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Welcome to the latest edition of Corporate Update, our fortnightly bulletin offering a five-minute read of the latest developments which we consider relevant to corporate counsel. Please get in touch with your usual contact if you want to explore any of the topics covered in more detail. If you would like to subscribe to this bulletin as a regular email, please click here.
In this issue:
News
Chancellor announces Spring Budget 2024
On 6 March 2024, the Chancellor, Jeremy Hunt, announced the Spring Budget 2024. The focus was more on measures affecting individuals, but there were some announcements relating to corporate tax. For further details of the proposed measures, see our blog posts here and here.
Companies House changes introduced by ECCTA 2023 come into force
Following publication of the relevant commencement regulations (see Legislation below), various company law reforms under the Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023) came into force on 4 March 2024. These include changes to the role and powers of the registrar of companies and certain company administration measures (for further details of the various changes to the company administration regime, see our briefing), in particular requirements for companies to have their registered office at an appropriate address, and the requirement for subscribers to make a statement of lawful purpose on incorporation and for companies to confirm the intended lawful purpose of their future activities on an ongoing basis (in their confirmation statements).
It should be noted the reforms in force from 4 March extend to changes to the disqualification regime for directors, including the provision relating to the cessation of a director’s office if disqualified under the disqualification regime. However, section 31 of ECCTA 2023 which expands the grounds on which a director can be disqualified to include persistent breaches of certain companies' legislation, has not come into force.
The government has republished its collection of ECCTA 2023 Factsheets. Companies House has also updated various forms and its guidance to reflect the changes.
Pre-Emption Group publishes report on use of 2022 Statement of Principles
On 5 March 2024, the Pre-Emption Group (PEG) published its annual report monitoring the use of its revised Statement of Principles for the disapplication of pre-emption rights by FTSE350 companies in AGMs held in the period between 4 November 2022 and 31 July 2023. In general, the report found that a majority of companies had adopted components of the Principles to seek enhanced disapplication authority and there had been broad shareholder support for such disapplication authority requests. Of the FTSE 350 companies with an AGM during the period:
- 55.7% sought enhanced disapplication authority allowed under the new Principles.
- 65.7% requested authority for a specified capital investment, in addition to general corporate purposes.
- 98.3% had all disapplication resolutions passed by shareholders, with only a small number seeing significant dissent.
PEG also reminded companies that they should send a post-transaction report (in accordance with the template set out in Part 2B of the Principles) to PEG on completion of a capital raising in which they have utilised disapplication authority. PEG will implement a public database of post-transaction reports over the next year to ensure wide accessibility to the information.
Investment Association provides update on Principles of Remuneration
On 23 February 2024, the Investment Association (IA) sent a letter to FTSE 350 Remuneration Committee Chairs providing an update on its Principles of Remuneration. The IA letter covers (i) changes to long-term incentive awards to reflect pressure from the US market and (ii) the introduction of “hybrid” incentive plans, as well as acknowledging the role of executive remuneration in maintaining the UK’s attractiveness as a listing venue (see Publications below).
The lA also acknowledged that the guidance on remuneration provided to companies over the last couple of years has increased the granularity of oversight of remuneration practices, limiting the scope of companies to produce tailored arrangements for their most senior executives. In response to this, the IA has indicated that it will conduct a more fundamental review of the Principles, with a view to ensuring that they are a framework of principles to guide companies, rather than anything more restrictive. The updated Principles will be published later in the year.
FRC provides update on review of UK Stewardship Code
On 27 February 2024, the Financial Reporting Council (FRC) published a policy update on its proposed review of the UK Stewardship Code 2020. In its update, the FRC stated that, following the publication of the revised Corporate Governance Code, it is carrying out a fundamental review of the Stewardship Code and will seek views from stakeholders on whether the Stewardship Code is being used by asset managers, asset owners and other signatories to promote better stewardship outcomes. The review will focus on, amongst other topics, the extent to which the Code:
- supports long term value creation through appropriate investor-issuer engagement that drives issuers’ prospects and performance
- creates reporting burdens on issuers as well as Code signatories and
- has led to any unintended consequences, such as short-termism in targets and outlook for issuers.
