FRC consultation on draft amendments to Guidance on the Strategic Report - Law Society response
The Financial Reporting Council (FRC) published a consultation seeking views on its draft amendments to Guidance on the Strategic Report.
The draft amendments flow from the requirements of the EU Non-Financial Reporting Directive (NFRD), which has an objective of helping investors, consumers, policy makers and other stakeholders to evaluate the non-financial performance of large companies and encouraging these companies to develop a reasonable approach to business.
The FRC’s proposals relate to areas including:
- Enhancing the linkage between section 172 of the Companies Act (duty to promote the success of the company) and the purpose of the strategic report
- Making targeted improvements to certain areas of the guidance to reflect key developments in corporate reporting.
The Law Society Company Law Committee has responded to the consultation.
It recognised the importance of a well-written strategic report in informing members of a company and helping them assess how directors have performed their duty under section 172 of the Companies Act.
It noted that because some of the proposed changes represent a reasonably significant change in practical reporting for many entities, it would be helpful if the FRC acknowledges that the amendments to the guidance go beyond the NFRD’s requirements and explains why this is in line with the government’s policy to create the best possible environment for good business.
It noted that some of the proposed changes to the guidance will require reporting entities to produce reports that overlap with requirements under the Corporate Governance Code, and such multiple reporting could confuse rather than clarify matters for reporting entities.