9 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
FCA publishes final rules on reforms to the UK listing regime
On 11 July 2024, the Financial Conduct Authority (FCA) announced the publication of Policy Statement PS24/6 setting out the final rules for a new and simplified UK listing regime, which will come into force on 29 July 2024. The much-trailed reforms (the proposals of which were set out in CP23/31 published in December 2023) represent one of the most significant overhaul of the UK listing regime in decades. Under the new regime, the premium and standard segments will be collapsed into a single segment for equity shares of commercial companies (“ESCC”) whose rules will be based mainly on the current premium segment rules. The reforms will result in a disclosure-based approach to significant transactions, with no shareholder approval required for Class 1 transactions and no mandatory announcement requirements for Class 2 transactions.
In response to feedback, there are some changes from the initial proposals set out in CP23/31 including the following:
- Significant transactions: There will be more flexibility for ESCC companies on the timing and content of the disclosures that will be required for significant transactions – for significant acquisitions, shareholders will need to be informed of certain information as soon as possible once terms are agreed, but certain further information will only need to disclosed later (by no later than completion).
- Controlling shareholders: Companies are still required to be independent from any controlling shareholder. However, rather than relying on a formal written agreement between issuers and controlling shareholders, this requirement will be addressed through a disclosure-based approach. Directors will be required to give their opinions on resolutions proposed by a controlling shareholder when a director considers the resolution is intended to circumvent the proper application of the listing rules.
- Dual class share structures: Institutional investors (i.e. legal persons, and not just natural persons) will be allowed to hold enhanced voting rights under DCSS structures, subject to a 10-year sunset period.
FTSE Russell has indicated that ESCC companies will be eligible for inclusion in the FTSE UK Index Series although standard listed companies, which will be mapped to the Secondary Listing category or Transition category, will not be eligible. An applicant for the admission of securities that has made a complete submission to the FCA for an eligibility review for listing by 4:00pm on 11 July 2024 will (where the securities have not been admitted to listing prior to 29 July 2024) be treated as an ‘in-flight applicant’. Any new submissions after 4:00 pm will need to be submitted according to the proposed new requirements.
United Kingdom ratifies the 2019 Hague Convention
On 27 June 2024, the UK ratified the Hague Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters. The Convention establishes common rules on the recognition and enforcement of judgments between its signatory states. There are currently 30 signatories, including the EU Member States (other than Denmark) and Ukraine. The Government response to a consultation on the matter was published on 23 November 2023. The Convention will enter into force on 1 July 2025 and apply to applications to register judgments lodged on or after that date.
Department of Business and Trade launches consultation on the deregulation of the Commercial Agents (Council Directive) Regulations 1993
On 2 July 2024, the Department of Business and Trade (DBT) launched an open consultation on its proposal to deregulate the Commercial Agents (Council Directive) Regulations 1993, which is an EU-derived legislation that gives “commercial agents” (defined as a self-employed intermediary who has continuing authority to negotiate and/or conclude contracts for the sale or purchase of goods (not services – although gods include software) on behalf of the principal) certain rights which cannot be excluded in the agency contract.
The Regulations propose to bring in legislation to prevent new commercial agents (as defined) from being created in the future, with the aim of returning to the pre-1993 position when contracts were negotiated on an individual basis within the context of agency. However, commercial agents in existing agreements will retain their rights under the Regulations even under these proposals. The proposals are framed as part of the government’s deregulatory push following Brexit, although whether the new government will continue with this agenda following the general election is unclear. The consultation is open until 1 August 2024.
Legislation
Directive (EU) 2024/1760 on corporate sustainability due diligence published in the Official Journal
On 5 July 2024, Directive (EU) 2024/1760 on corporate sustainability due diligence was published in the Official Journal of the EU. The Directive will enter into force on 25 July 2024, although Member States will have two years to implement the Directive. The Directive will apply on a gradual phased basis over a three year period.
