (opens PDF)

Read the Government’s press release on modernising corporate reporting

Supreme Court rules that loss of bargain damages are recoverable for non-repudiatory breach

The Supreme Court has held that, where a contract is breached, damages for loss of bargain may be recoverable even if the breach was not repudiatory.

Great Asia Maritime Limited v Orion Shipping and Trading LLC [2026] UKSC 23 concerned a failure, on two occasions, to deliver a ship under a contract governed by the Norwegian Saleform 2012, the standard form contract for sale and purchase of second-hand ships. However, the decision is relevant more widely for parties considering or negotiating their contractual termination rights and the consequences of exercising those rights.

Following the second failure, the buyers terminated the contract, citing clause 14 of the standard form, which reads:

“Should the Sellers fail to give Notice of Readiness by the Cancelling Date or fail to be ready to validly complete a legal transfer as aforesaid they shall make due compensation to the Buyers for their loss and for all expenses together with interest if their failure is due to proven negligence and whether or not the Buyers cancel this Agreement.”

The court rejected the concept of a universal rule that, if a party cancels a contract pursuant to a contractual right (as opposed to terminating the contract at common law due to a repudiatory breach), it is not entitled to loss of bargain damages (i.e. damages directly resulting from the cancellation).

The court found that the natural and ordinary meaning of the word “loss” in clause 14 included loss of bargain damages suffered by the buyers as a result of cancelling the contract.

The case also contains welcome reaffirmation from the UK’s highest court that industry standard form contracts benefit from predictable, stable interpretations that will be respected by the courts unless obviously wrong.

You can read more about the Supreme Court’s decision that loss of bargain damages were recoverable for non-repudiatory breach in our colleagues’ separate in-depth piece

Access the court’s decision in Great Asia Maritime Ltd v Orion Shipping and Trading LLC that loss of bargain damages were recoverable for non-repudiatory breach