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Welcome to the latest edition of Corporate Update.

Corporate Update is our fortnightly bulletin offering a quick read of the latest developments relevant to corporate counsel. Please get in touch with your usual contact or any of the contacts listed below if you want to explore any of the topics covered in more detail. If you would like to subscribe to this bulletin as a regular email, please click here.

Publications

Contract Law Update

We have published Contract Law Update, our quarterly review of key developments in contract law for corporate and commercial practice. Among other issues, the latest edition covers: loss of bargain damages, force majeure and intervening acts. In each case, the briefing provides detailed analysis and key takeaways for practitioners.

Labour markets in the spotlight: no-poach agreements and the reform of non-competes

Labour markets have been a key focus for competition authorities and policymakers around the world in recent years. Our briefing examines the latest developments in this area, including the treatment of “no poach” agreements by the Court of Justice of the European Union and proposals by the UK government to reform non-compete clauses in employment contracts. The briefing reflects on the debate about the relationship between such restrictions and economic growth, and concludes with the practical takeaways for dealmakers.

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News

Materiality in corporate reporting – FRC publishes new guidance

On 29 July 2026, the Financial Reporting Council (FRC) published new insights on materiality in corporate reporting, aimed at helping boards to produce more concise, coherent and useful annual reports. The guidance will be of interest to companies in considering whether their existing reporting processes could be improved, particularly in relation to the strategic report. 

Key points include:

  • Communication. Annual reports should be used as a communication tool rather than a compliance checklist. Directors are encouraged to exercise judgement and focus reporting on information that informs investor decisions, rather than disclosing everything. For example, companies should avoid simply rolling forward all accounting disclosures from the previous year's report and should instead actively remove content that is no longer relevant – asking whether there are accounting policies that are no longer applicable or that could be condensed.
  • Process. To help companies implement their guidance, the FRC sets out an illustrative process for applying materiality, including practical tips about how to organise disclosures. Preparers of accounts are encouraged to give prominence to the most important matters and to "tell the story" of the business's performance, position and prospects, using strategic themes or pillars to structure the narrative. The FRC also recommends digital tagging to make information more accessible and highlight material facts.
  • Relevance to the strategic report. At the end of the report, the FRC includes links to its recently updated Guidance on the Strategic Report, which encourages companies to meet their reporting obligations in a way that is proportionate to their size and circumstance (see Corporate Update Bulletin - 19 February 2026). Where the board determines that more detailed or stakeholder-specific information falls outside the scope of what is material for its primary users, the FRC suggests it can be reported on the company's website or in other communications outside the annual report itself.

Department for Business and Trade renamed and given NSIA oversight

On 21 July 2026, the government announced a series of governmental changes to take place with immediate effect, including renaming the Department for Business and Trade as the Department for Business, Innovation, Science and Trade (DBIST). Further detail about the changes were given in an accompanying Fact Sheet.

DBIST will assume responsibility for the science and innovation portfolio, replacing the Department for Science, Innovation and Technology, and will take over certain functions from the Cabinet Office, including the Investment Security Unit, which oversees the National Security and Investment Act 2021 regime.

The Prime Minister is also creating an AI Taskforce within a newly established Office for the Prime Minister and the Cabinet (OPMC) to drive the Government’s overall strategy on AI including AI adoption across the Civil Service. Responsibility for AI strategy, public sector AI adoption and the AI Security Institute will move to the Cabinet Office. 

EU launches consultation on sustainability reporting for non-EU undertakings with an EU branch or subsidiary

On 23 July 2026, the European Financial Reporting Advisory Group (EFRAG) launched a public consultation on the draft European Sustainability Reporting Standards for Certain Non-EU Undertakings (ESRS-40a). This potential reduction in sustainability reporting could be significant for clients which are non-EU parent companies with a large EU turnover, but whose subsidiaries do not meet the amended turnover and headcount requirements for individual reporting under the Corporate Sustainability Reporting Directive (CSRD). We have published a Sustainable Matters blog which discusses the proposals and ESRS-40a reporting in more detail.

Under Article 40(a) of the Accounting Directive, an EU subsidiary or branch whose ultimate parent undertaking is established outside the EU will have to publish an ESRS-40a compliant sustainability report for financial years starting on or after 1 January 2028, if it meets certain thresholds: 

  • net turnover of €200m in the preceding financial year; and
  • parent group net turnover in the EU of over €450m for each of the last two consecutive financial years. 

The ESRS-40a specify the information that must be covered in the sustainability report.

According to EFRAG’s announcement, ESRS-40a is designed to ensure a level playing field for EU market operators and to promote transparency regarding how non-EU undertakings with relevant EU activities impact people and the environment.

The requirements in ESRS-40a are intended to support the implementation of the CSRD. ESRS-40a follows the adoption of two delegated acts relating to sustainability reporting for EU undertakings, as covered in Corporate Update Bulletin - 9 July 2026. The consultation closes on 31 October 2026, and will inform the finalisation of EFRAG's technical advice to the European Commission, which is expected to be delivered in January 2027.

