An explanation of run-off insurance – and its implications for you and your business

While the importance of professional indemnity insurance for a wide range of business owners and those providing a service is well understood, you may not be so familiar with the concept of run-off cover. Indeed, there is sometimes a temptation to incorrectly regard run-off insurance as representing something significantly different to ordinary professional indemnity cover.

“Claims made” vs. “claims occurring” protection

To understand how run-off insurance works, it is important to appreciate the “claims made” nature of the protection it provides.

The professional indemnity cover that your business may already have in place will be underwritten on what is called a “claims made” basis, rather than a “claims occurring” one. This means that your policy will respond to a claim – or an event possibly leading to a claim – that the insurer is first notified of while the policy is actually in force.

In other words, the policy will respond to a claim made during an insured period, even though the event giving rise to the claim might have actually occurred before the policy started, or when the policyholder was still being insured by another insurer.

This is different to how “claims occurring” policies – such as employers’ liability, public liability, or car insurance – work.

These particular insurance policies respond to losses that occurred while the policy was in force. So, if the policyholder has switched to another insurer since the event giving rise to the claim, it will be the company that provided the insurance at the time of the event that will deal with the claim.

So, how does this apply to professional indemnity cover?

In the case of your business’s professional indemnity insurance, it is crucial to ensure you have a policy in force to protect you in the event of a claim being made against you or your former practice for work carried out in the past.

This explains the need for a run-off insurance policy to be purchased and maintained while the professional liability period to your clients is still “running off”.

Run-off insurance, then, is a form of professional indemnity cover that takes effect when you or your employees cease to trade, with any claims made under such a policy relating to work undertaken before the run-off cover commenced.

What should your next steps be if you might need run-off insurance?

Those retiring from their business often purchase run-off insurance; its very nature makes it especially suitable for smaller firms and sole traders.

It is important to remember that with even speculative or spurious claims still needing to be defended, the right run-off policy can give you invaluable peace of mind. It will cover the costs of defending claims, and reimburse any losses that occur in the event of a claim being upheld against you as the insured party.

Anyone who required the protection of a professional indemnity policy while providing services and advice therefore stands to benefit from having run-off cover in place.

If you conclude that you do indeed require run-off insurance for your business, your next step should be to advise your current insurer or broker of this. If it is a while until your current policy’s renewal date, you will need to tell your present insurer or broker that you have stopped trading.

The insurer or broker will attach an endorsement to your policy, making clear that they will not provide cover for any service or work provided after that date – the “run-off” endorsement date. When the renewal date arrives, the insurer will present you with run-off renewal terms, and may request that you complete a proposal form setting out the work you have carried out between the previous renewal date and the date you ceased trading.

It will then be up to you whether to commit to the run-off policy, or instead make alternative arrangements. A run-off insurance policy typically continues for up to six years, although your business’s particular circumstances and requirements may dictate a shorter or longer period of cover. Note, too, that after the first full year of run-off, your premiums on such a policy should begin to show signs of decreasing from what you paid for indemnity cover while trading.

Don’t trust anyone else as your corporate governance partners

At this time of great uncertainty for so many businesses – including for their prospects in the months and years ahead – you are likely to greatly appreciate the specialised knowhow and assistance our company secretarial subscriptions can offer to your organisation.

To find out more about the details of this service, and everything else the London Registrars team can do to serve your governance, risk and compliance needs, please don’t hesitate to call or email us.

April 2021

Staff to continue working from home as much as possible until late into the easing of lockdown

In late February, the UK government set out its four-step “roadmap” for easing its most recent lockdown restrictions. In the process, it revealed that guidance to staff to work from home where possible would not be altered until 21 June at the earliest.

A week prior to that date, a review will be published to inform any update the government makes to its advice on working from home. Until then, the guidance for normally office-based workers is still to continue largely working from home where feasible.

Any change in guidance for such staff therefore looks set to coincide with the lifting of all legal restrictions on contact with others, and large closed venues such as nightclubs being permitted to open their doors once more.

