There are currently several ongoing initiatives both at EU and UK level proposing changes to the transparency regime.
At EU level, a directive was adopted containing new rules on social responsibility for certain large companies (see below).
At UK level:
- the Small Business, Enterprise and Employment Bill containing new rules aimed at increasing transparency of UK corporate ownership is currently being discussed at the House of Commons (see ‘The UK’s new Small Business, Enterprise and Employment Bill: Transparency is nothing to be scared of’);
- the Department for Business, Innovation & Skills (BIS) is consulting on the UK implementation of Chapters 1-9 of the EU Accounting Directive (which includes, among others, provisions governing annual financial statements and consolidated financial statements) aimed at reducing unnecessary administrative burdens on businesses, in particular small businesses;
- in July 2014 the Financial Conduct Authority (FCA) consulted on the early implementation of the directive amending the Transparency Directive by removing the requirement to publish interim management statements (IMS) and intends to remove the requirement to publish IMS in autumn 2014, one year ahead of the full implementation of the directive;
- the FCA is further consulting on the UK implementation of the country by country reporting requirements for issuers in the extractive or logging industries contained in the Directive amending the Transparency Directive; and
- the Financial Reporting Council (FRC) is consulting on the development of a new Financial Reporting Standard for Micro-Entities.
New transparency rules on social responsibility for certain large companies
On 29 September 2014 the Council of the European Union adopted a directive amending the Accounting Directive as regards the disclosure of certain non-financial and diversity information by public interest entities with over 500 employees such as listed undertakings, banks, insurance companies or undertakings which are of significant public relevance because of the nature of their business, their size or their corporate status. Small and medium-sized companies will be exempted from the new reporting obligation.
Affected companies will be required to draw up an annual statement describing their policies, outcomes and risks related to environmental, social and employee-related matters, respect for human rights, anti-corruption and bribery matters on a comply-or-explain basis.
Member states have two years to incorporate the new provisions into domestic law.
Country by country reporting on taxes
The new directive further requires that the report by the Commission due by July 2018 consider the possibility of introducing an obligation requiring large undertakings to produce, on an annual basis, a country-by-country report for each member state and third country in which they operate, containing information on profits made, taxes paid on profits and public subsidies received, taking into account developments to increase transparency in financial reporting at OECD level.