UK Stewardship Code 2026 to Enhance Value Creation, Reduce Reporting Burdens, and Enhance Engagement
On 3 June 2025, the Financial Reporting Council (FRC) published the UK Stewardship Code 2026. The new Code, effective from 1 January 2026, aims to foster long-term sustainable value creation and improve engagement quality between market participants. It reflects extensive stakeholder consultation, involving over 1,500 participants, and responds to feedback from the investment and corporate issuer community.
Key features of the UK Stewardship Code 2026 include:
- Enhanced Definition of Stewardship: Focuses on creating long-term sustainable value for clients and beneficiaries.
- Reduced Reporting Burden: Streamlined principles and reporting prompts aim to reduce reporting volume by 20-30%, eliminating “box-ticking” approaches.
- Flexible Reporting Structure: Signatories can submit separate Policy and Context Disclosures and Activities and Outcomes Reports or combine them into a single document. The Policy and Context Disclosure will only need to be submitted once every four years (as opposed to annually as originally proposed in the consultation).
- Targeted Principles: Dedicated principles for asset owners, asset managers, and for the first time, specific principles for proxy advisors, investment consultants, and engagement service providers.
- New Guidance: Optional guidance offers tips and examples for effective implementation, especially for non-equity asset classes.
The transition year of 2026 will allow current signatories to adapt to the new Code without the risk of removal from the signatory list.
Government Unveils New Tax Advantages for PISCES
On 15 May 2025, the government introduced legislation to establish the Private Intermittent Securities and Capital Exchange System (PISCES). This legislation establishes the regulatory sandbox environment for the operation of PISCES for a five-year period, where the detailed regulatory requirements for PISCES can be calibrated before the government considers whether the regime should be made permanent. The FCA is expected to release the rules governing PISCES, including rules around disclosure and operator oversight, shortly after the legislation takes effect on 5 June 2025.
In addition, the government announced plans to legislate in the next Finance Bill to allow employers, with their employee’s permission, to amend existing Enterprise Management Incentives (EMI) and Company Share Option Plan (CSOP) contracts to include a PISCES trading event as an exercisable event, maintaining tax advantages. This change, to take effect retrospectively, would allow employees with EMI and CSOP contracts to exercise them on PISCES while retaining tax advantages. This follows the Autumn Budget announcement that PISCES transactions will be exempt from Stamp Taxes on Shares.
Potential Revival of “Fraud on the Market” Claims
On 25 March 2025, the High Court dismissed a listed company’s application to strike out certain securities litigation claims that passive investors brought under Section 90A of the Financial Services and Markets Act. These claims pertain to alleged misleading public disclosures that the company made.
Broadly, the company’s counsel sought to rely on a recent High Court judgment that summarily dismissed claims from investors who based their claims solely on share price movements, despite not having read the public disclosures. That previous case held that an investor could only demonstrate “reliance” as required under the applicable statutory provision if they had read and considered the published information. However, the court in this case declined to follow that approach, noting that this area of securities law is still evolving and should be resolved at trial as opposed to striking the claims out at an early stage. Additionally, the court declined to dismiss claims of dishonest delay (i.e., that the listed company dishonestly withheld material information), which do not require proof of reliance, for similar reasons.
Listed companies should be aware that the potential scope of liability in UK securities class actions may be broader than previously anticipated, due to the current ambiguity regarding passive investors’ ability to bring claims under Section 90A. Listed companies should meticulously ensure the accuracy of their public statements, especially concerning blanket culture or compliance statements, or if there is a known regulatory risk.
Stakeholder Insights on the Future of UK Digital Reporting
On 15 May 2025, the FRC unveiled insights from its discussion paper titled “Opportunities for Future UK Digital Reporting”. This paper reflects the feedback gathered from a diverse range of stakeholders, including preparers, regulators, software vendors, and others, during the consultation period from 13 August to 1 November 2024.
The discussion paper highlights the strong stakeholder support for digital reporting and emphasises the need for a collaborative approach to address the challenges in the next phase of digital reporting, particularly in the context of the post Brexit environment and new legislation such as the Economic Crime and Corporate Transparency Act 2023. While no specific decisions will be made this year based on the discussion paper, the responses will significantly inform the policy thinking and service development of relevant regulators.
Key themes from the feedback include the trade-offs between UK-specific reporting requirements and maintaining global comparability, as well as the value of assurance in enhancing trust and data quality. However, stakeholders raised concerns about the costs and proportionality of assurance, particularly for smaller entities. Respondents consistently requested additional guidance and support materials across various media and sources.
To improve access to structured company reporting data, the FRC also recently launched a digital reporting viewer which is open to the public and free to use.