What does the government’s roadmap document state?

The government’s document released alongside the announcement of the “roadmap” – COVID-19 Response – Spring 2021 – states: “Social distancing is difficult and damaging for businesses and, as a result, it is important to return to as near to normal as quickly as possible.

“Ahead of Step 4, as more is understood about the impact of vaccines on transmission and a far greater proportion of the population has been vaccinated, the government will complete a review of social distancing measures and other long-term measures that have been put in place to limit transmission.”

Disagreement as to whether a ‘new normal’ looms

Presuming the advice on home working is finally revised towards the end of June, many workers will have spent a significant proportion of the previous 15 months away from the office. This has raised questions about the likely extent to which these personnel will return full-time to the office as previous limits are gradually lifted.

Various City and international firms, for instance, have already indicated that they won’t need as much office space as they did before the coronavirus crisis, due to the likelihood of people needing to come into the office less often.

Indeed, it seems probable that many employees in the long term will devote three or four of their working days each week to the office, and the rest to working from home.

However, one high-profile sceptic on suggestions that the pandemic could help bring profound and lasting change in this area, is seemingly the Prime Minister, Boris Johnson.

Mr Johnson commented in a Downing Street press conference: “The better remote communication gets and the more people can see each other and talk on mobile devices, as a paradox the more actually they want to see each other face to face.”

“That, I’m sure will come back. I think that London and our great cities will be filled full of buzz and life and excitement again.”

Enquire now about our company secretarial solutions

Whatever the situation looks likely to be for your organisation’s workforce once the worst of the COVID-19 crisis is history, you may well be highly appreciative of the assistance with corporate governance and compliance that our own professionals can provide.

Don’t be afraid to reach out to the London Registrars team today for more information and guidance in relation to Companies House filings maintenance, minute book maintenance, directors’ service addresses, and other key aspects of our company secretarial services.

March 2021

What does the CMA’s COVID-19 taskforce mean for businesses?

One perhaps easily overlooked development amid the fast-moving coronavirus crisis has been the Competition and Markets Authority (CMA)’s creation of a COVID-19 taskforce to help protect consumers.

The taskforce was created in response to a significant rise in complaints from customers during the pandemic, largely about coronavirus-related cancellations and refunds.

To this end, the non-ministerial department of the UK government has made clear that the COVID-19 crisis has not brought about any relaxation in its rules on unfair trading practices and anti-competitive behaviour.

So, what should retailers be mindful of amid the competition authority’s focus on these aspects of how businesses are conducting themselves during the coronavirus situation?

What are the areas of focus for the CMA’s COVID-19 taskforce?

The CMA created its COVID-19 taskforce to investigate and instigate action against businesses that have refused refunds or introduced unnecessary complexity to the refunds process.

Other retailers’ behaviour being given greater scrutiny by the competition body include instances of customers being charged high administration or cancellation fees, or pressured into accepting vouchers instead of cash refunds.

Earlier in the pandemic, the CMA published an open letter to all businesses involved in organising package holidays for UK customers. The authority said that since the taskforce’s launch, it had

received more than 17,500 consumer complaints about traders that had provided misleading information and failed to give refunds within the 14-day deadline.

However, the package holiday industry is not the only one that has attracted concern since the onset of the COVID-19 outbreak, with other sectors potentially in line for CMA scrutiny in the coming months including holiday accommodation, wedding and private event venues, nurseries and childcare.

In what circumstances are retailers required to provide refunds?

Businesses are generally expected to issue refunds whenever they have cancelled a contract without supplying any of the requested goods or services, or where tier or lockdown conditions prevent them from providing the service.

Consumers must also be provided with refunds, in most cases, if they cancel or are unable to receive the requested service as a consequence of restrictions.

Exceptions to these requirements exist – for example, in the event of the customer having already received some benefit, or the goods or services being provided as part of a subscription – in which case, payment may be suspended or refunds limited.

