Companies Act 2006 amended to extend strategic report requirements

A number of amendments to the Companies Act 2006 introduced via statutory instrument 2016/1245 will require companies and qualifying partnerships to include non-financial information statement in the annual strategic report from 1 January 2017

The amendments made by regulations 2 to 4 of these Regulations apply (a) in relation to the financial years of companies and qualifying partnerships beginning on or after 1 January 2017. These are the result of various measures outlined in the EU Accounting Directive.

Under section 414A of CA 2006, the directors of a company must produce a strategic report for each financial year, while the directors of a company which is a parent company producing group accounts must produce a group strategic report (which is a consolidated report relating to all the undertakings included in the consolidated accounts). Section 414C sets out the required content of a strategic report.

The new rules state that a strategic report of a company must include a non-financial information statement if the company was at any time within the financial year to which the report relates:

  1. a traded company,
  2. a banking company,
  3. an authorised insurance company, or
  4. a company carrying on insurance market activity.

The rules do not apply if the company is subject to the small companies regime in relation to that financial year or the company qualifies as medium-sized under section 465-467 for that financial year.

Section 414CA requires companies and groups of a certain type (as defined above), which are not small or medium-sized, and have more than 500 employees in a financial year, to produce a non-financial statement as part of their strategic report.

This requirement does not apply to a company which is a subsidiary undertaking if that company and its subsidiary undertakings (if any) are included in a wider group strategic report.

The non-financial information statement must include information on the company’s development, performance and the impact of its activity. It should cover details on the business model, due diligence process and management of principal risks. Other mandatory areas include:

  1. environmental matters (including the impact of the company’s business on the environment);
  2. company’s employees;
  3. social matters;
  4.  respect for human rights; and
  5.  anti-corruption and anti-bribery matters.

The rules were introduced via statutory instrument, The Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016 on 19 December 2016. 

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