FCA implements amendments to PRM Rules

The FCA has published Handbook Notice 143 and FCA instrument Prospectus Rules (Miscellaneous Amendments No 2) Instrument 2026 setting out minor and clarificatory amendments to the Prospectus Rules: Admission to Trading on a Regulated Market (PRM) with effect on 31 July 2026.

The amendments were consulted on in Quarterly Consultation Paper 51 (CP/28) and are relatively narrow in scope, addressing a number of technical issues that have arisen in the operation of the Public Offers and Admission to Trading Regulations 2024 (SI 2024/105) (POATR). Key changes include:

  • Transferable securities allotted to directors/employees (PRM 1.4.12 R). The exemption from the prospectus requirement for securities offered or allotted to current or former directors or employees has been narrowed. It will not apply if the offer or allotment is intended to facilitate a subsequent transfer to a third party as part of an arrangement to raise funds for, or discharge an obligation owed to, the issuer. This amendment has been made to ensure that the exemption cannot be used to facilitate a placing (by issuing the shares to a director or employee for onward sale to the placee).
  • Publication of an IPO prospectus (PRM 9.5.2 R). The FCA has amended the rule to clarify that the requirement to publish an IPO prospectus at least three working days prior to the end of the offer period (the “three-day rule”) will only apply where there is an offer to retail investors that does not fall within a relevant exemption in Schedule 1 to POATR.
  • Accompanying statement for PFLS (PRM 8.2.3 R). Disclosure has been streamlined in relation to Protected forward-looking statements (PFLS). Where a PFLS appears more than once in a prospectus, the accompanying statement of principal assumptions need be set out only once, with appropriate cross-referencing wherever the forward-looking statement is repeated to signpost where the accompanying statement can be found.
  • Prospectus submission and approval requirements: PRM 9.2.16R and PRM 9.4.3R have been amended to clarify the requirements for cross-reference lists.

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Case law

Loss of bargain damages: parties may agree recoverable loss

In Great Asia Maritime Ltd v Orion Shipping and Trading LLC (The Lila Lisbon) [2026] UKSC 23, the Supreme Court held that loss of bargain damages could be recovered under an express compensation clause, even in the absence of repudiatory breach.

At common law, the usual principle is that loss of bargain damages are not recoverable in cases of non-repudiatory breach, because the aggrieved party’s loss results from their decision to terminate rather than the breach itself (Financings Ltd v Baldock [1963] 2 QB 104). However, under the express terms of the contract in this case, which concerned the sale of a ship, the seller’s breach entitled the buyer to due compensation for “their loss and for all expenses”.

As we explain in more detail in our latest Contract Law Update, the Lila Lisbon shows that the courts will give effect to express compensation clauses where a party has suffered the relevant loss. To benefit from this protection, parties should consider express drafting to clarify the losses for which damages will be recoverable, including loss of bargain.

Derivative claims: shareholders may claim for anticipated harm 

In De Menezes v Alves & Ors [2026] EWHC 1906 (Ch), the High Court confirmed that a derivative claim does not require the company to have already suffered identifiable loss and can be based on anticipated or future harm.

The claimant and first defendant were equal shareholders and the only directors of Oficina Inglesa Limited (OIL), a high-end furniture company. Following a breakdown in their personal relationship, the first defendant incorporated his own furniture company, Cobogo Gallery Limited (Cobogo).

The claimant brought a derivative claim against the first defendant under section 260 of the Companies Act (the Act), alleging breach of his duty to avoid conflicts of interest under section 175 of the Act based on the potential for future unfair competition between the two businesses. It was accepted that OIL had not yet suffered any identifiable loss, since Cobogo had only recently started trading and in any case was currently focussed on a different style of furniture from OIL, albeit aimed at similar clients and at a comparable price point.

The defendant cited McGaughey v Universities Superannuation Scheme Ltd [2023] EWCA Civ 873, a case based on a common law derivative claim (rather than the statutory regime), where the Court of Appeal stated obiter that a derivative action requires “the company to have suffered a loss or harm which it is sought to remedy by the action". (Where one or more further corporate layers are interposed between the member and the company that has the right of action, the shareholder must rely on the common law regime, rather than the statutory regime, as the draftsman of Act did not (inadvertently or otherwise) provide for that situation.)

The court rejected the first defendant’s argument for a number of reasons:

  1. McGaughey addressed the question of who had suffered loss (the company or its shareholders), not whether the loss had crystallised.
  2. The first defendant’s arguments contradicted the logic of a derivative claim. A shareholder is not required to wait for damage to occur before issuing a claim.
  3. The statutory regime expressly recognises the possibility of a derivative claim for anticipated harm.

For these reasons, the court held that a threat of future harm was sufficient to establish a prima facie case, and granted permission for the derivative claim to proceed. It also found that the possibility of future competition between the two companies was enough to establish a breach of section 175. The decision provides clarification that a shareholder does not have to wait for loss to occur before bringing a derivative claim and will be particularly helpful for shareholders in joint ventures where the other JV partner or a director is intending to pursue a potentially competing business and loss from the competitive activity is difficult to quantify – for example, diversion of supply-chain capacity, loss of tender opportunities, or erosion of client relationships.

 

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