Narrative reporting is the other information provided in a company’s annual report that can include the company’s business model, activities, performance and position, strategy and, in some cases, greenhouse gas emissions.
The Strategic Report & the Directors’ Report
These two “front end” reports are the most important of the narrative reports. You can find out more about the Strategic Report and Directors’ Report on our dedicated page.
Corporate Governance Reporting
From 28 September 2018, AIM-listed companies must adopt a ‘recognised corporate governance code’. The board of directors will be required to publish, on the company’s website, details of which code they have decided to apply, explain how the company complies with that code and, where and why it departs from it.
The AIM Rules do not specify a code that must be used but AIM Notice 50, which announced this rule change, makes clear that it should be “appropriate for a company admitted to a public market”.
It includes examples of existing codes such as the Quoted Companies’ Alliance’s Corporate Governance Code (the QCA Code) and the Financial Reporting Council’s UK Corporate Governance Code (the FRC Code). It also suggests that overseas companies, or companies with a second listing on an overseas market, may adopt an appropriate corporate governance code from this foreign jurisdiction.
Premium and Standard-listed companies
Companies with a Premium listing on the Main Market of the London Stock Exchange (LSE) must apply the FRC Code on a ‘comply or explain’ basis. These companies must include information on their compliance with the FRC Code in their annual report each year.
Companies with a Standard listing on the LSE are covered by the less stringent rules included in the Disclosure Guidance and Transparency Rules (DTR), which do not specify a code of corporate governance that must be adopted and allow companies to make their governance disclosures on the company website, rather than in their annual report.
The FRC issues an annual report on the implementation of the UK Corporate Governance and Stewardship Codes and related developments. The annual reports are available here.
Large privately owned companies
The Government intends to introduce governance rules that will apply to large, privately owned companies. It is expected that the rules will require companies of a “significant size” to include in their Directors’ Report a statement of their corporate governance arrangements. To support this, a Coalition Group has been established to develop new voluntary corporate governance principles for large privately owned companies. We will provide further information on these proposals once it is available.
Directors’ Remuneration Report
The UK Companies Act requires ‘Quoted companies’ to include a Directors’ Remuneration Report (the DRR) in their annual report. The DRR must include a breakdown of directors’ remuneration by individual director, and other specific information such as the comparison of directors’ remuneration against employee pay. At least every three years, it must also include the company’s policy with regards to Directors’ remuneration.
While AIM-listed companies are not required to produce a DRR, the AIM Rules for Companies do require certain disclosures about directors’ remuneration to be included within the annual report.
We have published the AIM Directors Remuneration Report, in order to a address a conspicuous lack of information. The report will enable AIM-listed company remuneration committees to compare the salary levels of their CEO, CFO, other executive directors and non-executive directors against their industry sector peers and businesses of a similar size.