The Modern Slavery Act 2015: the annual statement requirement

On 29 October 2015 it became a legal requirement under the Modern Slavery Act 2015 (the “Act”) for certain organisations to prepare a slavery and human trafficking statement for each financial year.

The Act requires large organisations to set out the steps they have taken during each of their financial years to ensure that slavery and human trafficking is not taking place in any of their supply chains, or in any part of their own business.

Is my business caught by the statement requirement under the Act?

Businesses that meet the following criteria are caught by the requirement:

  • A body corporate (including a company or limited liability partnership (LLP) incorporated by whatever means) or a partnership (an “organisation”). It does not matter where the organisation was incorporated or formed.
  • Carrying on a business, or part of a business, in the UK.
  • Supplying goods or services.
  • A global annual turnover of £36million or above. This threshold covers both parent company and subsidiaries.

Further information is provided in the guidance on what must be done where there is a non-UK parent with UK subsidiaries and, conversely, UK parents with non-UK subsidiaries. But whether an organisation must produce a statement is very much dependent on the specific circumstances of each business.

What information should the statement contain?

The government has now issued guidance on what businesses must do to ensure their statements are compliant.

There is no set form or content, only suggested subheadings. The guidance does, however, recommend that the statement should be written in simple, succinct language. It must also be written in English, but available in other languages relevant to the supply chain.

As mentioned in our previous article, How will the Modern Slavery Act 2015 affect your business?, there are six areas of information that an organisation may include in its statement, which are:

  • Its structure, business and supply chains.
  • Policies in relation to slavery and human trafficking.
  • Due diligence processes in relation to slavery and human trafficking in its business and supply chains.
  • The parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and any steps that it has taken to assess and manage that risk.
  • Its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against key performance indicators.
  • Training about slavery and human trafficking available to its staff.

Businesses required to produce the statement do not have to guarantee that their entire supply chain is slavery-free, but they are required to detail in their statement all the actions taken to ensure their supply chains and businesses are free from slavery. This means that it is important for organisations to fully understand their supply chains so that they can identify the type and extent of potential slavery risks. Knowing the supply chain and associated risks will help organisations to produce a full and accurate statement, upholding their reputation among consumers, suppliers and competitors.

Where a subsidiary is part of its parent company’s own business or supply chain, but does not itself meet the turnover threshold, the parent must produce a statement covering its own commercial activities and those of the subsidiary.

When do businesses need to produce their first statements?

The first organisations that need to produce a statement are those whose financial year ends on 31 March 2016. Their statements relating to the current year (2015-2016) will be due as soon as possible, suggested as no later than 6 months after the financial year end to which it relates. Working to this suggested timeframe, the first target is 30 September 2016.

Where their financial year ends fall before this date, for example, 30 November 2015, organisations will not have to publish a statement for that company’s current year (2014-2015), but the following year. So, taking the example of an organisation with a year end of 30 November 2015, its first statement will be due by the end of May 2017, 6 months after its 2015-2016 year end.

Organisations will then need to publish a statement for each successive financial year.

What are the other formalities surrounding the statement?

The statement must be approved and signed by an appropriate senior person in the business. For example, for a company, the statement must be approved by its board of directors and signed by a director (or equivalent).

It also needs to be published on an organisation’s website or websites containing information about the organisation’s business in the UK, with a link to it in a prominent place on the homepage.

For those businesses without a website, a copy of the statement must be provided to anyone who requests it within 30 days of their request.

What do I need to do?

If your business is caught by the large organisation threshold (see above), you need to produce a statement that fully covers the steps you have undertaken to ensure there is no slavery or human trafficking in your supply chain. To do this, you will need to have a good understanding of your supply chain(s) in order to identify where any risks lie.

You could start your due diligence into your supply chain by conducting a general audit of your current and pending commercial contracts. Where you have any concerns about certain suppliers, you should gather further information and carry out investigations, to identify what the exact risk is and where it might lie.

It would also be wise to train your employees, particularly those involved in procurement, on potential supply chain issues. This will enable your people to spot any such risks, allowing you to have the best possible understanding of your overall risks and manage them accordingly.

There are some general suggestions about the subheadings you might use, but it is important to ensure the content is appropriately tailored to take account of your business’s structure, sector and the associated risks involved.

Author - Alice Birch

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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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Craig Chaplin

Partner - National Head of Commercial & Competition

I am a Partner and Head of the Commercial & Competition Team.