The much-publicised Directive introduces obligations on in-scope companies (which includes non-EU companies with an EU nexus if they meet certain thresholds) to take measures to address potential and actual adverse environmental and human rights impacts (“adverse impacts”) within their operations, their subsidiaries' operations, and across their entire “chain of activities”. Companies are required to integrate due diligence measures into their policies and risk management systems to identify and address adverse impacts, as well as take appropriate measures to prevent, mitigate and remedy adverse impacts, depending on the company’s proximity to the actual or potential adverse impact. The Directive also includes a requirement on companies to adopt a transition plan for climate change mitigation.
Case law
Cantor Fitzgerald & Co v Yes Bank Ltd [2024] EWCA Civ 695
Court of Appeal interprets “private” to qualify the entirety of a list of nouns in an engagement letter
This case focused on the terms set out in a corporate finance engagement letter between Cantor Fitzgerald & Co (a US broker-dealer and investment bank) and YES Bank, under which Cantor was appointed to help raise equity financing for YES Bank in return for a retainer and commission on sums raised.
The Court of Appeal considered whether the word “private” in the phrase “private placement, offering or other sale of equity instruments” only qualified “placement” or whether it also qualified “offering or other sale of equity instruments”. The interpretation of that one word would determine whether the engagement letter applied to public offers. Lady Justice Falk decided that while there is no grammatical rule that applies, a “reader will naturally tend to assume than an adjective or determiner at the start of a list qualifies the entirety of it”. The Court found that the whole list was qualified by the preceding word “private” and Cantor was therefore not entitled to be paid commission on amounts subscribed by investors in a follow-on public offer. The judgment also referenced the contractual context, which supported this conclusion. The case demonstrates the need to check the use of qualifying terms in lists and to ensure the drafting is as clear as possible.
In the matter of The Lakes Distillery Company PLC [2024] EWHC 1535 (Ch)
Court approves takeover scheme where directors’ interests were inadequately disclosed
The High Court approved a scheme of arrangement to effect the takeover of an unlisted public company although the judge considered that the explanatory statement (in the scheme circular) required under section 897 of the Companies Act 2006 did not adequately disclose the company directors' interests in convertible loan notes (CLNs) that were repayable at a 100% premium on a change of control. Ultimately the Court decided that the holders of the CLNs did not need to be treated as a separate class and that, in “exceptional” circumstances (as was the case here), no further meeting or supplementary circular was required, but warned against disclosure that, although in line with “market convention”, was not tailored in both format and content to the specific context of the particular scheme.
Tom v Candey & Ors (Re Candey Ltd and Companies Act 2006) [2024] EWHC 1398 (Ch)
High Court considers the limitation period that is applicable to unfair prejudice petitions
The case concerned an unfair prejudice petition brought by a director of a company who claimed the affairs of the company had been conducted in a manner unfairly prejudicial to his interests as a member, which led to his resignation. The respondents brought an application for the court to strike out the claim or enter summary judgment on the basis that too much time had passed and the claim had become time-barred. The High Court dismissed the respondents’ argument and drew attention to the key factor that the relief sought – an order for the respondents to purchase the petitioner’s shares – was non-monetary relief. A 12 year limitation period under section 8 of the Limitation Act 1980 therefore applied to the petition. In coming to this decision, the Court applied the Court of Appeal's recent decision in THG plc v Zedra Trust Co (Jersey) Ltd [2024] EWCA Civ 158.
Publications
Money Laundering: Now a Never-ending Chain? – R (World Uyghur Congress) v National Crime Agency
Slaughter and May has published a briefing on the recent Court of Appeal decision in R (World Uyghur Congress) v National Crime Agency [2024] EWCA Civ 715 where the Court disagreed with the widely-held interpretation that, where adequate consideration has been given on a property, there can be no concurrent or subsequent money laundering offences in relation to that property under the Proceeds of Crime Act 2002. The case may be of general interest given its potentially wide-ranging implications for businesses and the management of risks in their supply chains.
Podcast: A Labour Government – Will It ‘Make Work Pay’?
Slaughter and May has released a podcast discussing Labour’s planned reforms to employment law including, for example, day 1 employment rights, anti-strike laws and flexible-working rights, and the steps that employers can take to prepare for these changes.