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Corporate Update is our fortnightly bulletin highlighting the latest legal and regulatory developments which we consider to be of relevance to in-house corporate counsel. If you would like to subscribe to this bulletin as a regular email, please click here.
In this issue
News
Government publishes white paper on corporate transparency and register reform
In light of Russia’s invasion of Ukraine, the government has brought forward measures designed to improve corporate transparency in order to combat money laundering and abuse of UK’s company incorporation regime. To this end, the government has published its White Paper on corporate transparency and register reform, which sets out its final position ahead of introduction legislation in relation to the reform of Companies House and proposals to increase the transparency of UK corporate entities. This follows earlier government consultations on the package of reforms. The reforms include, among other things:
- the Registrar being granted a new statutory function to promote and maintain integrity of the register and new powers to query information pre or post-registration;
- requirement for identity verification of directors, beneficial owners and agents; and
- changes to how companies report their financial information to Companies House.
The government has also published the Economic Crime (Transparency and Enforcement) Bill, which was introduced to Parliament on 1 March 2022 and passed the Commons stage on 7 March 2022 (see “Legislation” below for further details).
FCA reminds issuers of inside information obligations during Ukraine crisis
The Financial Conduct Authority (FCA) has published a statement reminding issuers of their disclosure obligations under the Market Abuse Regulation (MAR) during the Ukraine crisis. Issuers are reminded that although information relating to developments in the invasion and responses to it by national governments will be in the public domain, and will therefore not be inside information, information about how such developments and responses could affect the company, and details of the company’s response, could be inside information. A company that concludes it has such inside information are required disclose it as soon as possible unless they are able to justify a delay.
Investment Association publishes 2022 Shareholder Priorities
The Investment Association has published Shareholder Priorities and IVIS approach for 2022, setting out expectations of its members to issues including climate change and diversity:
- Climate change: Companies are expected to take immediate action on climate change and the transition to net zero and will amber top companies that do make disclosures against all four pillars of TCFD. Directors should affirm that the financial impact of climate-related matters have been incorporated into company accounts.
- Diversity: Companies are expected to set out their approach to meet the recently announced FTSE Women Leaders Review and Listing Rule targets on gender and diversity. FTSE100 companies that have not met Parker review target on ethnic diversity will be red-topped as will FTSE350 companies where women represent less than one third of the Board.
- Stakeholder engagement: Material stakeholders should be identified and disclosed and companies should decide on the most appropriate mechanism to engage with those stakeholders.
Government publishes policy statement on reform of the prospectus regime
On 1 March 2022, HM Treasury published a policy statement setting out at high level the reforms it intends to make to the UK prospectus regime, following its consultation in July last year. In most areas, the government intends to make the changes it originally proposed in its consultation. Broadly, the changes separate the regulation of admission to trading on a UK regulated market from the regulation of public offers of securities:
- The FCA will be responsible for specifying when a prospectus is required where securities are to be admitted to trading on a UK regulated market, and for making rules covering other matters covered by the UK Prospectus Regulation, including content requirements and requirement for approval prior to publication.
- A prospectus will not be required on an offer to the public. Instead, there will be a general rule that a person must not offer securities to the public, subject to various exemptions
Amendments will be needed to the Financial Services and Markets Act (FSMA) and the FCA’s Prospectus Regulation Rules to implement the reforms. The government will legislate to make the necessary changes “when parliamentary time allows”.
Government publishes response to consultation on wholesale capital markets
HM Treasury has also published its response to the July 2021 consultation on the UK's regime for wholesale capital markets. The government says it will consider further with relevant stakeholders (i) whether to create a new category of trading venue with a more proportionate regulatory framework for SMEs with a sub-£50 million market capitalisation; and (ii) what steps could be taken to facilitate retail investor access to capital markets.
FRC publishes report on corporate governance reporting following Wates Corporate Governance Principles
The Financial Reporting Council (FRC) has published its report on the quality of corporate governance reporting by companies following the Wates Corporate Governance Principles for Large Private Companies. The Wates Principles were developed for use as an appropriate framework by relevant companies disclosing their corporate governance arrangements as required under Part 8 of Schedule 7 to the Large and Medium-sized Companies Regulations 2008. The report notes some positive aspects in the first year of reporting but highlights many areas for improvement, including:
- Disclosure of more detailed information in relation to the application of the principles and discussion of instances and circumstances relating to a given corporate governance practice to show how companies have applied the principles.
- Increased and better use of cross-references to other sections of the annual reports.
Legislation
Economic Crime (Transparency and Enforcement) Bill introduced
On 7 March 2022, the Economic Crime (Transparency and Enforcement) Bill passed the Commons stage, having been introduced one week previously. The Bill provides for the establishment of a beneficial ownership register of overseas entities that own UK property, and makes amendments to unexplained wealth orders and sanctions legislation. Several amendments were made at this stage to “toughen” the Bill, including:
- A reduction in the registration period and transitional period to register overseas entities from 18 months to six months.
- An increase in the availability of criminal penalties under the various offences proposed in the legislation.
- The lowering of the threshold at which a person is defined as a beneficial owner to more than 10% (from 25%) of the shares or voting rights in an entity.
Publications
APAC M&A Outlook 2022
Slaughter and May has produced a report summarising what we are seeing in the M&A markets in China, Australia, Japan, India and ASEAN, with a focus on the hot sectors, growth accelerators, and regulatory themes impacting deal-doing across the region. The report looks back at last year’s APAC M&A activity, and ahead at how we expect 2022 will unfold.