The FCA has published new rules for UK listed companies on board diversity targets and related disclosure requirements. Changes are being made to the Listing Rules sourcebook (LR) and to the Disclosure Guidance and Transparency Rules sourcebook (DTR).

What's happening?

Companies with a premium or standard listing will be required to:

  • include a "comply or explain statement" in their annual financial report setting out whether they have met specific board diversity targets. Companies which have not met the targets must explain why they have not done so; and
  • publish numerical data on the sex or gender identity and ethnic diversity of their board, senior board positions (Chair, CEO, SID and CFO) and executive management in a table.

Changes have also been made to the requirement to provide a description of the diversity policy which has been applied to the issuer's board. DTR 7.2.8AR now requires that the description has regard to broader aspects of diversity including ethnicity, sexual orientation, disability and socio-economic backgrounds alongside existing aspects such as age and gender. In addition the disclosure requirement has been extended to cover key board committees (remuneration, audit and nomination committees). 

What diversity targets have been set by the FCA?

The targets are that:

  • at least 40% of the board are women; 
  • at least one of the senior board positions (Chair, CEO, SID or CFO) is a woman; and 
  • at least one member of the board is from a minority ethnic background (which is defined by reference to categories recommended by the Office for National Statistics). 

What other information must be disclosed?

Issuers will also have to set out in their statement: 

  • the reference date used, and where this is different from the reference date used in respect of the previous accounting period, an explanation of why; and 
  • any changes to the board that have occurred between the reference date and the date on which the annual financial report is approved that have affected the company’s ability to meet one or more of the targets.

Can an issuer make additional diversity disclosures?

Yes. In addition to the information required under the new rules, a listed company can choose to include the following in its annual financial report: 

  • a brief summary of any key policies, procedures and processes, and any wider context, that it considers contribute to improving the diversity of its board and executive management;
  • any mitigating factors or circumstances which make achieving diversity on its board more challenging (for example, the size of the board or the country where its main operations are located); and 
  • any risks it foresees in being able to meet or continue to meet the board diversity targets in the next accounting period, or any plans to improve the diversity of its board.

What's the timing?

The new rules will apply to financial years starting on or after 1 April 2022. So the new disclosures should start to appear in annual financial reports published from around Q2 2023 onwards. 

The FCA is encouraging companies whose financial years began before then (from 1 January 2022) to consider reporting on the targets and making numerical disclosures in relation to their current accounting period on a voluntary basis.  

Where can I find the detail?

In April 2022, the FCA published Policy Statement PS22/3: Diversity and inclusion on company boards and executive management. This contains the new rules and guidance from the FCA. It also sets out the feedback which the FCA received following the publication of its original consultation paper (CP21/24) in July 2021 (Diversity and inclusion on company boards and executive committees).

Does this apply to AIM Companies?


Do the new rules apply to OEICs?

No. The FCA has excluded open-ended investment companies from the scope of the new rules. Closed-ended funds are subject to the new disclosure requirements.

What about issuers with listed debt?

The new rules do not apply to issuers of listed debt and debt-like securities, securitised derivatives or miscellaneous securities. 

Further information

If you would like to discuss these new rules please contact Nick Graves or another member of the Burges Salmon Corporate Group.