Long-awaited reforms to the UK's audit and corporate regime will ask directors to detail longer-term risks and aspirations for the company, as well as potentially justifying shareholder payouts.
Under the proposed changes, public and private companies that turn over at least £750mn or employ at least 750 people will have to add significant detail to annual reports beyond the outlook for the next 12 months, and they’ll also need to complete an annual “reverse stress test”, highlighting circumstances that could make their business plan unviable.
Companies will also have to publish a policy statement explaining how much they plan to pay out in dividends and buybacks over the short and medium term, highlighting any accompanying risks from this, and where the cash will come from.