The Department for Business, Innovation, Science and Trade (BIST) has published a wide-ranging consultation titled "Modernising Corporate Reporting to support long-term economic growth". Describing itself as a 'once in a generation review', the consultation proposes a significant overhaul of the UK's corporate reporting framework, guided by five principles:

  1. clarity of purpose,
  2. flexibility and trust,
  3. simplicity and coherence,
  4. proportionality, and
  5. being fit for the future.

The proposals would reshape reporting, governance and audit requirements across UK businesses, potentially reducing compliance burdens for small and medium-sized enterprises (SMEs) while introducing a new approach to strategic reporting, remuneration disclosures and financial reporting obligations.

Changes to governance and remuneration disclosures

Proposals include:

  • Moving corporate governance reporting from company to group level and updating the definition of "corporate governance" in the Companies Act 2006, so it is more easily understood by companies, investors and creditors.
  • Testing whether private companies need to continue with governance reporting. The report asks whether non-financial reporting disclosures from private companies in general are necessary to help manage private company investment risk.
  • Retaining core remuneration disclosures (single figure, chair's statement, performance graph, remuneration policy) while removing requirements that are not working effectively or duplicate other requirements, such as CEO-employee pay ratios and the annual advisory vote on the directors' remuneration report.

A new approach to strategic reporting

The consultation proposes replacing the current prescriptive requirements with a principles-based baseline framework covering business model, performance review, resources and relationships, company strategy, and risks.

Interestingly the explicit requirements to report on specific topics such as environmental matters, employees, social matters, human rights, and anti-corruption would be removed, though companies would still be expected to report on these where financially material. The government is also considering setting a single threshold for which companies must produce baseline strategic reporting. The intention here being to ensure that companies are able to explain their performance in a way that reflects their size and the nature of their business.

Sustainability disclosures

Climate-related financial disclosures (CFD) are subject to a separate post-implementation review (due spring 2027) and are not directly addressed in the consultation. The UK Sustainability Reporting Standards, published in February 2026, will be considered for integration into the Companies Act framework. Companies would have flexibility to locate sustainability information within the strategic report.

Reforming financial reporting

The government proposes fundamental changes to the relationship between the Companies Act 2006 and accounting standards:

  • Removing detailed financial reporting requirements from the Companies Act and moving them into accounting standards, so standards become the single source of detailed obligations.
  • Streamlining to four main accounting standards: UK-adopted International Accounting Standards (UK-IAS), United Kingdom Generally Accepted Accounting Practice (UK GAAP) for large companies, UK GAAP for SMEs, and UK GAAP for micro-entities.
  • Replacing the "true and fair presumption" for micro-entities with a requirement to prepare accounts that comply with the micro-entities standard. Disclosures required by micro-entities would be set at a minimum level to meet objectives relating to the prevention of financial crime.
  • Removing the true and fair override for SMEs and replacing it with a requirement to comply with the SME standard. As a result, SMEs that meet the standard's disclosure requirements would not be required to demonstrate that their accounts give a true and fair view. SMEs would also no longer be required to produce a cash flow statement and SME groups would be exempt from producing consolidated accounts.
  • Moving from the current distributable profits and capital maintenance regime to a solvency-based regime for determining the legality of dividends, which would mark a significant departure from the existing legal framework. The proposal would be to require companies to state that the payment of the dividend will not affect the company's ability to continue as a going concern.

Digital communications and virtual AGMs

Proposals include:

  • Making electronic communication with shareholders the default (removing the requirement for prior consent).
  • Clarifying the law to confirm that annual general meetings (AGM) can take place virtually where there is shareholder consent.
  • Encouraging greater use of electronic tagging (iXBRL) and exploring whether certain disclosures could move to company websites or online portals so investors have easier access to data outside of annual reporting cycles

Clarifying the purpose of annual reports

The government proposes to reaffirm that the annual report and accounts are primarily intended for investors and creditors (including potential investors and creditors), providing financially material and decision-useful information.

Simplified company categories and thresholds

The consultation proposes simplifying the complex array of company categories, thresholds, exemptions and ineligibility criteria in the Companies Act 2006. These proposals include:

  • Creating an expanded SME regime allowing medium-sized companies to access the wider package of exemptions currently available only to small companies.
  • Extending the small company audit exemption to medium-sized companies.
  • Considering updating the employee headcount definition to allow full-time equivalents (FTE), to offer a clearer reflection of the size of some larger businesses.
  • Introducing a new "very large" company threshold to consolidate non-financial reporting requirements. Currently these requirements use different thresholds and definitions for companies in scope.

How to respond

The consultation is open to companies of all sizes, investors, auditors and professional bodies.

In practical terms the consultation closes at 11:59pm on 30 November 2026. Responses should be submitted via the online survey or emailed to mcr.review@businessandtrade.gov.uk.

Potential impact

These proposals are significant and we would encourage companies to start assessing the potential impact of these changes on reporting processes, governance arrangements and audit requirements, particularly if the company falls near the current thresholds for small, medium or large company classifications.

If you would like to discuss these proposals or any other corporate reporting matter, please contact Sharon Ayres, Amar Adatia or your usual Gowling WLG contact.