UK: Modernising corporate reporting: Key proposals and next steps

Why should I read this?

On 7 September 2026, the Department for Business, Innovation, Science and Trade (BIST) launched a 12-week consultation on modernising corporate reporting. The consultation is described as a "once-in-a-generation" review and aims to make the UK corporate reporting framework more proportionate, effective and growth-focused, while preserving investor and creditor confidence. Responses are due by 30 November 2026.

The proposals are guided by five principles: clarity of purpose, with annual reports focused primarily on investors and creditors; flexibility and trust, with directors empowered to determine financially material disclosures; simplicity and coherence, by reducing duplication across company law, accounting standards and regulatory rules; proportionality, by aligning requirements with company size, ownership structure and economic impact; and being fit for the future, including digital reporting and emerging technologies.

Key proposed reforms

The consultation is wide-ranging. The key points for in-house legal, reporting and finance teams are summarised below.

Simplified company categories and thresholds

The Government is considering whether to rationalise the company definitions, thresholds and exemptions in the Companies Act 2006 (2006 Act). Key proposals include creating an expanded SME reporting regime under which medium-sized companies could access a wider package of exemptions currently available to small companies, including a possible audit exemption for some or all medium-sized companies. The consultation also seeks views on a new "very large" company threshold for certain non-financial reporting obligations.

Restructured financial reporting framework

The consultation proposes a significant restructuring of financial reporting. Detailed requirements would be removed from the 2006 Act, which would instead set high-level obligations and identify the applicable accounting standards. Accounting standards would become the single source of detailed financial reporting requirements.

The Government envisages four main standards: UK-adopted international accounting standards, UK GAAP for large companies, UK GAAP for SMEs and UK GAAP for micro-entities. SMEs could use a simpler standard, without a cash flow statement or consolidated accounts for SME-sized groups. The consultation also explores replacing the current "true and fair" requirement for SMEs with compliance with the relevant SME accounting standard, and replacing the micro-entity true and fair presumption with a requirement to comply with a micro-entities standard.

Distributable profits and reserves

The Government is also consulting on whether to replace the current distributable profits and capital maintenance rules with a solvency-based regime for determining the legality of dividends and other distributions. This would be a fundamental change to the 2006 Act. The proposals would require companies to state that the dividend would not affect the company's ability to continue as a going concern.

Streamlined strategic report

The Government proposes to replace prescriptive strategic report requirements with a principles-based framework centred on five baseline disclosures: business model, performance review, resources and relationships, company strategy and risks. It proposes removing specific disclosure requirements in the 2006 Act for environmental matters, employees, social matters, community matters, human rights, anti-corruption and anti-bribery, except for existing climate-related financial disclosure requirements. Companies would still be expected to report on those matters where financially material. The section 172(1) statement would also be replaced by the resources and relationships baseline disclosure.

Sustainability and climate reporting

Existing climate-related financial disclosure requirements in the 2006 Act are not proposed to change in this consultation. They are being considered separately through a post-implementation review, due to be completed by spring 2027. UK Sustainability Reporting Standards (UK SRS 1 and UK SRS 2) were published in February 2026. The Government will consider how UK SRS should be reflected in the 2006 Act, taking account of responses to this consultation, the climate-related financial disclosures post-implementation review and related policy processes.

Companies would have flexibility to locate sustainability information within the strategic report, either integrated into the relevant baseline disclosures or in a separate section. The FCA has separately consulted on aligning listed issuer sustainability disclosures with UK SRS, with final UK Listing Rules expected in autumn 2026.

The consultation confirms that the Government does not have any plans to introduce new requirements for reporting companies to obtain assurance over future UK SRS reporting or for other strategic reporting topics.

Corporate governance and remuneration reporting

The consultation seeks views on simplifying corporate governance reporting so that it is more focused on decision-useful information for investors and creditors.

Proposals include moving corporate governance reporting from company level to group level, encouraging better use of the UK Corporate Governance Code's "comply or explain" flexibility, simplifying the statutory definition of corporate governance and considering whether some or all of the statement of corporate governance arrangements could sit on a company website rather than in the annual report. The Government is also seeking views on the appropriate threshold for corporate governance reporting, including whether requirements should apply only to very large private companies and public companies.

On remuneration reporting, the consultation proposes retaining core investor-critical disclosures, simplifying or removing less useful requirements and reviewing whether the current scope for remuneration reporting for quoted companies remains appropriate. Specifically, the Government proposes removing the annual advisory shareholder vote on the directors' remuneration report on the basis that the forward-looking remuneration policy is already subject to a binding triennial vote.

Digital-first communications and virtual AGMs

The Government has accepted the Digitisation Taskforce recommendation to make electronic communication with shareholders the default option, while preserving an individual shareholder right to opt in to hard copy communications.

The Government also intends to clarify that a "place" for AGM purposes can include a virtual location where there is shareholder consent, enabling fully virtual AGMs. Views are sought on whether additional shareholder safeguards are needed.

Other proposals

• Directors' report: as previously announced, the requirement to produce a directors' report will be removed, with some provisions deleted and others relocated within the annual report. Statutory instruments are expected in due course.
• Auditor transparency: companies would be required to notify Companies House of auditor appointments and departures, with the auditor's identity and registration number visible on the register.
• Reporting Gateway: A new central government function will scrutinise future reporting requirements to ensure they are coherent, proportionate and cost-effective.

Impact and next steps

If implemented, the proposals would represent a major overhaul of the UK corporate reporting landscape, with potentially significant implications for reporting obligations, audit requirements, governance processes and annual report preparation.

A recurring theme is the distinction between public and private company reporting. The Government notes that private companies often have closer relationships with investors, and may therefore have less need for detailed public disclosures, while recognising that some large private companies have sophisticated and dispersed financing structures. Listed and traded companies are likely to remain subject to more extensive requirements, including FCA and market-specific rules.

Companies should now:

1. Consider whether to respond: the consultation closes on 30 November 2026. Responses are encouraged. Details of how to respond are set out at page 9 of the consultation document.
2. Assess impact: consider how the proposals would affect reporting obligations, compliance costs and governance processes, particularly the potential SME audit exemption, changes to strategic reporting and remuneration reporting, and possible digital reporting changes.