Although the CMA does allow for vouchers, credits and rescheduling to be offered instead of a refund, it is crucial that customers are not obliged or misled into accepting such alternatives. The body also accepts that the current circumstances may result in refunds taking longer to be issued but still expects reasonable and clearly communicated timelines.

How are businesses responding to the CMA’s heightened monitoring?

Alert to the increasingly watchful eye of the competition authority, many businesses have moved to adapt their offering to customers beyond the legally required minimum – for example, by extending ‘change of mind’ returns until after the reopening of physical stores.

Such policies, in turn, may help cultivate greater customer trust in such businesses’ online and offline retail arms alike.

Our wealth of company secretarial services here at London Registrars could be instrumental in supporting your business through pandemic recovery – encompassing a range of company secretarial and business support services and the maintenance of statutory registers. Please reach out to our team today to find out more.

March 2021


How COVID-19 has forced retailers to adopt new ways to survive

To say that the coronavirus situation has profoundly impacted on the UK retail sector would be something of an understatement.

The obvious immediate enforced changes or temporary closures during periods of lockdown have  in many cases transformed into permanent closures as brands look to reduce costs. Meanwhile, many familiar retail names have opted to shift their operations either partly or fully online.

Some of these developments may seem to represent an acceleration of trends already evident long before the pandemic. After all, retail businesses were generally well aware, even prior to COVID-19, of the ever-heightening importance of being active on social media, showing brand transparency, and espousing sustainability.

These are all trends that have long exerted their influence on how British retailers continually reinterpret and evolve their online presence.

So, what has been especially notable about how brands have responded to the previously unheard-of conditions the pandemic has brought? In a nutshell, retailers have shifted their focus from how they can survive in the short term, to how they can thrive in the longer term – with the UK High Street unlikely to ever be quite the same again.

What have specific retailers done in response to the pandemic?

We have reached the stage of the coronavirus crisis where, for a great number of high-street brands, the permanent closure of stores has become all but unavoidable. This has led many of them to switch some roles to the e-commerce sector, as part of a broad rethinking of their business approach.

We have seen, for example, John Lewis closing some of its stores permanently and considering heavy investment in e-tail. Indeed, the partnership has stated that online shopping now accounts for 60-70% of its sales, compared to just 40% before the pandemic.

The shirts and ties retailer T. M. Lewin, meanwhile, went into pre-pack administration last summer, and announced that all 66 of its UK stores would be shuttered. However, the brand continues to have an e-commerce presence.

Cath Kidston, too, fell into administration not long after the beginning of the first lockdown. As a consequence, all 60 of the chain’s UK stores were closed, although its online operations remain.

Away from the obvious high-street retailers, even major names in the arts have discovered the value of maximising an accessible online presence.

The National Theatre, for instance, has caught the eye with its ‘National Theatre at Home’ streaming service, which makes available one-off rentals, monthly and annual subscriptions to an international audience. This will doubtless include many individuals who would not have had the luxury of visiting the theatre in person, even before the pandemic and is an example of how COVID-19 may even present opportunities for brands to expand, rather than merely retain an audience.

However, the broader trend is not just of retailers shifting previously brick-and-mortar operations online but also of offering their own delivery services. Cambridge Wine Merchants is among those to have rapidly moved to offer in-house delivery to customers based nearby. Other retailers have used existing delivery platforms such as Deliveroo, Ocado and Just Eat, thereby fuelling their stellar growth during the coronavirus crisis.

Position your business advantageously to thrive after the worst of the pandemic

While we may never live in a truly ‘post-COVID-19’ world and much uncertainty remains about the recovery, one thing has become clear for brands across the UK — the importance of modernising and retaining the agility to thrive in an era when the high street may not have the same role it once did.

We can play our own role in helping your business to not just survive, but thrive in the months and years ahead here at London Registrars. To learn more about our expertise and track record in company secretarial practice for PLCs, please do not wait any longer to contact our team or call us direct on 07415 107436.

1 March 2021

When might a company or individual require a process agent?

If you have already had reason to investigate our process agent service here at London Registrars, you may already know the basics of what a process agent does.