FCA publishes consultation proposing to name firms under investigation
On 27 February 2024, the Financial Conduct Authority (FCA) published a consultation (CP24/2) in which it proposes to publicly name the firms it probes and publish information about its investigations at an earlier stage to increase the deterrent effect of its enforcement actions. The FCA will also identify the subject of its investigations when it is in the public interest and then announce when it has closed cases that do not lead to further action. This would mainly apply to firms rather than individuals due to legal constraints around privacy. The FCA has asked for feedback on its proposed new approach by 16 April 2024.
FTSE Women Leaders Review publishes report
The FTSE Women Leaders Review, a government-supported business led initiative aimed at increasing the representation of women on FTSE 350 Boards, has published its report on gender balance in FTSE leadership in 2023. The scope of the Review included 400 of the biggest public-listed, and private companies in the UK. While noting a steady gain for women in leadership roles in FTSE350 companies (with overall 42.1% woman representation on boards), the Review also indicated that there is room for more progress:
- For FTSE 100 companies, the number of women in the Combined Executive Committee & Direct Reports has increased to 35.2% (up from 34.3% last year), with the appointment rate of women remaining constant at 41% of all available roles.
- For FTSE250 companies, the number of women in the Combined Executive Committee & Direct Reports had increased 33.9% (up from 32.8% last year), but with the appointment rate of women dropping to 36% (from 40% in 2022) of all available roles.
House of Lords Committee publishes Modern Slavery Act call for evidence
The House of Lords Committee has published a call for evidence as part of its inquiry into the impact and effectiveness of the Modern Slavery Act 2015. It will consider how the Act’s provisions have been implemented, how the Act has been impacted by recent political developments, and whether the Act needs improvement. The focus is specifically on the Act itself, and its implementation, rather than modern slavery in general. Submissions are requested by 10am on 27 March 2024.
Legislation
Economic Crime and Corporate Transparency Act 2023 commencement regulations made
On 29 February 2024, the Economic Crime and Corporate Transparency Act 2023 (Commencement No.2 and Transitional Provision) Regulations 2024 were made. These Regulations bring into force various provisions of the ECCTA relating to enhancing the powers of the Registrar of companies, as well as company law changes relating to company administration on 4 March 2024.
The Limited Liability Partnerships (Application of Company Law) Regulations 2024 have also been published and came into force on 4 March 2024. These Regulations amend the Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009 and the Limited Liability Partnerships Act 2000 to ensure that certain of the amendments made to the Companies Act 2006 by the Economic Crime and Corporate Transparency Act 2023 (ECCTA) also apply (with modifications) to LLPs.
In addition, section 87(4) Small Business, Enterprise and Employment Act 2015 (restricting the use of corporate directors) was also brought into force on 4 March 2024 under the Small Business, Enterprise and Employment Act 2015 (Commencement No. 8) Regulations 2024 but only for the purpose of bringing into force the provision granting the government power to provide for exceptions from requirement that each director be a natural person.
Principal Office Address (Rectification of Register) Regulations 2024 published
Following the publication of the draft form of these regulations in December 2023, the government has, on 5 March 2024, published the Principal Office Address (Rectification of Register) Regulations 2024. These regulations give the Registrar power, either on application or on their own motion, to change the address registered as the principal office of a “relevant person” (which includes a director, secretary, or person with significant control) to a default address, where the Registrar is not satisfied that the address is in fact their principal office. No substantive changes have been made to the draft regulations.
Publications
2024 Investment Association guidance - executive remuneration briefing
Slaughter and May has published a briefing on the IA’s long-awaited guidance on executive remuneration for UK-listed companies, discussing a couple of particular issues highlighted for Remuneration Committees’ consideration and the potential approach of the IA to remuneration.