As the 2017 AGM and reporting season gets underway, we give an overview of the key changes affecting listed and AIM companies.


Many listed companies will be putting a new remuneration policy to shareholders for approval in 2017, as their existing three year policies expire this year. It is likely that such policies will be carefully scrutinised by investors given the renewed political and public focus on executive remuneration. In particular, the Investment Association and PLSA have indicated that they will be looking for listed companies to set maximum remuneration caps, improve disclosures in relation to bonus targets and clarify when discretion may be exercised. Both also emphasise the importance of shareholder engagement when setting or revising remuneration policies.

Disapplication of pre emption rights

Following the issue of revised pre-emption guidelines in 2015, the Pre Emption Group have published template resolutions for use by listed companies seeking a disapplication of pre emption rights for up to 5 per cent of share capital in connection with an acquisition or specified capital investment (in addition to the usual 5% general authority). Listed companies should ensure that they use these templates, as the Institutional Voting Information Service has indicated that it will "red top" any listed company seeking this additional authority which does not do so.

Viability statements

The 2016 AGM season was the first year that companies had to include a statement on the viability of the company over a specified period (most companies used between three and five years). The Investment Association and the Financial Reporting Council (FRC) have both expressed some concerns about the quality of viability statement reporting and suggested ways it could be improved. For example, the Investment Association has indicated that investors expect to see greater differentiation between companies and that the time period should generally cover a longer period than three to five years given the long term nature of equity capital and directors' duties. A clear statement should be made on why a particular period was chosen and what wider factors were considered by the directors. Similarly, the FRC suggests that viability statement reporting should address in more detail the background to, and judgments made, in formulating the statement.

Negative votes

2016 was the first reporting season in which listed companies were required to explain, when a significant proportion of the votes had been cast against a resolution at any general meeting, what action it intended to take to understand the reasons behind the vote result. The FRC has noted that, overall, many such explanations are of poor quality and require improvement. In advance of this year's AGM, listed companies should therefore plan the steps they would take to engage with shareholders in the event that a negative vote is received on any AGM resolution.

Audit changes

For financial years beginning on or after 17 June 2016, changes in EU regulation require all listed companies (not just those in the FTSE 350) to change their auditor every ten years, which may be extended by a further ten years if a tender process is undertaken. The Corporate Governance Code requires audit committees to provide advance notice of any audit retendering plans. Listed companies who are now within this regime should therefore consider when they need to put their audit out to tender and include appropriate disclosures regarding their tendering plans in the annual report.

Alternative performance measures

ESMA has published guidelines, which apply to annual reports published after 3 July 2016, on the use of alternative performance measures (often used in strategic reports to supplement information prepared in accordance with IFRS or UK GAAP). Ahead of publication of the annual report, listed companies may wish to consider whether additional disclosures are required regarding their use of alternative performance measures.

Format of AGM

2016 saw Jimmy Choo PLC hold the first electronic AGM in the UK. The AGM was held through a secure app which was delivered by Equiniti Registrars. Given the increasing use of technologies and the international spread of shareholders, other companies may elect to hold electronic AGMs or a hybrid of electronic and physical AGMs. As Jimmy Choo did in their 2015 AGM, it is likely that companies will need to amend their articles of association to permit electronic AGMs.

Board diversity

Board diversity continues to be an area of focus for investors and corporate reporting. Investor bodies continue to monitor diversity disclosures and progress made in achieving the diversity targets that companies have set themselves. Two independent reviews published in 2016 make recommendations in relation to further improving gender and ethnic diversity in FTSE 350 boards. Building on the Davies Review, the Hampton Alexander Review recommends new voluntary targets for female representation on boards, on executive committees and the direct reports to executive committees. The Parker Review addresses ethnic diversity and sets out several recommendations relating to improving the ethnic diversity of boards, developing people of colour for the pipeline and enhancing transparency.

Looking ahead, listed companies should also be aware of new requirements in relation to diversity reporting in the Disclosure Guidance and Transparency Rules. With effect from financial years beginning on or after 1 January 2017, a listed company's corporate governance statement must include a description of its diversity policy, its objectives, how it has been implemented and the results of it in the reporting period. If the company does not have a diversity policy, an explanation is required.


Brexit is likely to dominate the political and economic arena in 2017. In the context of corporate reporting, both the FRC and ESMA have issued statements reminding companies that they need to consider and disclose the risks and expected impact of Brexit. The FRC notes that as the economic and political effects are developed and become more certain in the medium and longer term, companies are expected to provide increasingly company specific disclosures with quantification of the effects.

Stakeholder engagement

One of the main themes of the Government's Green Paper on Corporate Governance published last year, is the need for boards to strengthen engagement with wider stakeholders (eg employees, customers and suppliers). Investor bodies including the Investment Association and PLSA are also focussing on stakeholder engagement by boards, with further guidance on this expected later this year. In light of this, companies should therefore be reviewing their approach to stakeholder engagement and how they report on it.