UK process agents are also sometimes referred to as service agents or agents for service of process. Their responsibility is to accept service of notices, proceedings or documents on behalf of their (usually) overseas clients. A process agent service can therefore be invaluable in situations where the serving of a notice cannot happen abroad, or it would be difficult to accomplish this.

In what exact situations may a process agent service be needed?

One typical example of a process agency arrangement would be where an entity based in another country enters into a loan agreement with a bank in the UK, or with the European Bank for Reconstruction and Development (EBRD).

Another scenario may entail an overseas client entering into a large hire or purchase agreement with a UK supplier, where the foreign entity will be subject for a number of years to terms based on UK law and jurisdiction.

Contracts and loan agreements like this may have a clause written into them whereby the overseas entity must enter into a process agency agreement for the entirety of the loan or hire period. This would mean that in the event of the foreign entity breaching its agreed terms or falling behind with loan repayments, service of any court claim papers would be made on the process agent.

This would ensure that a correct procedure is followed for the serving of papers to start court or arbitration proceedings, in line with the Civil Procedure Rules. It would then be the process agent’s responsibility to forward the papers to their client who appointed them (‘the Appointor’).

A process agent service can deliver both time and cost benefits

When a process agent is in place for a foreign entity involved in an agreement like the above, the counterparty (often the Seller or the Lendor) knows that service of the court papers on the UK process agent constitutes proper service and allows the court proceedings to run their course, without the uncertainty, extra costs and hassle that would be involved if the court papers had to be served on the foreign entity abroad.

It is worth noting that the appointment of a process agent is strangely triangular in that the appointment primarily serves the counterparty (the Lendor or the Seller, etc) and not the Appointor (the Borrower or Purchaser) who is obliged by contract to appoint the process agent and enter into the process agency agreement (and generally bears the cost of this).

Nor are process agents of relevance only to companies

It would be easy to presume from all of the above that only companies engaged in commercial transactions would ever need to seek a process agent service.

In recent years, foreign-based individuals or couples who wish to obtain a mortgage or loan for a UK property purchase have also frequently been asked to secure a process agent’s services.

In conclusion, process agents routinely play a crucial role for both organisations and individuals that are based overseas, but looking to enter a contract or agreement with a bank, lendor or supplier in the UK, and frequently the bank, lendor or supplier asks for confirmation direct from the process agent that the process agent has indeed taken on the appointment.

If you have been told – whether as an individual or organisation – that you need to appoint a process agent, our team at London Registrars can provide assistance and guidance from your first point of contact with us, right through to the executed agreement. If you wish to contact us, please email [email protected] or call 07415 107 436.

February 2021

What does a company secretary actually do?

If your organisation has been considering getting some assistance with company secretarial compliance, one of our basic company secretarial subscriptions might be of interest to you. For this, or similar services, you may be interested in receiving a refresher on the company secretary’s role within an organisation, and why it is so important.

Company secretaries are individuals with a broad skill set who exert considerable influence on how an organisation is directed and controlled.

While the given company’s general strategy and decision-making are key here, a company secretary also plays an important role in ensuring that all of the organisation’s activities comply with ethical, legal and regulatory requirements.

The scope of company secretarial responsibilities

Company secretaries can be found working across all manner of organisations – including the public, private and not-for-profit sectors.

The exact responsibilities a given company secretary has will depend to a great extent on the level of their role, the size of the organisation they are working for, and the organisation’s sector.

Nonetheless, there are certain general duties that company secretaries tend to have. These include guiding the chairman and the board on their responsibilities in accordance with the rules and regulations to which they are subject, and on how they should discharge those responsibilities.

A company secretary can also serve as an invaluable source of support for the chairman in ensuring the effective and efficient functioning of the board.

Furthermore, you can expect a capable company secretary to help ensure good information flows within the board and its committees, as well as between senior management and non-executive directors.

The right company secretary can also be fundamental to the maintenance of good shareholder relations for a company, including by keeping the board informed on the views of shareholders.

What else should a company secretary do for an organisation?

