On 12 March 2021, Her Majesty’s Government issued updated guidance on the annual requirement, under Section 54 of the Modern Slavery Act 2015 (the “MSA”), for certain businesses to publish an annual statement (the “March 21 Guidance”).
Whilst the March 21 Guidance does not add anything new in relation to who and what should be filed, it does advise that the new Government registry is now open and online. The new Government registry is part of the future changes that were announced in September 2020 (most of which have yet to come into effect) and aimed at bolstering the effect of Section 54 of the MSA.
The March 21 Guidance also serves as a useful reminder for businesses from the Government of the requirement to publish an annual statement under the MSA, and the criteria for having to do so.
Who needs to publish a statement?
A commercial organisation is required to publish an annual statement if all of the following criteria apply to it:
- it is a ‘body corporate’ or a partnership, wherever incorporated or formed
- it carries on a business, or part of a business, in the UK (and “business” includes a trade or profession)
- it supplies goods or services; and
- it has an annual total turnover of £36 million or more (total turnover refers to the turnover of the organisation and any of its subsidiary undertakings (including those operating wholly outside the UK)). ‘Turnover’ means the amount derived from the provision of goods and services falling within the ordinary activities of the business or its subsidiary undertakings, after the deduction of trade discounts, value added tax and any other taxes based on the amounts so derived.
Overseas organisations trading in the UK or UK organisations trading overseas
If the business meets the above test of carrying on a business, or part of a business, in the UK and meets all the other criteria above, it is required to publish an annual statement. In this regard, the March 21 Guidance (when referring to this test as whether an organisation has a “demonstrable business presence”) sets out some non-exhaustive factors to consider in making this determination. These are:
- is the business registered at UK Companies House?
- does the business have any UK offices?
- does it provide service or support functions in the UK?
- does the business receive income in the UK?
- does it have any other visible UK business presence (e.g. a website)?
The presence of one or more of these factors may well indicate that the organisation carries on business in the UK, and thus falls within the scope of the requirement to publish an annual statement under the MSA. That said, it needs to be remembered that the Home Office’s separate and more detailed statutory guidance confirms that the key legal concept here is whether or not an organisation “carries on a business” (or indeed part of a business) in the UK.
Groups of companies
Some corporate groups may have more than one parent or subsidiary organisation which meets the criteria for publishing an annual statement. If this is the case, then parents and subsidiaries in the group can elect whether to publish separate statements, reflecting the different nature of their businesses, or the group can publish a single statement covering all the organisations that meet the criteria.
If a group chooses to publish one statement, it:
- must cover the steps taken to prevent modern slavery in all the organisations within that group that meet the criteria, and their supply chains
- must clearly name the parent and subsidiary organisations covered by the statement; and
- should publish the statement on the UK websites of all the group entities covered by the statement.
Some holding companies may not meet the criteria for publishing a statement (e.g. if they do not provide goods or services). However, any organisations within the holding company’s corporate structure that do meet the criteria must either:
- publish a statement or
- be covered by a group statement.
What should the statement say?
The statement should be updated annually, and be published within six months after the organisation’s financial year-end (the date of the financial year-end should be included in the statement). The March 21 Guidance states that best practice is to keep a record of previous statements, so that “progress can be monitored”, although, presumably these would not have to be published on its website.
If a business organisation has a website, the statement must be published on the organisation’s website, with a link to the statement in a prominent place on the website’s homepage.
In addition, for business organisations with more than one website, the separate and more detailed Home Office guidance recommends placing the statement on the most appropriate website relating to the organisation’s business in the UK and where there is more than one relevant website that separate guidance recommends placing a copy of the statement or a link to the statement on each relevant website.
If the business organisation does not have a website, it can now elect to publish its statement on the new Government modern slavery statement registry although it is not currently obliged to do so. The registry is a publicly accessible database and anyone interested in viewing statements can use the registry to search for business organisations’ statements and view the summaries provided. Under the proposed changes to strengthen Section 54 of the MSA, if a business organisation is required to produce a statement, it will become mandatory to add it to the registry.
However, whether or not a business organisation without a website publishes its statement on the new Government modern slavery statement registry, Section 54(8) of the MSA still requires that a copy of its statement must be provided to anyone who makes a written request for it, within 30 days beginning with the day of receipt of the request. Though Section 54(8) is not explicit as to how the copy is provided, clearly it should be some form of written copy as the March 21 Guidance indicates. Business organisations might also choose to relax the requirement that the request be a “written” request and respond to other forms of request as well, because the March 21 Guidance does not refer to the request needing to be in writing.
Section 54(6) of the MSA sets out how statements must be approved (e.g. for a non-LLP body corporate, by the board of directors (or equivalent management body) and for an LLP by the LLP members) and who must sign them. Statements should state that board etc approval of the statement has been obtained, the date approval was obtained, the name and job title of the signatory and date of signature.
Of note is that the March 21 Guidance repeats previous Government advice that organisations are not expected to guarantee that all their supply chains are ‘slavery free’. However, statements do have to describe the steps that the organisation has taken during the past financial year to deal with modern slavery risks in its supply chains as well as its own business operations. Conversely, if an organisation has taken no steps to deal with modern slavery risks it must state this.
Referring to the Home Office’s separate and more detailed statutory guidance, the March 21 Guidance recommends that the following six areas be addressed in a statement:
- organisation structure and supply chains
- policies in relation to slavery and human trafficking
- due diligence processes
- risk assessment and management
- key performance indicators to measure the efficacy of steps being taken; and
- training on modern slavery and trafficking
The detail and quality of information included under each of the six areas should be improved in successive annual statements.