Corporate reporting reform: what could it mean for growing businesses?

The Government has launched a major consultation on simplifying the UK's corporate reporting regime, with proposals covering everything from financial and strategic reporting to audit, dividends and digital communications. 

The aim is to make reporting simpler and more proportionate, while keeping the information that investors and creditors need to make decisions. 

More choice over audit

One of the most significant proposals is to extend the audit exemption currently available to small companies to eligible medium-sized companies, as part of a wider package of SME reporting exemptions.  

That could reduce both direct cost and management time. But becoming eligible for an exemption would not automatically mean opting out of audit is the right commercial decision. 

If you’re planning to raise investment, borrow, bring in new shareholders or sell, investors, lenders or buyers may still expect audited accounts. Having that track record in place can also make future funding or due diligence discussions easier. 

For a growing company, the question may therefore be less “Do we have to have an audit?” and more “What will the business need over the next few years?” 

Simpler dividend rules, with more reliance on board judgement

The Government is also considering replacing the existing rules around distributable profits and capital maintenance with a solvency-based regime for dividends.  

The current framework can be difficult to navigate. A solvency-based approach could make the rules simpler and, depending on its design, could remove the constraints that historic losses can create for some companies. However, it would place more weight on directors assessing and recording sound judgements about the company’s financial position and being comfortable that it can afford to make a distribution without prejudicing its ability to continue as a going concern. 

The detail will be key. A robust regime would need an appropriate forward-looking assessment and safeguards to protect creditors and other stakeholders against inappropriate distributions. The information directors rely on, the assumptions and forecasts behind the decision and the way it is recorded would therefore become even more important. 

Proportionate reporting, rather than simply less reporting

The Government wants reporting obligations to reflect a company's size, ownership structure and economic impact, and to remove requirements where the cost is not justified by the benefit. It also wants companies to have greater flexibility to focus reporting on information that is financially material and useful to investors and creditors.  

Growing companies can reach a point where the administrative burden increases faster than the management capacity available to deal with it. Medium-sized businesses in particular can find themselves carrying more reporting complexity and cost before they have the finance, legal and governance infrastructure of a much larger corporate. 

The balance will be making reporting more proportionate without losing information that supports confidence in the business.

What happens next?

These are proposals, not changes to the law. 

The consultation runs until 30 November 2026, after which the Government will decide which reforms to take forward.  

If thresholds change or exemptions are widened, companies will need clarity over: 

• when they move from one reporting regime to another  

• how transition periods will work  

• which requirements fall away and which remain  

• how the rules apply across group structures. 

For growing companies, the framework needs to be predictable as well as proportionate. 

We’ll continue to track the proposals and keep clients updated as the detail develops. If you have questions about your current reporting obligations, audit arrangements or wider corporate governance, our Corporate team can help.