It is also customary for a company secretary to develop and oversee the systems that are crucial to ensuring compliance with all applicable codes and legal and statutory obligations.

These professionals also routinely keep an eye on the latest changes to relevant legislation and the regulatory environment, taking action when necessary.

In addition, your organisation might take an interest in company secretarial subscriptions – like those of London Registrars – in order to take advantage of services like the maintenance of the statutory registers and the minute book, and the filing of changes with Companies House after ensuring that these are supported by the appropriate authorities.

You might also count on your chosen company secretary to undertake such duties as the organisation of board meetings and AGMs, and the preparation of agendas, the preparation of the minutes and matters arising schedules.

Contact us now about our company secretarial subscriptions

Whether you are seeking the services and expertise of a company secretary for your private limited company, public limited company, LLP or non-listed PLC – among the many options we present – we would be pleased to discuss your requirements when you reach out to us.

Simply call us on 07415 107436 or email [email protected] for further information and advice.

27 January 2021

Application deadline for emergency business loans extended to end of January

Many of the businesses using London Registrars’ company secretarial services, such as central London registered office addresses and register of shareholders maintenance, may be interested to learn that the UK Treasury has extended its emergency business loan scheme.

The news means that firms can now request to “top up” their borrowing, as the government looks to shore up businesses at a time of continuing restrictions to limit the spread of the coronavirus.

What do businesses need to know?

Companies in the UK have now been given until the end of January to apply for emergency business loans, including bounce back loans (BBLS), coronavirus business interruption loans (CBILS) and the CLBILS scheme for bigger firms. This is a two-month extension on the previous 30 November deadline, and also covers the Future Fund, which targets UK start-ups.

Chancellor of the Exchequer Rishi Sunak stated on Twitter in early November: “To help more businesses access additional support, deadlines for applications to our government-backed loan scheme and the Future Fund have been further extended until 31 January 2021.”

The changes include previous small-business recipients of funds through the BBLS programme being entitled to ask for top-ups to existing loans if they require further cash. The Bounce Back Loan Scheme offers businesses cheap loans worth as much as £50,000.

The maximum amount available for firms to borrow through the BBLS scheme is 25% of their turnover, up to a £50,000 limit, and the top-up is intended to assist businesses that borrowed less than this amount.

A government document describing the changes read: “We understand that some businesses did not anticipate that the disruption to their business from the pandemic would go on for this long; this will ensure that they are able to benefit from the loan scheme as intended.”

The document also stated, however, that firms requesting a top-up would only be able to do so once.

Reality of second lockdown prompted a review of government-backed loans

The imposition of a second nationwide lockdown in England from early November seemingly accelerated the need for additional funding to support under-pressure businesses.

It led to the Treasury convening an emergency meeting with Britain’s largest banks, including HSBC, NatWest, Lloyds and Barclays, in order to review the government-backed loan programme’s terms.

Among those to welcome the Treasury’s announcement was Conservative MP Kevin Hollinrake, who also serves as co-chair of the all-party parliamentary group (APPG) on fair business banking.

However, he said a longer extension into mid-2021 would benefit firms, and that the top-ups should also apply to the bigger CBILS scheme, which enables businesses to borrow as much as £5 million, and comes with an 80% government guarantee.

Enquire now to learn more about how we could serve your company

Whatever the challenges that the next few months pose to your firm, we stand ready and waiting here at London Registrars to assist your company with its governance, risk and compliance requirements.

Call 020 7608 0011 or email [email protected] today to find out more about our basic company secretarial support packages, maintenance of the statutory registers and the minute book, Companies House filings and many other aspects of corporate governance.

December 2020

FRC review calls for better corporate reporting on climate change

A review by the Financial Reporting Council (FRC) has concluded that corporate reporting on climate change must improve to meet the expectations of investors and other users.

The regulator expressed its backing for the introduction of global standards on non-financial reporting. In the meantime, it urged UK public interest entities to report on the TCFD’s (Task Force on Climate-related Financial Disclosures) recommended disclosures, as well as the SASB (Sustainability Accounting Standards Board) metrics for their industry.

