Section 172 Statement

SECTION 172 (1) STATEMENT AND STATEMENT OF ENGAGEMENT WITH OTHER STAKEHOLDERS

The directors provide the following statement pursuant to the Companies Act 2006 (as amended by Companies (Miscellaneous Reporting) Regulations 2018) (the “Act”) to describe how they have acted in accordance with their duty under Section 172 of the Act (“Section 172”) to promote the success of the Company for the benefit of its member(s) as a whole, and in so doing, how they have had regard to those factors set out in Section 172, (1) (a) to (f) during the financial year.

 

Furthermore, in compliance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended by the Companies (Miscellaneous Reporting) Regulations 2018), the directors provide the statement which follows to describe how they have had regard to the need to foster the Company’s business relationships with suppliers, customers and others, and in each case, the effect of that regard, including on the principal decisions taken by the Company during the financial year.

 

Section 172 requires a director to have regard to the following matters, among others, when discharging their duty:

•  the likely consequences of any decision in the long- term;
•  the interests of the Company’s employees;
•  the need to foster the Company’s business relationships with suppliers, customers and others;
•  the impact of the Company’s operations on the community and the environment;
• the desirability of the Company maintaining a reputation for high standards of business conduct; and
• the need to act fairly with members of the Company.

 

The Board of the Company is collectively responsible for managing the affairs of the Company to achieve its long-term prosperity by making important decisions, monitoring the underlying performance of the Company, as well as being a means for establishing ethical standards. Understanding the interests of key stakeholders is an important part of CBG’s strategy and helps inform the directors’ decision making throughout the year.

 

Board and management meetings are held as required where the directors will consider the Company’s principal activities and make decisions. Meetings are scheduled to provide adequate time for consideration and discussion by the directors of the interests of stakeholders, and for the directors to seek further information from management, as required. As a part of those meetings, the directors receive information in a range of different formats to assist them in discharging their responsibilities under Section 172 when making relevant decisions. This information may include, among other things, reports and presentations on financial and operational performance, business updates, budget planning and forecasts, HR matters, as well as specific areas of engagement, such as employee opinion surveys. When making decisions, the Board seeks to understand the impact on each of its stakeholders, including the likely consequences of a decision in the long term, whilst acknowledging that a decision will not necessarily be favourable for all stakeholders, as there may be competing interests between them.

 

The Company is part of the wider Close Brothers Group (the “Group”), and as such it follows a range of Group-wide policies in place to protect employees and provide a safe working environment, to ensure compliance with all regulatory requirements and adherence to the highest professional and ethical standards in dealing with customers, suppliers and colleagues, as well as ensuring that it continues to be cognisant of its social and environmental responsibilities. In doing so, and by balancing the interests of the Company’s stakeholders when making decisions, the Board seeks to maintain a reputation for high standards of business conduct. Further information on these Group-wide policies can be found in the annual report and financial statements of the Company’s ultimate holding company, Close Brothers Group plc.

 

The directors seek to engage directly with stakeholders wherever possible on certain issues, though the size of the Group means that stakeholder engagement often takes place at an operational or Group level. This approach creates greater efficiency and facilitates a greater positive impact on environmental, social and other issues than may be possible at an individual company level, as well as ensuring consistency of approach across the Group. Where engagement has taken place at operational level, the outcome of that engagement has been brought to the Board for its consideration where relevant throughout the year. During the financial year, the Company continued to work in a flexible manner engaging with stakeholders both in-person and virtually, including holding ‘hybrid’ events to widen participation. Additional details on engagement at Group level with stakeholders, including employees, suppliers, customers, the community and environment can be found in the Strategic Report section of the Annual Report and Financial Statements of Close Brothers Group plc.

 

The table and case studies below set out further examples of the ways in which the Board has engaged directly and indirectly with stakeholders during the financial year, as well as detailing how the directors have had regard to employee interests and the need to foster the Company’s business relationships with suppliers, customers and others, and the effect of that regard, including on principal decisions taken throughout the year, as well as matters set out in Section 172 (1)(a)-(f) when discharging their duties under Section 172.

Colleagues

Why we focus on them and the impact of engagement

The Company directly employs approximately 70 employees around the UK and is part of the Commercial Division with approximately 1,000 employees around the UK, Republic of Ireland and Germany. We have a diverse and motivated workforce which delivers the highest levels of service to our customers, clients and partners. We are committed to the development of our colleagues, ensuring they are supported and engaged.

 

Listening to our colleagues enables us to build an engaged workforce, allowing us to develop and retain high levels of expertise. We are able to ensure we are considering the views of all colleagues and making sure everyone feels included

 

Stakeholders’ key priorities and areas of focus

• A safe working environment
• A fair and inclusive culture where employee feedback is valued
• Being appropriately rewarded for their contributions
• Opportunities for training and development

How the board and management engage and consider stakeholder interests

• We participated in the Group's pulse employee opinion survey, which closed in February 2025, to gather feedback from our colleagues anonymously. The results of this survey gave us insight into key topics including customers and clients, culture, a sense of belonging, and comfort in speaking up.
• Follow-up focus groups were conducted with different teams to understand more around colleague sentiment, with action plans created to ensure we are focusing on the areas that matter most to our colleagues as well as ensuring we are meeting the needs of other stakeholders.
• We have eight Group employee-led inclusion networks which act as a voice for our minority colleague groups.
• We held regular Commercial Division town halls, providing employees with updates from across the business and Group.
• Review and discussion of a culture dashboard by Commercial Division Risk and Compliance Committee, providing an overview of matters relating to culture, conduct and values.

