Large public interest entities to prepare non-financial information statement from 1 January 2017

Regulations to implement the Non-Financial Reporting Directive (2014/95/EU) in the UK have been laid before Parliament. They will take effect seven days after they are made and will apply in relation to financial years commencing on or after 1 January 2017.

Non-Financial Information Statement

The Regulations amend Part 15 of the Companies Act 2006 by inserting two new sections:

  • Section 414CA sets out the requirement for large public interest entities (banks, insurers, financial services and listed companies) with over 500 employees to prepare a non-financial information statement as part of their strategic report. 
  • Section 414CB sets out the content of the non-financial information statement. This includes disclosure (to the extent necessary for an understanding of the company's development, performance and position and the impact of its activity) of environmental, social and employee related matters, respect for human rights and anti-corruption and bribery matters, a description of the policies pursued by the company in relation to such matters, the outcome of such policies, a description of the principal risks relating to the matters and how the company manages such risks. If the company does not pursue policies in relation to such matters, it must give a clear and reasoned explanation for not doing so. A brief description of the business model must also be included.

There is overlap with the enhanced business review that quoted companies (irrespective of their size or the number of their employees) are required to produce as part of the strategic report. To prevent duplication, the Regulations provide that compliance with new Section 414CB(1)-(6) is deemed to fulfil some of the requirements for non-financial information contained in Section 414C (content of a strategic report). In some respects, the new requirements go beyond the current strategic report in requiring the disclosure of anti-corruption and bribery matters and information on policies and principal risks in relation to the non-financial matters.

The implementation of the Regulations will be supported by guidance on the strategic report from the Financial Reporting Council.

Another aspect of the Non-Financial Reporting Directive, the requirement for issuers to disclose information about their diversity policy is being implemented by the Financial Conduct Authority (see Minor amendments made to DTRs below).

Accounting Directive

The regulations also remedy a gap in the transposition of Article 23(1) Directive 2013/34/EU and ensure that the parent company of a small group cannot benefit from an exemption from the requirement to prepare group accounts if a member of the group is established in an EEA State and is a public interest entity within the meaning of the Accounting Directive.

Further information

The Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016 can be found here. An explanatory note can be found here.