PART 5U.K.ANNUAL ACCOUNTS

[F1Strategic reportU.K.

12A.  Sections 414A, 414C and 414D apply to LLPs, modified so that they read as follows—

414A    “Duty to prepare strategic report

(1) The members of an LLP which is—

(a)a traded LLP, or

(b)a banking LLP,

must prepare a strategic report for each financial year of the LLP.

(2) For a financial year in which—

(a)the LLP is a parent LLP, and

(b)the members of the LLP prepare group accounts,

the strategic report must be a consolidated report (a “group strategic report”) relating to the undertakings included in the consolidation.

(3) A group strategic report may, where appropriate, give greater emphasis to the matters that are significant to the undertakings included in the consolidation, taken as a whole.

(4) In the case of failure to comply with the requirement to prepare a strategic report, an offence is committed by every person who—

(a)was a member of the LLP immediately before the end of the period for filing accounts and reports for the financial year in question, and

(b)failed to take all reasonable steps for securing compliance with that requirement.

(5) A person guilty of an offence under this section is liable—

(a)on conviction on indictment, to a fine;

(b)on summary conviction, to a fine not exceeding the statutory maximum.

414C    Contents of strategic report

[F2(1) The strategic report of a traded LLP and of a banking LLP—

(a)must contain a fair review of the LLP’s business and a description of the principal risks and uncertainties facing the LLP; and

(b)where subsection (1A) applies, must in addition to the information described in paragraph (a), contain climate-related financial disclosures.

(1A) This subsection applies to any traded LLP or banking LLP which, in the relevant year to which the strategic report relates, either—

(a)has more than 500 employees; or

(b)is a parent LLP and the aggregate number of employees for a group headed by the LLP is more than 500.

(1B) For the purposes of subsection (1A), the number of employees of an LLP or of a group headed by an LLP means the average number of persons employed by the LLP or the group headed by the LLP in the year, determined as follows—

(a)find for each month in the financial year the number of persons employed under contracts of service by the LLP or the group headed by the LLP in that month (whether throughout the month or not);

(b)add together the monthly totals; and

(c)divide by the number of months in the financial year.]

(2) The review required is a balanced and comprehensive analysis of—

(a)the development and performance of the LLP’s business during the financial year, and

(b)the position of the LLP’s business at the end of that year,

consistent with the size and complexity of the business.

(3) The review must, to the extent necessary for an understanding of the development, performance or position of the LLP’s business, include—

(a)analysis using financial key performance indicators, and

(b)where appropriate, analysis using other key performance indicators, including information relating to environmental matters and employee matters.

(4) In subsection (3), “key performance indicators” means factors by reference to which the development, performance or position of the LLP’s business can be measured effectively.

[F3(4A) In this section and section 416A, “climate-related financial disclosures” means—

(a)a description of the LLP’s governance arrangements in relation to assessing and managing climate-related risks and opportunities;

(b)a description of how the LLP identifies, assesses, and manages climate-related risks and opportunities;

(c)a description of how processes for identifying, assessing, and managing climate-related risks are integrated into the LLP’s overall risk management process;

(d)a description of—

(i)the principal climate-related risks and opportunities arising in connection with the LLP’s operations, and

(ii)the time periods by reference to which those risks and opportunities are assessed;

(e)a description of the actual and potential impacts of the principal climate-related risks and opportunities on the LLP’s business model and strategy;

(f)an analysis of the resilience of the LLP’s business model and strategy, taking into consideration different climate-related scenarios;

(g)a description of the targets used by the LLP to manage climate-related risks and to realise climate-related opportunities and of performance against those targets; and

(h)a description of the key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities and of the calculations on which those key performance indicators are based.

(4B) Where the members of an LLP reasonably believe that, having regard to the nature of the LLP’s business, and the manner in which it is carried on, the whole or a part of a climate-related financial disclosure required by subsection (4A)(e), (f), (g) or (h) is not necessary for an understanding of the LLP’s business, the members may omit the whole or (as the case requires) the relevant part of that climate-related financial disclosure.

(4C) Where the members omit the whole or part of a climate-related financial disclosure in reliance on subsection (4B) the strategic report must provide a clear and reasoned explanation of the members’ reasonable belief mentioned in that subsection.

(4D) The Secretary of State may issue guidance on the climate-related financial disclosures, which are described in subsection (4A), and otherwise in connection with the requirements of this section.]

(5) The report must, where appropriate, include references to, and additional explanations of, amounts included in the LLP’s annual accounts.

(6) In relation to a group strategic report this section has effect as if the references to the LLP were references to the undertakings included in the consolidation.

(7) Nothing in this section requires the disclosure of information about impending developments or matters in the course of negotiation if the disclosure would, in the opinion of the members, be seriously prejudicial to the interests of the LLP.

414D    Approval and signing of strategic report

(1) The strategic report must be approved by the members and signed on behalf of all the members by a designated member.

(2) If a strategic report is approved that does not comply with the requirements of this Act, every member who–

(a)knew that it did not comply, or was reckless as to whether it complied, and

(b)failed to take reasonable steps to secure compliance with those requirements or, as the case may be, to prevent the report from being approved,

commits an offence.

(3) A person guilty of an offence under this section is liable—

(a)on conviction on indictment, to a fine;

(b)on summary conviction, to a fine not exceeding the statutory maximum.”]

Textual Amendments

F1Reg. 12A inserted (with effect in accordance with reg. 2(5)(a) of the amending S.I.) by The Statutory Auditors Regulations 2017 (S.I. 2017/1164), reg. 1(2)(3), Sch. 3 para. 4 (with reg. 2(6)(7))