2.16 Why does the Board treat a director of [n] years' service, linked to a 10% shareholder, as independent (both years)?
UK Company B · a UK-listed technology and logistics group · Regulator-style question
In brief
The 2018 Code lists more than nine years' service as a circumstance likely to impair a non-executive director's independence, and asks for a clear explanation where the Board still considers the director independent. In both years one non-executive director had served for more than twice that long (21 years in the 2024 report, [n] years in the 2025 report) [wording masked] trust behind an approximately 10% shareholder. The Board says he does not represent that shareholder, which has no right to appoint a director. Its reasons for independence describe his contribution: in 2024 the value of his experience and his re-election by shareholders; in 2025 also '[wording masked]'. Neither report says why the length of service does not affect his judgement.
The evidence, as filed
Screenshot withheld to protect the company’s identity: Annual Report 2025, page 114; Annual Report 2024, page 105; Annual Report 2025, page 169; Annual Report 2024, page 91; Annual Report 2025, page 117. 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 2025 report p.114: director 'has been a Director for [n] years [wording masked] [shareholder] Trust', a 'significant (approximately 10%) shareholder'; independent '[wording masked]'. 2024 report p.105: tenure of 21 years and the same trust link named; reasons given are the benefit of his experience and his annual re-election, then 'The Board considers [name] to be independent'. Both reports (p.169; [amount].91) state compliance with all provisions of the 2018 Code. | What the rule requires A clear explanation of why service of more than twice the nine-year marker, together with the beneficial link to a 10% holder, does not impair his independence of judgement, or the director shown as not independent, with the effect on board balance stated. |
What we checked: Independence statements, committee membership tables and the Code compliance statement in both reports; the 2018 Code Provision 10 (the 2018 Code applies to both years); UKLR 6.6.6R(6).
The rule
UK Corporate Governance Code 2018, Provision 10
Version relied on: UK Corporate Governance Code, FRC, July 2018; applies to financial years beginning from January 2019 (the 2024 edition applies from January 2025)
represents a significant shareholder; or • has served on the board for more than nine years from the date of their first appointment. Where any of these or other relevant circumstances apply, and the board nonetheless considers that the non-executive director is independent, a clear explanation should be provided.
UK Listing Rules, UKLR 6.6.6R(6)
Version relied on: FCA Handbook, UK Listing Rules (UKLR), in force from July 2024, as at the financial year end
a statement as to whether the listed company has: (a) complied throughout the accounting period with all relevant provisions set out in the UK Corporate Governance Code
Why it applies here: Provision 10 is comply-or-explain and the Board has explained, so there is no departure.
Why it matters
Investors and proxy advisers who apply the Code's indicators may count one fewer independent director than the report shows and may vote against his re-election.
Exposure
No legal exposure: Provision 10 is comply-or-explain and an explanation has been given.
Our workings
the 2025 report says the director 'has been a Director for [n] years' [wording masked] trust that owns a 'significant (approximately 10%) shareholder', that he 'is not a representative of [shareholder]' and that [shareholder] has no right to appoint a director; the Board considers him independent '[wording masked]' and says [wording masked]. The 2024 report named the same two factors at 21 years, gave as its reasons the benefit of his experience and knowledge, the long-term perspective he brings and his annual re-election by a substantial majority since 2011, and then stated 'The Board considers [name] to be independent'. He sits on the People Committee, not on the Audit or Remuneration Committees. Both reports state full compliance with the 2018 Code.
none.
The shareholder link is answered in part: the Code's circumstance is representing a significant shareholder, and the Board states he does not. The tenure circumstance is not answered in either year: the 2024 reasons are about his value to the Group and shareholder support, and the 2025 addition (his record of challenge) is an assertion of independent judgement rather than a reason why [n] years' service does not affect it. The Board reports that all three committees met the Code's independence provisions, so the classification does not appear to change any composition test; it changes the count of independent directors reported.
Management’s best defence, and our reply
Management would say the Code is comply-or-explain, the Provision 10 circumstances are indicators rather than tests, and the Board has given a reasoned explanation each year: he is not [shareholder]'s representative, [shareholder] has no appointment right, his record of challenge shows independent judgement and shareholders re-elect him by a large majority. Every committee composition test is met whichever way he is classified. That defence is credible, which is why this is a question and not a finding; the open point is only whether the explanation addresses the length of service itself.
The fix
- Expand the explanation to address the length of service directly (and the beneficial interest in the 10% holding as an other relevant circumstance), or classify the director as not independent and restate the independence count.
Question for the company
What factors led the Board to conclude that service of [n] years (21 years in the 2024 report) does not impair the director's independence of judgement, given that the reasons published in both years describe his contribution and shareholder support rather than the effect of tenure, and has the Board considered presenting him as not independent?
Evidence relied on
| # | What it shows | Type | Where |
|---|---|---|---|
| 1 | Tenure and link to a significant shareholder | Document | Annual Report 2025, page 114 |
| 2 | Size of the shareholding | Document | Annual Report 2025, page 114 |
| 3 | The Board's reason for treating him as independent | Document | Annual Report 2025, page 114 |
| 4 | Full-compliance statement | Document | Annual Report 2025, page 169 |
| 5 | He sits on the People Committee | Document | Annual Report 2025, page 117 |
| 6 | 2024 report: the 21-year tenure is named as a factor in the independence assessment | Document | Annual Report 2024, page 105 |
| 7 | 2024 report: the two circumstances that the Board itself identified (tenure of 21 years; beneficiary of the trust behind an approximately 10% holder) | Document | Annual Report 2024, page 105 |
| 8 | 2024 report: the reason given is the benefit of his experience and knowledge to the Group, followed by 'The Board considers [name] to be independent'; no reason is given why the tenure and the shareholder link do not affect his independence of judgement | Document | Annual Report 2024, page 105 |
| 9 | 2024 report: the Code in force for the year was the 2018 Code, and the Board states that it complied with all of its provisions throughout the year | Document | Annual Report 2024, page 91 |
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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