Regulator underlines importance of a “reporting framework”

The FRC’s review found that while climate change may not be the most immediate challenge for some companies, there was a need for it to be integrated into decision-making now, to enable the subject to be addressed in an orderly way.

The regulator said that its review reflected the important part played by boards, companies, auditors, professional organisations and investors in considering and responding to climate-related issues, adding that “each has the capacity to act as a driver of change.”

What were the key findings of the review?

Various findings, expectations and next steps were set out by the FRC review which concluded that there was only “limited” evidence of business models and company strategy actually being influenced by climate considerations.

Furthermore, the review stated that, while some companies had set strategic goals such as “net zero”, their reporting did not make clear how progress towards these goals would be achieved, monitored or assured.

An increasing number of companies did provide narrative reporting on climate issues, frequently meeting minimum reporting requirements. Users, however, were calling for additional disclosures to inform their decisions.

The review also concluded that the manner in which climate change matters were considered and disclosed in the financial statements “lags behind narrative reporting”. Indeed, the review noted areas of possible non-compliance with the requirements of International Financial Reporting Standards.

There was also considerable variation across firms in the quality of support, training and review provided to audit practices on climate change. Audits reviewed indicated a requirement for auditors to improve how they considered climate-related risks in the planning and execution of their audits.

UK professional bodies and audit regulators in the Crown Dependencies were responding to climate change, the report said, but differences were observed in the substance and granularity of their approaches.

In addition, while investors backed the TCFD framework, they also wished to see disclosures in relation to the financial impacts of climate change. As the review noted, investors are themselves subject to evolving regulations.

“Now is the time for all of us to raise the bar”

Sir Jonathan Thompson, FRC Chief Executive, commented: “Users of corporate reports expect more from companies, auditors, regulators and standard setters in terms of climate change reporting.

“While this review highlights some bright spots of better practice in both corporate reporting and auditing, we also found that more needs to be done. I know that this is a difficult time to ask for more, but now is the time for all of us to raise the bar.”

Ask us today about our company secretarial services

Whether you approach the London Registrars team with an interest mainly in the effective maintenance of statutory registers, directors’ service addresses, or any other aspects of our highly rated company secretarial and governance support services, we would be pleased to hear from you.

When you do contact us – as is possible via email, phone or fax – we will be able to discuss with you how our corporate governance know-how could serve your organisation for months and even years to come.

November 2020

Additional information that EEA companies will have to file with Companies House

With the transition period formerly agreed by the UK and the European Union (EU) as part of the former’s departure from the bloc nearing its end, Companies House has written to European Economic Area (EEA) companies about changes in filing requirements that will soon come into effect.

More specifically, the Registrar has said that from 11pm on 31 December 2020, EEA companies registered with Companies House in accordance with the Overseas Companies Regulations will be required to provide further information, aligned with that demanded of non-EEA companies.

What extra details will such firms be expected to provide?

Companies House has stated that the additional information it expects EEA companies to supply will include details on the law under which the given company is incorporated, as well as the address of its principal place of business or registered office.

These firms will also be asked to outline the company’s purpose – its ‘objects’ – and the amount of share capital issued. Furthermore, in the case of companies required to prepare and disclose accounts under their parent law, the accounting period and period of disclosure must be provided.

The companies subject to these latest changes will include EEA companies who have already registered a branch of their overseas company in the UK, as well as all new overseas company registrations made after exit day – the principle being that the same requirements will apply to all non-UK registrations.

More information must also be included on client or public-facing material

In addition to the above, the Registrar has set out the further details that EEA companies will need to include on their materials for public or client consumption, such as their websites, letterheads and order forms.

Such information will encompass the location of the given company’s head office, the legal form of the company, and its limited liability status. The company’s share capital must also be stated on these materials, as well as – if applicable – notice that the company is being wound up or is subject to insolvency or any other analogous proceedings.

