After a number of a significant changes in the corporate governance sphere in the first half of 2024, the past year has been considerably quieter in terms of big-ticket developments and reforms. Instead, it has largely focused on the practical implementation of existing reform programmes, although there are bigger changes to look out for over the coming months that will affect how companies report, raise capital and engage with investors.
ECCTA implementation: Identity verification begins
Implementation of the Economic Crime and Corporate Transparency Act 2023 (ECCTA) is now well underway, with the expectations and practicalities in relation to one of the most significant changes being introduced by that legislation – identity verification (IDV) for inpiduals, including company directors, persons with significant control (PSCs) and those filing documents at Companies House on a company's behalf – becoming clearer. As of 8 April 2025, inpiduals can voluntarily verify their identity directly with Companies House or via an authorised corporate service provider (ACSP). Mandatory IDV will follow in autumn 2025 for all new directors and PSCs. For existing directors and PSCs there will be a 12-month period from the autumn commencement date in which to comply with the IDV requirements, the timing for which will be pegged to the filing date for the company's annual confirmation statement. It is anticipated that the IDV requirements will apply to members of LLPs from the same date as they apply to directors. Then from spring 2026, IDV is expected to become compulsory for anyone filing documents at Companies House on a company's behalf.
Key ECCTA IDV implementation milestones:
8 April 2025
Voluntary IDV begins
Autumn 2025
Mandatory IDV starts for new directors and PSCs
Autumn 2025 – Autumn 2026
Transition period for existing directors and PSCs
Spring 2026
Mandatory IDV for anyone filing documents at Companies House
Inpiduals can verify their identity online with Gov.UK, in person at designated Post Office locations, or via an ACSP. The simplest method involves digital facial verification, where approved photo ID (eg, a biometric passport or driving licence) and a "selfie" are submitted.
The start of voluntary IDV follows the launch of the ACSP registration service in March 2025, allowing third-party providers (such as accountants, solicitors and company formation agents) which are regulated for anti-money laundering purposes to register as ACSPs. Once registered, ACSPs will be able to verify client identities and make filings at Companies House on their behalf.
Businesses should stay informed and develop an action plan for the upcoming mandatory IDV requirements, taking advantage of the current window for voluntary compliance. As deadlines approach, early action will be key to ensuring compliance and minimising potential disruptions. Consideration will need to be given to ascertaining the population within the business whose identity will need to be verified, as well as the best route to use for the IDV process itself (which may differ for different constituencies within an organisation – for example, an ACSP attending a board meeting to facilitate director IDV).
For further details on the IDV requirements of the ECCTA, see our snapshot her
Businesses should stay informed and develop an action plan for the upcoming mandatory IDV requirements, taking advantage of the current window for voluntary compliance. As deadlines approach, early action will be key to ensuring compliance and minimising potential disruptions."
Hannah Whitney
Associate
Non-financial reporting: Streamlining disclosure obligations
Efforts to reduce regulatory burdens on UK companies have continued, with changes being introduced to narrative reporting requirements. These changes reflect ongoing efforts to streamline UK reporting obligations and also move away from certain EU-derived rules.
In April 2025, legislation came into effect removing several reporting requirements from the directors' report which were considered duplicative or of limited value to investors and other stakeholders. For financial years beginning on or after 6 April 2025, large and medium-sized companies will no longer be required to include in their directors' report disclosures on post-year-end events, future business developments, R&D activities, overseas branches, use of financial instruments, employment of disabled persons, and stakeholder engagement.
In practice, most companies (including those with 31 December and 31 March financial year-ends) will not benefit from these relaxations until the annual report that they publish in 2027 and, with the exception of the disability- and stakeholder engagement-related disclosures, substantially similar reporting obligations remain in place under the FCA's Disclosure Guidance and Transparency Rules (DTRs). As such, listed companies will need to continue to make these disclosures, subject to any amendments the FCA may make to the DTRs.
Further reductions to reporting requirements came into effect on 11 May 2025, this time targeting the directors' remuneration reporting regime. For financial years beginning on or after that date, disclosures introduced under former EU rules, including director and employee pay comparisons, total fixed pay and total variable pay figures for each director, and certain details around share awards and remuneration policy decisions, are no longer required.