 

Customers, clients and partners

Why we focus on them and the impact of engagement

The needs of our customers, clients and partners are at the heart of our business and are core to our purpose. Our aim is to be there for our customers across all market conditions to help them meet their goals, and to foster confidence that earns their loyalty and ensures we build long-lasting customer relationships.

 

Our long-term success depends on the strength of our relationships with customers, clients and partners, our specialist expertise and the maintenance of high standards of service. Central to all decision-making is doing the right thing for customers, clients and partners, by helping them access financial solutions to meet their needs. As such, we engage with our customers throughout their end-to-end journey with us and actively seek their feedback.

Stakeholders’ key priorities and areas of focus

• Building and maintaining strong personal relationships based on trust, understanding and specialist expertise
• Understanding, treating and valuing them as individuals
• Fair and equitable conduct of business
• Receiving consistent, responsive and supportive service delivered with simplicity, clarity and ease
• Meeting their needs throughout changing economic cycles
• Implementing customer-led propositions that meet their individual needs

How the board and management engage and consider stakeholder interests

• Review of customer metrics and engagement scores, and updates on a wide range of matters relating to customer issues, including complaints.
• Monitoring and analysis of complaints and activity to ensure we treat customers fairly and deliver good customer outcomes.
• Consideration of customer and conduct related issues during the year in relation to particular projects.
• Consideration of conduct matters as part of the culture dashboard reviewed by the Commercial Division Risk and Compliance Committee.
• Continuing to invest in strengthening our capability to capture, consolidate and act upon customer, client and partner feedback by extending experience measurement to more interaction points.

Regulators and Government

Why we focus on them and the impact of engagement

We are committed to sustaining high standards of business conduct in line with regulatory, governmental and legal expectations and operate prudently within the laws and regulations that apply to us.

 

The Group, on behalf of the Company, fosters an open and cooperative relationship with all our regulators, government authorities and trade associations in the jurisdictions in which we operate. Active engagement helps to ensure we are aware of and adapting to the evolving regulatory framework.

Stakeholders’ key priorities and areas of focus

• Good customer outcomes
• Operational and financial resilience
• Financial crime prevention
• Diversity and inclusion
• Digitisation and analytics

How the board and management engage and consider stakeholder interests

• Regulatory risk and compliance reporting to Commercial Division Risk and Compliance Committee.
• As part of the Group, who have engaged constructively with our regulators during this period of heightened regulatory scrutiny, we have provided information in support of the FCA's focus on the cost of living and their market-wide review of Borrowers in Financial Difficulty, as well as in connection with the FCA's review of historical motor finance commission arrangements.
• To align our approach with regulatory expectations, we have actively monitored the FCA's formal and informal guidance of Consumer Duty including monitoring of consumer outcomes management information metrics and the annual assessment of consumer outcomes.
• As part of the Group, who continued to engage actively with the PRA on our IRB approach application.
• As part of the Group, who undertook reporting and analysis as requested, enabling regulators to better understand our business activities and how we are operating in a controlled and prudent manner in line with their expectations.

 

 

Suppliers

Why we focus on them and the impact of engagement

Our business is supported by a broad range of suppliers, enabling us to provide high standards of service to our customers, clients and partners. We are focused on ensuring we have transparent and sustainable working relationships with our suppliers.

Engagement is focused on driving an open and collaborative approach with our suppliers, as we work together to ensure services support us to meet out goals, whilst considering areas for improvement.

Stakeholders’ key priorities and areas of focus

• Strong and sustainable relationships with Close Brothers
• Fair and equitable conduct of business
• Appropriate and clear payment procedures
• An understanding of the Close Brothers purpose and strategy
• Robust risk management framework

How the board and management engage and consider stakeholder interests

• As part of the Group, who conducted our annual supplier survey to engage with our suppliers on topics such as how they feel about doing business with us, how likely they would be to recommend us as a client and the transparency of our strategies and priorities. This has indicated that:
  • 80% of our suppliers have described feeling "Very Satisfied" or "Satisfied" by our approach to Supplier Management.
  • 30% of our suppliers have described our transparency and fairness in doing business as "Extremely Clear", with an additional 45% voting "Very Clear".
• As part of the Group, who updated the Group's Code to reflect feedback from key strategic suppliers.
• As part of the Group, who held regular review meetings with suppliers, with strategic meetings taking place at least quarterly with top-tier suppliers.
• Monitoring of supplier payment statistics including average days to pay suppliers.

Communities and Environment

Why we focus on them and the impact of engagement

Close Brothers is committed to contributing lasting value and making a positive impact on the communities in which we operate and the environment more broadly. This underpins the growing range of programmes and initiatives we support that benefit society and the environment.

