2.02 The directors' report says no qualifying third-party indemnity was in force, in the same paragraph that describes [wording masked]
UK Company B · a UK-listed technology and logistics group · Compliance or disclosure gap
In brief
In both years the directors' report says the Company indemnifies each director under an indemnity deed whose provisions are permitted by the director liability provisions of the Companies Act 2006, and then says [wording masked]. An indemnity for directors that the Act permits is, by the Act's own terms, a qualifying third-party indemnity provision, and the Act requires the report to say that such provision was in force.
The evidence, as filed
Screenshot withheld to protect the company’s identity: Annual Report 2024, page 149; Annual Report 2025, page 160; Annual Report 2024, page 128. Their wording or layout could lead back to the company even with names and figures masked; the evidence list below records what each page shows.
What the report shows, and what the rule requires
| What the annual report shows | What the rule requires |
|---|---|
| What the annual report shows Both reports: '[wording masked] the director liability provisions of the Companies Act 2006' followed by '[wording masked].' | What the rule requires A statement under section 236 that qualifying third-party indemnity provisions (the indemnity deeds) were in force for the benefit of the directors during the year and remain in force at the date of the report. |
The rule
Companies Act 2006, section 236(3)
Version relied on: Companies Act 2006, revised text on legislation.gov.uk as in force for the financial year reviewed
If at any time during the financial year to which a directors' report relates any such provision was in force for the benefit of one or more persons who were then directors of the company, the report must state that such provision was in force.
Companies Act 2006, section 236(2)
Version relied on: Companies Act 2006, revised text on legislation.gov.uk as in force for the financial year reviewed
If when a directors' report is approved any qualifying indemnity provision (whether made by the company or otherwise) is in force for the benefit of one or more directors of the company, the report must state that such provision is in force.
Companies Act 2006, section 232(2)
Version relied on: Companies Act 2006, revised text on legislation.gov.uk as in force for the financial year reviewed
Any provision by which a company directly or indirectly provides an indemnity (to any extent) for a director of the company, or of an associated company, against any liability attaching to him in connection with any negligence, default, breach of duty or breach of trust in relation to the company of which he is a director is void, except as permitted by
Companies Act 2006, section 234(2)
Version relied on: Companies Act 2006, revised text on legislation.gov.uk as in force for the financial year reviewed
Third party indemnity provision means provision for indemnity against liability incurred by the director to a person other than the company or an associated company.
Why it applies here: a director indemnity that is 'permitted by the director liability provisions' and is not insurance or a pension scheme indemnity can only be qualifying third-party indemnity provision under section 234.
Why it matters
- A reader is told the directors have no qualifying indemnity while the same paragraph says each director has an indemnity deed.
- A one-sentence correction restores the statement the Act requires.
The directors' report makes a statement the Act requires in the opposite sense to the arrangements it describes; a reader is told the directors have no qualifying indemnity while the same paragraph says they each have an indemnity deed.
Exposure
A directors' report statement that does not comply with section 236 can draw a Financial Reporting Council Corporate Reporting Review enquiry and is normally corrected in the next report; no fine is realistic.
Our workings
the 'Directors' insurance and indemnities' paragraph in the 2024 report and the 2025 report says the Company '[wording masked]', that the deed '[wording masked] the director liability provisions of the Companies Act 2006', and that a deed is usually entered into on appointment. The next sentences say [wording masked] and '[wording masked]'. The remuneration policy table says the Company '[wording masked] 2006'. Law: section 232(2) makes void any provision by which a company indemnifies a director against liability in connection with negligence, default, breach of duty or breach of trust, except as permitted by section 233 (insurance), section 234 (qualifying third-party indemnity provision) or section 235 (qualifying pension scheme indemnity provision). Section 234(2) defines third-party indemnity provision as indemnity against liability incurred by the director to a person other than the company or an associated company. Section 236(2) and (3) require the directors' report to state that qualifying indemnity provision is in force when the report is approved, and was in force during the year.
The deeds described therefore appear to be such provision, and the report should say it was in force; instead it says the opposite. The wording is the same in both years, so it reads as template text not updated for the deeds. The terms of the deeds are not published, so the point rests on the report's own description of them.
Management’s best defence, and our reply
The company could say that its indemnity deeds may be drafted so narrowly (for example covering only defence costs funded under section 205, which is a loan rather than an indemnity) that they do not amount to qualifying third-party indemnity provision, or that the sentence was meant to refer only to directors of associated companies, as the sentence before it does. It could add that the deeds are on its register under section 237 and open to members. However, the report itself says the deeds indemnify the directors and that their provisions are 'permitted by the director liability provisions' of the Act; under section 232(2) the only indemnity for directors the Act permits outside insurance and pension schemes is qualifying third-party indemnity provision, and section 236(3) then requires a positive statement. The sentence as printed covers all directors, not only those of associated companies.
The fix
- Replace the last sentence with: 'Qualifying third-party indemnity provisions, as defined in section 234 of the Companies Act 2006, were in force for the benefit of the Directors throughout the year and remain in force at the date of this report.'
Evidence relied on
| # | What it shows | Type | Where |
|---|---|---|---|
| 1 | 2024 report: [wording masked], permitted by the Act's director liability provisions | Document | Annual Report 2024, page 149 |
| 2 | 2024 report: the next sentence says no qualifying third-party indemnity provision was in force | Document | Annual Report 2024, page 149 |
| 3 | Remuneration policy table: indemnity to the fullest extent the Act permits | Document | Annual Report 2024, page 128 |
| 4 | 2025 report: the same indemnity deed wording | Document | Annual Report 2025, page 160 |
| 5 | 2025 report: the same statement that none was in force | Document | Annual Report 2025, page 160 |
Prepared by Pramanex from the company’s published annual reports, without the company’s involvement, to show how an annual report review reads. The company is not named, and nothing on this page is a statement about any identifiable company. Observations are not an audit, review or other assurance engagement, and not legal advice. A regulator-style question is a question, not a conclusion.
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