The Directors’ Report: Part 2 of the Guide to Annual Reporting

In this article, we set out the requirements of one of the most important sections of a company’s annual report, the Directors’ Report.  The Directors’ Report provides shareholders with a statutory overview of the company’s performance, its activities, its dividend payments for the year, its company’s governance arrangements, and addresses the company’s risk management, too.

Unless stated otherwise, any reference to a section of law mentioned here is a reference to the Companies Act 2006 (‘CA 2006’).

MSP Company Secretarial can provide support for all aspects of planning and preparing a Directors’ Report or annual report and accounts for publication.  Speak to our team to find out more.

Which companies must provide a Directors’ Report?

All companies must prepare a Directors’ Report unless a company is classified as a micro-entity (s. 415 – Duty to prepare directors’ report).  A micro-entity is a company that satisfies two of the following three requirements (s. 384A – Companies qualifying as micro-entities):

• Turnover: not more than £1M
• Balance sheet total: not more than £500k
• Number of employees: not more than 10

Note that a public company cannot qualify as a micro-entity; it must prepare a Directors’ Report even if it could satisfy two of the three criteria above.

Companies entitled to ‘small companies exemption’ (see definition of a small company in the table below) are exempt from reporting (i) dividends payment, and (ii) some filing exemptions at Companies House relating to the directors’ report (see s. 415A – Directors’ report: small companies exemption).

If you’re not sure if you are required to submit a directors’ report, email our team here.

What needs to be included in the Directors’ Report?

The contents of the Directors’ Report is dependent upon the size of the company, whether it is a public or private company, and whether it is a listed company or a quoted company.

When it comes to size, private companies may be classified as a micro-entity, small company, medium-sized company, or a large company; and when it comes to the Directors’ Report, then a micro-entity is not required to prepare a Directors’ Report, and a small company qualifies for selective exemptions.  For large and medium-sized companies, listed and non-listed, their Directors’ Report is governed by SI 2008/410 and DTR and listing rules.

Company size classes

CA 2006 defines company size as follows:

• A large company is one that does not qualify as a micro-entity, small, or medium-sized company.
• A public company is exempt from being classified as a micro-entity, small, or as a medium sized company – in practical terms, it follows the requirements of a ‘large company’.

Details required by the Directors’ Report

The following table gives the range of matters to be addressed in the Directors’ Report and directs you to the relevant statute.  It gives you an indication of the scope of the reporting requirement and the qualified nature of the requirement – reporting depends upon a company’s size, form (viz. private vs public), and some other criteria like the number of employees.

The requirements of the Directors’ Report can be confusing to companies, and MSP Company Secretarial can help you navigate through this section of a company’s annual report, as well as the strategic report and the remuneration reports.

Note too, the requirement for traded companies (again, subject to qualifying criteria) to include a non-financial and sustainability information statement as part of the company’s strategic report (ss. 414CA and 414CB).

Liability for false or misleading statements

Section 463 (Liability for false or misleading statements in reports and statements) applies to the Directors’ Report (along with the strategic report, the directors’ remuneration report, and any separate corporate governance statement).  Under s. 463, a director “is liable to compensate the company for any loss suffered by it as a result of” any untrue or misleading statement, or omission (s. 463(2)) if knowingly done (s. 463(3)).

Considerations for listed companies

For commercial companies, then the requirements of UKLR 6.6.1R to 6.6.13R are typically addressed in the Directors’ Report.  For companies in the transition company category, see UKLR 22.2.24R and following.

Companies are required to comply with DTR 7.2.1R and include “a corporate governance statement in its directors’ report”.  For more information about corporate governance statements, including what’s required, please see part 1 of our annual reporting guide.

From the foregoing details, the Directors’ Report has a broad scope, with much of the details being dependent upon features of this business.  It can be confusing for companies to be clear of their reporting and compliance obligations, and here, MSP Company Secretarial has a lot of experience helping companies and is available to help companies.

Strategic report

Now that we have already addressed Corporate Governance Statements and the Directors’ Report, the next part of our guide on annual reporting will focus on the Strategic Report.

How can MSP Company Secretarial help?

MSP Company Secretarial provides consultancy, practical support and fractional Company Secretary services.  We can help with your annual reporting requirements by:

• Assisting with filings for reports
• Providing support with annual report preparation
• Guidance on compliance and governancereporting regulations
• Providing further information on company eligibility for annual reporting

Speak to our team and discuss your requirements with us.

The Directors’ Report: Frequently Asked Questions

When does the Directors’ Report need to be filed?

The Directors’ Report is part of a company’s annual report and accounts, and so it is filed in accordance with CA 2006 Part 15 Chapter 10.  A PLC must file its accounts and reports with Companies House within 6 months of the end of the company’s financial year.  Private companies required to prepare a Directors’ Report should file their accounts and reports within 9 months of the company’s financial year end.  Filing accounts and reports late can result in penalties being issued.

If you’re unsure of your filing deadline, speak to our team, and we can help.

What happens if the Directors’ Report contains an error?

If the report has been filed and a mistake has been identified afterwards, then a revision can be submitted to Companies House (CA 2006 s. 454).  It is worth noting CA 2006 s. 463, which addresses a director’s liability where the Directors’ Report (or the Strategic Report or the Directors’ Remuneration Report) contains untrue or misleading statements.  The mistake must be clearly rectified, as there is an increased risk that the original report contains misleading information, potentially resulting in personal liability for directors, as outlined above.

If you have discovered you need to resubmit your Directors’ Report, speak to our team, and we can offer guidance.

How long should the Directors’ Report be kept?

The retention period for the Directors’ Report comes from its association with a company’s accounting records, and so is governed by CA 2006 s. 388, which requires PLCs to retain the information for 6 years from “the date on which they are made”, and 3 years for a private company.  Listed companies are subject to more specific requirements.  The Directors’ Report forms part of the company’s financial report, and companies subject to DTR rules must ensure their half-year (DTR 4.2.2R) and annual financial reports (DTR 4.1.4R) are publicly available for at least 10 years.  AIM and AQSE companies are required to make their annual accounts publicly available for at least 5 years (AIM Rule 26; AQSE Access Rule 4.3).

Other articles you may be interested in

Corporate Governance Statements: Part 1 of the guide to Annual Reporting

A guide to company reports. What to report and in what format.

A review of compliance in 2025 and a forward look for 2026