 

Engaging with local communities helps the Board and our employees develop their understanding of our clients, customers and partners so that we can support them and help them to achieve their ambitions, whilst also building employee engagement. We firmly believe that environmental considerations should form an integral part of our business decisions, and employees across the Group are actively engaged on responsible behaviours and environmental issues.

 

Stakeholders’ key priorities and areas of focus

• A suitable strategy for approaching sustainability issues
• Support for community initiatives
• Take active steps to ensure equity of opportunity, regardless of background or experience
• A long-term focus on addressing the impacts of climate change

How the board and management engage and consider stakeholder interests

• As part of the Group, colleagues completed numerous volunteering activities to positively impact local communities, including volunteering at food banks and supporting youth groups such as Guides, Scouts and Cadet groups and children's sports teams.
• As part of the Group, extended our partnership with the University of Sheffield AMRC Training Centre, with our 15 apprentices funded through the Close Brothers SME Apprenticeship Programme entering their second year of training.
• As part of the Group, continued to support social mobility programmes, hosting 35 interns across the group in partnership with the 10,000 Interns Foundation and Up Reach.

 

Investors

Why we focus on them and the impact of engagement

The Company is a wholly owned member of the Close Brothers Group, forming part of the Commercial Division; as such it operates as part of the broader Group in delivering its purpose and strategic objectives, in line with Group-wide processes, governance and culture

 

Close Brothers has a proven and resilient business model and is focused on generating long-term, sustainable value for its investors, while also maintaining a strong balance sheet

 

Our investors are the providers of capital to our business so it is important that we engage actively with them and listen and respond to their feedback through an established and comprehensive programme throughout the year

 

Stakeholders’ key priorities and areas of focus

• Strong returns and financial resilience through the cycle
• Capital generation and distributions
• Sustainable and consistent business model
• Appropriate governance practices and regard for environmental and social responsibility
• Managing the potential impact on the Group following the FCA's review on motor finance commission arrangements, whilst protecting our business franchise

How the board and management engage and consider stakeholder interests

• Although the Company has a sole shareholder, the Company’s directors, have appropriate oversight of, and regard to, wider Group investor interests and considerations when making decisions.
• Updates to Group level committees, including the Close Brothers Group plc board on the operation and performance of the Company.
• Participation in Group-wide initiatives and programmes (including those that support consideration of the Company’s other stakeholder groups including customers, employees and suppliers.
• Budget and financial plans developed as part of wider Group process.
• Participation in broader enterprise-wide risk, regulatory and compliance initiatives.

Furthermore, set out below is an additional detailed example of the way in which the Board of the Company has engaged directly with key stakeholders during the financial year, how stakeholder interests have been considered in the decision-making of the directors, and how the directors have had regard to the matters set out in Section 172 (1)(a)-(f) when discharging their duties under Section 172. The Company is a wholly owned subsidiary of Close Brothers Group PLC and, as such, the duty of directors to have regard to the need to act fairly as between members of the Company is limited.

Response to Court of Appeal Ruling on Commission Disclosure (October 2024)

On 25 October 2024, the Court of Appeal ruled that motor dealers acting as credit brokers owe both a disinterested duty and a fiduciary duty of loyalty to their customers. This decision significantly raised the standard for disclosure and customer consent regarding commission payments, surpassing existing FCA rules and regulatory expectations at the time.

 

In response, the Board and the Commercial Division Executive Committee convened immediately to assess the legal and operational implications of the ruling. The principal decision taken was to implement an additional disclosure and commission consent letter for all externally introduced commission-based lending, ensuring continued legal compliance.

 

The Board’s decision was guided by a comprehensive assessment of the factors outlined in Section 172(1) of the Companies Act, including:

• Long-term consequences: The ruling had potential to disrupt trading and damage trust if not addressed swiftly. The Board prioritised a solution that would safeguard long-term customer relationships and regulatory compliance.
• Employee interests: Clear communication and rapid implementation of the new disclosure process minimised confusion and disruption for staff. Training and support were provided to ensure confidence in the updated procedures.
• Customer relationships: The decision prioritised transparency and trust, aligning with the Company’s purpose of supporting customers responsibly. The new letter provided clarity on commission arrangements, reinforcing ethical standards.
• Supplier and partner engagement: The Company worked closely with legal advisors and external lending partners to ensure the new documentation met legal standards and could be deployed quickly.
• Regulatory expectations: Although the ruling exceeded current FCA requirements, the Board chose to adopt the higher standard immediately, demonstrating a proactive approach to compliance and governance.
• Reputation and conduct: The swift and transparent response reinforced the Company’s commitment to high standards of business conduct and ethical trading.

 

The decision to implement the new disclosure letter was executed swiftly, resulting in only one day of lost trading activity. This rapid response;

• Minimized disruption to customers and staff.
• Ensured legal compliance and protected the Company’s ability to trade.
• Preserved investor confidence by limiting operational and financial impact.
• Reinforced the Company’s reputation for integrity and responsiveness.