How UK Boards Should Respond to the Corporate Reporting Overhaul

UK boards should treat the government’s Modernising Corporate Reporting consultation as a live governance decision: respond by 30 November 2026 and redesign reporting now.

Published on 7 September 2026 by the Department for Business, Innovation, Science and Trade, the consultation proposes the most significant rewrite of Companies Act 2006 reporting in two decades. It would remove the section 172(1) statement, scrap the annual advisory vote on the directors’ remuneration report for quoted companies, replace the capital maintenance rules on distributions with a solvency-based test, and move shareholder communications to digital by default. The government describes it as a “once-in-a-generation” reset.

According to the government’s own press release, the wider reform programme is expected to save businesses more than £450 million a year. According to the Quoted Companies Alliance, the average annual report now runs to 98,000 words, rising to 152,000 for FTSE 100 companies. For directors, the question is not whether reporting gets lighter, but which accountability mechanisms go with it.

What exactly is the government proposing to change?

The consultation refocuses the annual report on investors and creditors, tied more closely to financial materiality. The main proposals are:

• Strategic report: prescriptive requirements replaced by baseline narrative disclosures on business model, performance, resources and relationships, strategy and principal risks.
• Section 172(1) statement: removed and replaced by the new “resources and relationships” disclosure. Explicit disclosure matters on employees, environment, human rights and anti-bribery would also leave the legislation.
• Remuneration: the annual advisory vote on the remuneration report would go, alongside disclosures such as the CEO pay ratio and malus and clawback use.
• Distributions: a solvency-based regime, with directors stating a dividend will not affect the company’s ability to continue as a going concern.
• Thresholds: a possible new “very large” company category, and audit exemption extended to medium-sized companies.
• Communications: electronic shareholder communication as the default and statutory clarity on fully virtual AGMs.

The consultation makes no proposals on climate-related financial disclosures, which face a separate post-implementation review due by spring 2027. Boards tracking the UK Sustainability Reporting Standards should keep that workstream running unchanged.

Executive Action

• Ask the company secretary for a one-page map of which current disclosures each proposal would remove or change.
• Diarise the 30 November 2026 deadline and agree who owns the company’s response.
• Confirm that sustainability and climate reporting plans are not paused on the back of this consultation.

Does scrapping the section 172 statement change directors’ duties?

No. The consultation targets the reporting requirement, not the underlying duty to promote the success of the company. Directors must still have regard to employees, suppliers, customers, communities, the environment and long-term consequences. What disappears is the prescribed public statement showing how they did so.

That creates a governance risk. For many boards, the s172 statement has been the forcing mechanism for recording stakeholder considerations in board papers and minutes. Remove the disclosure and that discipline can quietly erode, while the legal exposure remains, particularly in contested decisions, restructurings and insolvency scenarios where a director’s reasoning is examined after the event.

Executive Action

• Keep stakeholder consideration as a standing section in board papers for material decisions, regardless of the disclosure outcome.
• Ask the general counsel to confirm how minutes will continue to evidence section 172 reasoning.
• Use the new “resources and relationships” disclosure as a chance to report fewer, more material stakeholder issues.

How should the board approach a solvency-based dividend test?

This is the proposal with the sharpest edge for directors. Replacing distributable-profit calculations with a solvency statement simplifies mechanics but moves judgement squarely onto the board. A director signing a going-concern-based statement is making a forward-looking call, not checking a reserves figure.

CFOs will welcome the flexibility, particularly in groups where trapped reserves have constrained upstream dividends. Audit Committees should ask what evidence would support each statement: cash-flow forecasts, stress scenarios and covenant headroom. The proposals would not affect prudential requirements for banks and insurers.

Executive Action

• Ask the CFO to model how the last three years of dividends would have looked under a solvency test.
• Define the forecast horizon and downside scenarios the Audit Committee would expect before approving a solvency statement.
• Use our capital approval assessment template to structure distribution decisions consistently.

What happens to remuneration and governance accountability?

Removing the advisory vote on the remuneration report shifts investor pressure elsewhere. Expect investors to lean harder on the binding policy vote, director re-election and direct engagement. Remuneration Committees that relied on the annual vote as their feedback loop will need another one.

The consultation also asks whether the corporate governance statement could be published on the website only, and whether governance reporting should move to group level. Listed companies should note that the UK Corporate Governance Code and FCA Listing Rules sit alongside the Companies Act. Simplification in one source does not remove comply-or-explain obligations in another.

Executive Action

• Ask the Remuneration Committee chair how shareholder engagement will work without the annual advisory vote.
• Decide whether the board would voluntarily retain the CEO pay ratio or malus and clawback disclosures.
• Check which governance disclosures stem from the Listing Rules or Code rather than the Companies Act.

Should your company respond to the consultation?

Yes, if the proposals materially affect how you report, pay or distribute. Consultation responses shape thresholds and transitional rules, and the government aims to publish its outcome within six months of the deadline. Following the shelving of the Audit Reform Bill, this is the main vehicle for change in UK corporate reporting.

A board-approved response also documents the board’s own view of what investors need, which will be useful when designing the slimmer annual report. Our executive self-assessments can help frame that discussion, and our briefing library tracks related governance reform.

Executive Action

• Commission a short response paper from the company secretary and CFO for October board approval.
• Coordinate with trade bodies to avoid duplicating effort.
• Contact INFORMD for a board briefing on the reform programme.

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