Companies House has told EEA firms that they will have three months from 31 December to supply this additional information, adding that from this date, an amended OSCH02 form to update company details will become available on its website.

The new requirements arise from the Companies, Limited Liability Partnerships and Partnerships (Amendment etc.) (EU Exit) Regulations 2019.

We can advise and assist where needed

If there is any uncertainty for your organisation as to its corporate governance obligations as we look to the final few weeks of 2020 and into 2021, we would be pleased here at London Registrars to give you the benefit of tailored advice and support.

The risk, compliance and legal services that we offer include such aspects of company secretarial practice for PLCs as a Central London registered office address, directors’ service addresses, and maintenance of the register of directors and secretaries, among other areas of expertise.

To learn more about these and our other renowned services and solutions, you are welcome to enquire to our team via phone, fax or email today.

November 2020

How to maximise the usefulness of your company’s section 172 statements

As a key and trusted provider of company secretarial subscriptions and related services here at London Registrars, we took much interest in the Financial Reporting Council (FRC)’s recent release – through its Financial Reporting Lab learning space – of advice on how companies can make their section 172 statements more useful.

More specifically, of course, this relates to section 172(1)(a) to (f) of the Companies Act 2006. We quote section 172 in a lot of the resolutions we draft for our clients, because the Act states that directors must make their decisions in the best interests of their company.

This is now statute law, having previously been covered by common law and part of the fiduciary duties directors had vis-a-vis their companies. But what are some of the most helpful tips that the FRC outlined with regard to such aspects of the section 172 statement as what content to include, how to present that content, and how to facilitate the process of the statement’s preparation?

First of all… why were section 172 statements introduced?

Section 172 statements were brought in by The Companies (Miscellaneous Reporting) Regulations 2018, to be first applied to the reporting periods of relevant companies for financial periods commencing on or after 1 January 2019. The FRC then issued a clarification in May 2018 as to which companies ought to prepare such statements.

The introduction of these requirements was driven by a wish to maximise insight and accountability, in light of concerns that boards were failing to pay enough attention to their responsibilities towards both shareholders and stakeholders.

In the words of the UK Corporate Governance Code: “The board should understand the views of the company’s key stakeholders and describe in the annual report how their interests and the matters set out in section 172 have been considered in board discussions and decision-making.”

What are some of the tips the FRC has outlined?

The following are just some examples of the advice the regulator has laid out for companies looking to compose more effective and useful section 172 statements:

  • Start early. Companies are urged not to simply compile relevant information for their section 172 statement at the end of each year, but to highlight the key decisions and engagement activities that may be worthy of inclusion in the statement as they take place, over the course of the year.
  • Be specific and genuine, instead of simply ‘box-ticking’. The FRC has also called for firms to not treat the section 172 statement as a mere compliance exercise. The statement should not just duplicate the section 172 requirements and state compliance; instead, the focus ought to be on how the company fulfilled those requirements, what happened during the year, and – where applicable – what the board and management’s intended future actions are.
  • Explain the ‘why’. Also included in the regulatory body’s tips was the importance of setting out the board’s reasoning on why particular stakeholders are identified as key, why given engagement methods were effective, and why certain decisions were taken in light of engagement and feedback that may have accumulated over time.
  • Consider the statement’s flow and context. In accordance with the regulations, a section 172 statement must be included within the Strategic Report, or elsewhere by cross reference. The statement should reflect the link to the organisation’s strategy, in addition to being clear about the board’s role. Companies are also encouraged to think about how the statement fits into the context of stakeholder engagement.
  • Make the statement visible. The FRC has also said each company’s section 172 statement should be clearly labelled and referred to in the annual report’s contents page.

During these testing times, London Registrars remains by your side

If you would appreciate further tailored advice, guidance and assistance in relation to various elements of your corporate governance and compliance practices, we are available here at London Registrars to serve those needs – including through the provision of company secretarial subscriptions.

Reach out to us now by calling 020 7608 0011 or 07415 107436, or sending us an email, and we will be both pleased and well-placed to help you with your query.

November 2020