The Future
In February 2016 the Department for Business, Innovation and Skills (BIS) published a consultation on the implementation of an EU Directive on the disclosure of non-financial information and diversity. Whilst the content aligns with existing requirements for the Strategic Report, BIS is seeking input, (amongst other things), on whether the non-financial statement should be placed outside of the annual report and whether companies should be able to provide this separate report via the company’s website. In addition, the consultation asks for feedback on the advantages and disadvantages of only publishing the annual report on the company’s website. It would appear that the days of hard copy communications may be numbered and communication with shareholders and the wider community will, in the future, be carried out via the web.
Recent Developments
Modern Slavery Act
Companies who have a minimum turnover of £36 million per year are required to prepare a slavery and human trafficking statement for each financial year for years beginning on or after 31 March 2016. If the organisation has a website this statement must be published on the website with a link in a prominent place on the home page. A subsidiary organisation that meets the turnover requirements in its own right must also put a statement on its website if it has one although a parent company may produce one statement that all its subsidiaries can use.
Gender Pay Gap Reporting
The pay gap information required under the Equality Act (Gender Pay Gap Information) Regulations 2015 must be published from 2018 on a searchable UK website and maintained for at least three years. The information is also to be uploaded to a government website. The requirement applies to all employers with 250 or more employees. As currently drafted group companies will not be required to aggregate employees across subsidiaries and therefore you may get large parent companies who do not have to publish this information on a website if it doesn’t employ this number of employees as a separate legal entity.
Payment Practices
In recently published draft regulations that will apply to large companies, LLPs and all listed companies, information about a company’s payment practices, policies and its performance in this respect will be required to be published quarterly on the company’s website in a prominent position.
It is very likely that the three reporting requirements above would traditionally have been required to form part of the annual report and it is interesting to note the move away from this use of this document. In terms of narrative reporting generally the Financial Reporting Council has encouraged the move in its ‘Cut the Clutter’ campaign to have standing data and explanatory information on a website rather than being replicated in the annual report.
Current Website Content Requirements
Companies Act 2006
Deemed consent – Schedule 5
Legislation allowing the company to communicate with shareholders electronically has been in place for some years. The introduction in the Companies Act 2006 of the ‘deemed consent’ regime whereby shareholders effectively have to opt-in to receive hard copies of documents, has greatly increased the use of electronic and website communication. In order to take advantage of this option shareholders have to be consulted individually as to whether they wish to receive hard copies of documents. However, if the shareholder has not responded within 28 days they are deemed to have agreed to communicate with the company electronically. Following this consultation any document or information circulated by a company to its shareholders may be published on its website and a notification sent to the shareholder either by email or letter, whenever a shareholder document appears on its website.
Poll results – section 341
A traded company must publish information on its website relating to a poll taken at a general meeting as soon as reasonably practicable after the meeting. This information includes text of the resolutions, number of votes cast, proportion of the issued share capital represented by the votes, and number of votes cast for and against and number of abstentions. It must be kept on the website for a period of two years.
Information about appointment of an independent assessor – section 351
Where an independent assessor has been appointed by a traded company to report on a poll, certain information on the assessor’s identity and the resolutions to which his appointment relates must be made available on the company’s website as soon as reasonably practicable and kept on the website for two years.
Annual report and accounts – section 430
A quoted company must ensure that its annual report and accounts are made available on its website as soon as reasonably practicable and must remain available until the next report and accounts are made available. However, it should be noted for companies subject to the Disclosure and Transparency Rules the time period for annual reports and half-yearly reports to be kept on a website is ten years (extended from five years in November 2015).
Publication of audit concerns – section 527
Shareholders of a quoted company (reaching a certain threshold) may require the company to publish on a website a statement setting out any matter relating to the audit of the company’s accounts that are to be laid before the next accounts meeting or any circumstances connected with an auditor of the company ceasing to hold office since the previous accounts meeting.
Information to be published on a website before a general meeting – section 311A
A traded company must publish, as soon as is reasonably practicable, the following information on a website before a general meeting:
- Matters set out in its notice of meeting;
- Total number of shares in the company and shares in each class in respect of which shareholders are entitled to exercise voting rights at the meeting;
- Totals of voting rights that members are entitled to exercise at the meeting in respect of shares of each class;
- Shareholders’ statements, resolutions and matters of business received after the first date on which the notice is published.
This information must be available on the website for 2 years from date of publication.
Questions and answers – section 319A
A traded company need not provide an answer to a shareholder question at a general meeting if an answer has already been given in the form of an answer to a question on the company’s website. Companies therefore often provide a comprehensive set of Q&As on their websites particularly in relation to sensitive or controversial issues.
Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015
Under the above regulations, companies must include the following information on their websites:
- The company's registered name;
- The part of the United Kingdom in which the company is registered;
- Its registered number;
- The address of its registered office;
- Where a limited company is exempt from the obligation to use the word "limited" as part of its registered name, the fact that it is a limited company;
- Where a community interest company is not a public company, the fact that it is a limited company;
- In the case of an investment company the fact that it is such a company;
- If a company discloses the amount of share capital on its websites, that disclosure must be to paid up share capital.
UK Corporate Governance Code (the Code)
Companies subject to the Financial Conduct Authority’s UK Corporate Governance Code are required to disclose as soon as reasonably practicable on a website certain information in respect of proxy votes where a vote has been taken on a show of hands. This includes the number of shares in respect of which proxy appointments were validly laid and number of votes for and against each resolution.
In addition, guidance to the Code suggests that the following information, which has to be made available under the Code, may be done so by placing it on the company’s website:
- Terms of reference of the nomination, remuneration and audit committees;
- Terms and conditions of appointment of non-executive directors;
- Where performance evaluation has been externally facilitated, a statement of whether the facilitator has any other connection with the company; and
- Where remuneration consultants are appointed, a statement of whether they have any other connection with the company.
Disclosure and Transparency Rules (DTR)
DTR 7 sets out requirements for listed companies to produce corporate governance statements. In terms of location the corporate governance statement may be set out by means of reference in its directors’ report where such a document is publicly available on the company’s website instead of being produced as a separate report or as part of the directors’ report.
DTR 2.3 requires inside information announced to the market via a regulatory information service (RIS) to be made available on the company’s website by close of the business day following the day of the announcement. The company must make sure that inside information notified to a RIS is made before, or at the same time as, publication of the information on its website. These announcements must be kept on a company’s website for a year following publication.
Under DTR 4 companies must keep their annual and half-yearly reports on their website for ten years. As there is no requirement to post copies of the half yearly report to shareholders the main point of access is now via the company’s website.
City code on Takeovers and Mergers (The Takeover Code)
The Takeover Code envisages that the website will be the single point of reference for all information published in connection with an offer and copies of certain documents, announcements and information issued during the course of an offer must be published on a website. Any document or information published on the website must be in ‘read-only’ format so that it cannot be altered.
AIM Rules
Rule 26 requires that AIM companies must maintain a website on which a variety of information must be available. This includes items such as names and biographical details of the directors, constitutional documents, most recent annual report, all notifications made in the past 12 months and details of its nominated adviser.
Provision of Services
The Provision of Services Regulations 2009 require companies providing business and consumer services to make available certain information including terms and conditions, geographic address, details of any trade registration etc. Companies must also make available contact details of where recipients can make a complaint and information about dispute resolution must be given if the company is subject to a code of conduct or is a member of a trade or professional association that has a non-judicial dispute resolution procedure. The legislation specifies four ways that the information can be made available. One of these is by making it easily accessible electronically by, for example, providing an exact address of where the information can be found on a publicly available website.
Other
Depending on the sector within which the company operates the website may need to comply with additional disclosures requirements. This is particularly true of companies providing online services and selling products via a website (see The Consumer Contracts Regulations 2015). With the implementation of various EU Directives designed at protecting the consumer service companies are required to provide information such as a VAT registration number (if applicable), a geographical address at which the service provide is located and an email address. Pharmaceutical, financial services companies and banks also need to adhere to specific regulatory requirements in respect of their website content.
Prism Perspective
The distinction between information disseminated via a website, regulatory filings and other forms of publication are merging with the website becoming the dominant medium. There is also a trend for retention periods for material to be held to be increased. Regular reviews and website audits are recommended in order to keep up with changing requirements.
The company website must be able to satisfy a wide variety of functions each competing for priority. Often now the first port of call for the public, the website must be inviting, easy to use and with a clear and coherent message. It has to deliver as a marketing and recruitment tool whilst providing potential investors and existing shareholders with the information they need. Alongside this it is important that companies do not forgot their legal and regulatory obligations and find ways of providing easy access to this information whilst enabling the website to be innovative and functional in performing a multitude of tasks.
Useful Sources
Companies Act 2006
Disclosure and Transparency Rules
UK Corporate Governance Code
City Code on Takeovers and Mergers
AIM Rules
Equality Act (Gender Pay Gap Information) Regulations 2015
Modern Slavery Act 2015
Investor Relations Society Best Practice Website Guidelines – www.irs.org.uk
FRC: Clear & Concise Reporting: Developments in Narrative Reporting December 2015
BIS: A call for views on effective reporting Feb 2016