4 min read
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
FRC publishes Corporate Governance Code 2024 Guidance
On 29 January 2024, the Financial Reporting Council (FRC) published its guidance on the revised 2024 Code Governance Code (the “Code”) that will apply to financial years beginning on or after 1 January 2025. It is intended to support companies and company advisers in applying the revised Code and contains advice, further details and good practice examples. It also consolidates previous FRC guidance into one document (accessible via the links in the Code).
Among other things, the guidance considers risk management and internal controls in light of the new Code requirement for boards to describe how they have monitored and reviewed the effectiveness of the internal control framework and to make a declaration concerning the effectiveness of material internal controls. However, the guidance does not establish a framework for companies to follow or define a “material control”, simply noting that “material controls will be company-specific and therefore different for every company depending on their features and circumstances, including for example size, business model, strategy, operations, structure and complexity.”
FRC publishes review of reporting by the UK’s largest private companies
On 31 January 2024, the FRC published its thematic review of reporting by the UK's largest private companies. The FRC was critical about the quality of reporting in some areas, particularly in terms of how clearly companies explained material matters that were complex or judgemental. Key recommendations in relation to future annual reports include for companies to:
- focus on and clearly and concisely explain matters key for an understanding of the company in the strategic report;
- include detail of the specific judgment involved and clearly explain the rationale for conclusions in judgement and estimates disclosures; and
- ensure accounting policies for complex transactions and balances are tailored, without using boilerplate wording.
ESG committees terms of reference
On 31 January 2024, the Chartered Governance Institute (CGI) published a guidance note (login required) on the terms of reference for sustainability / ESG committees, including a model set of terms of reference and good practice recommendations in line with other recommendations in the Code. It should be noted that it is not a requirement to have such a committee, although they are increasing.
Legislation
The Public Offers and Admissions to Trading Regulations 2024
On 29 January 2024, the Public Offers and Admissions to Trading Regulations 2024 were made. They set out the UK framework for public offers of securities and admissions to trading on regulated markets which will replace the UK Prospectus Regulation (which is derived from the EU Prospectus Regulation) when it is revoked. No significant changes were made to the draft regulations published on 28 November 2023 (for details of which, see our client briefing).
The Regulations introduce a new public offer of securities regime, under which it will be unlawful for a person to offer relevant securities to the public in the UK unless an exemption applies, and gives the Financial Conduct Authority (FCA) new powers to make rules in relation to the offer of securities to the public and admission to trading of securities to a UK regulated market or multilateral trading facility, including when a prospectus may be required.
On 30 January 2024, the FCA's power to make rules and issue guidance in relation to the new regime came into force. However, the substantive provisions of the Regulations will come into force only once the FCA has concluded its consultation on its detailed rules on the regime and finalised the underlying regulatory framework.
Regulations consequential on revocation of retained EU law made
On 23 January 2024, the Retained EU Law (Revocation and Reform) Act 2023 (Consequential Provision) Regulations 2024 were made. They make consequential amendments to secondary legislation to reflect changes made by the Retained EU Law (Revocation and Reform) Act 2023 that repeal EU-derived legislation specified in Schedule 1 of that Act immediately before the end of 2023.
This includes removing references throughout secondary legislation to rights previously recognised in domestic law by virtue of the now-repealed EU Withdrawal Act 2018 and “retained EU law”, which has been replaced with the term “assimilated law”. The Regulations come into force on 1 March 2024.
Economic Crime and Corporate Transparency Act 2023 revised draft regulations published
On 1 February 2024, revised draft Economic Crime and Corporate Transparency Act 2023 (Consequential, Supplementary and Incidental Provisions) Regulations 2024 were published, superseding the version laid before Parliament on 10 January 2024. The limited changes to the draft regulations include:
- they now come into force on the later of: (i) the date when s. 1 Economic Crime and Corporate Transparency Act 2023 (registrar’s objectives) comes into force; and (ii) the day after the date on which the Regulations are made; and
- revised amendments to para. 4 Schedule 1A European Public Limited-Liability Company Regulations 2004 (modifications of provisions of the 2006 Act applying in relation to documents sent to the registrar etc) dealing with the modification of s. 1094 Companies Act 2006 (removal of material from the register).