Hopefully these modest changes indicate this government's direction of travel and that further, and more substantial, relaxations can be expected as part of the broader review of non-financial reporting that the government has said that it will launch in the coming months.
Meanwhile, the ESG reporting landscape continues to evolve in both the UK and the EU (for more on these changes, see 'On your marks, get set...go! Preparing the ISSB'). In light of this, it may well be that the non-financial reporting regime in the UK becomes more complex in the coming years, notwithstanding the desire for a more streamlined and simpler regime to apply.
Also, for financial years beginning on or after 6 April 2025 the monetary thresholds for company size classifications have been increased by approximately 50%, although employee headcount thresholds remain unchanged, pending further consultation by the government.
New size thresholds for companies
| Entity type | Turnover – not more than: | Balance sheet total – not more than: | Employees – not more than: |
|---|---|---|---|
| Micro-entity | £1 million (previously £632,000) | £500,000 (previously £316,000) | 10 |
| Small company | £15 million (previously £10.2 million) | £7.5 million (previously £5.1 million) | 50 |
| Medium-sized company | £54 million (previously £36 million) | £27 million (previously £18 million) | 250 |
Shareholder meetings: Reform on the horizon?
In the coming months, the government is expected to look at the potential for modernising shareholder communication in line with developments and changes in technology as well as clarifying the legal position in relation to virtual AGMs. While the scope and timing of these proposals remain to be seen, the review is likely to be welcomed by companies seeking greater clarity on these points.
Audit reform: New regulator, new powers?
Rather unexpectedly, the King's Speech in July 2024 set out the government's intention to advance audit reform through an Audit Reform and Corporate Governance Bill. This legislation will revive proposals first introduced in the 2021 consultation under the previous Conservative government, but which many thought had moved down, if not off, the legislative priority list. Central to the reform is the replacement of the Financial Reporting Council (FRC) with a new statutory regulator, the Audit, Reporting and Governance Authority (ARGA).
Other key elements of the reform include:
- Broadening the definition of Public Interest Entities (PIEs) to encompass the largest private companies, thereby expanding the ARGA's remit.
- Granting the ARGA enforcement powers to investigate and sanction directors for serious failures in relation to their financial reporting and audit responsibilities.
While these proposals would mark a significant shift in terms of director accountability, the timeline for this legislation remains unclear.
Companies and their boards should continue to monitor the evolving regulatory landscape, particularly in areas such as ESG reporting, audit oversight and capital raising, where further clarity is expected in the coming months."
James Palmer
Partner
Prospectus reform: Simplifying capital raising
Another key reform on the horizon is the FCA's proposed overhaul of the UK prospectus regime, aimed at making it easier, and more flexible, for listed companies to raise capital. The proposals form part of the UK's broader capital markets reform agenda and build on last year's changes to the UK listing regime, which, among other things, removed the requirement for listed companies to obtain shareholder approval for significant transactions.
In July 2024, the FCA launched a consultation on when a prospectus will be required and where required, what a prospectus should contain. One of the headline proposals is to raise the threshold for when a prospectus is needed for further issues of shares from the current 20% to 75% of a company's existing share capital. If adopted, this would remove a significant regulatory hurdle for many secondary offerings.
The FCA is expected to publish the final rules in summer 2025.
Stewardship Code review: Potential implications for investor engagement
Following the review of the Corporate Governance Code, the FRC turned its attention to the Stewardship Code, last revised in 2020. A key aim of the review was to clarify the definition of "stewardship". The definition in the 2020 version, which framed stewardship as activity that leads to sustainable benefits for the economy, the environment and society, prompted concerns that it required a focus on environmental and social outcomes, even where these might not have aligned with an investor's core objectives. In its consultation, the FRC sought to make clear that stewardship should be guided by each signatory's own investment strategy, with flexibility around how ESG factors are incorporated.
The updated Stewardship Code was published at the start of June 2025 and will apply from 1 January 2026. When being applied in practice, the changes made may shift how asset managers and institutional shareholders engage with investee companies, including their expectations around disclosure.
These developments reflect a period of active and ongoing reform in the UK corporate governance sphere. While some measures, such as identity verification and streamlined reporting, are already taking effect, others remain at the consultation or legislative proposal stage. Companies and their boards should continue to monitor the evolving regulatory landscape, particularly in areas such as ESG reporting, audit oversight and capital raising, where further clarity is expected in the coming months.
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