Corporate Update Bulletin - 14 November 2024

8 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

Government announces commencement date for failure to prevent fraud offence and publishes statutory guidance on reasonable procedures

On 6 November 2024, the government announced that the new failure to prevent fraud offence introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023) will come into force on 1 September 2025 (see Legislation below). The new offence is intended to hold large organisations to account if they profit from fraud, meaning that they may be liable if an employee, agent, subsidiary or other “associated person”, commits a fraud intending to benefit the organisation or their clients - although the guidance makes it clear that the intention to benefit the organisation does not have to be the sole or dominant motivation for the fraud. 

There will be a defence where the company had reasonable procedures in place to prevent fraud. The long-awaited statutory guidance to organisations (as required by section 204 of ECCTA 2023) was published on the same day. Companies are being nine months (instead of the initially stated six months from publication of guidance) to review and implement procedures. The guidance sets out the framework for what may constitute such reasonable procedures, as well as providing an overview of the offence and how it applies, including some illustrative examples of the offence in different contexts.

FRC launches public consultation on the Stewardship Code 

On 11 November 2024, the Financial Reporting Council (FRC) launched a consultation on proposed significant updates to the UK Stewardship Code 2020. Following the launch of its review of the Stewardship Code and a period of extensive outreach to stakeholders, the FRC has focused on the following themes as the most important topics to consult on: Purpose, Principles, Process and Positioning. The key proposals in the consultation organised around these major themes include:

  • a revised definition of “stewardship” as “the responsible allocation, management and oversight of capital to create long-term sustainable value for clients and beneficiaries”.
  • a streamlined reporting process which reduces reporting burdens by separating policy and activity disclosures.
  • the introduction of targeted Principles for different types of signatories and service providers and a streamlining of the Principles to reduce boilerplate and duplication and focus on the most insightful and valuable reporting.
  • the ability for signatories to cross-reference to information disclosed outside the stewardship report as part of their assessment.

Government publishes consultation on amendments to the media mergers regime 

On 6 November 2024, the Department for Culture, Media and Sport (DCMS) published a consultation on the proposed amendments to the Enterprise Act 2002 in relation to government intervention in media mergers. The proposed amendments would allow for greater scrutiny in the public interest of deals to purchase UK online news publications and news magazines and will build on existing powers which already apply in relation to television, radio and certain print newspapers.

Takeover Panel publishes response statement on the scope of the Takeover Code 

On 6 November 2024, the Code Committee announced the publication of its response statement (RS 2024/1) to PCP 2024/1 setting out amendments to narrow the scope of companies to which the Code applies. Broadly, subject to transitional arrangements that will apply to certain existing companies currently subject to the Code, from 3 February 2025, the Code will apply only to UK-registered companies which are UK-listed or which were previously UK-listed in the two years prior to it being subject to a Code transaction. 

Legislation

ECCTA 2023 – further regulations published

Various secondary legislation to implement various measures of the ECCTA 2023 have been published. These include the following:

Autumn Finance Bill published

On 7 November 2024, HM Treasury published the Finance Bill 2024-5 (the “Bill”) together with an explanatory memorandum. The Bill gives a legislative basis to a number of the fiscal measures contained in the Autumn Budget 2024 including: changes to the main rates of capital gains tax; reforms to the taxation regime for non-UK domiciled individuals; changes to the tax treatment of carried interest; and the introduction of specific tax avoidance measures.

In the Bill, the government also announced new powers for HM Treasury to adopt secondary legislation exempting transactions on the proposed private intermittent securities and capital exchange system (PISCES) platforms from stamp duty and stamp duty reserve tax. This followed a consultation published at the Spring 2024 Budget, which proposed that the PISCES platform be developed using a time limited “financial market infrastructure sandbox” under section 13 of the Financial Services and Markets Act 2023.

Case Law

Topalsson GmBH v Rolls-Royce Motor Cars [2024] EWCA Civ 1330

Court of Appeal considers interplay between a liability cap and set-off, and between the cap and interest on late payments.

The case relates to the application of a liability cap contained in a services agreement and entitlement to interest for late payments under the agreement. The parties, Topalsson and Rolls Royce Motor Cars (RRMC) had entered into a services agreement relating to the design and implementation of software intended to allow RRMC’s prospective customers to configure and see vehicles that they were considering purchasing. There were delays and disputes and RRMC purported to terminate the agreement. Topalsson issued proceedings against RRMC, and RRMC defended the claims and counterclaimed for losses arising out of the termination.

The services agreement allowed RRMC to set off any charges due to Topalsson against, among other things, any amount owed by Topalsson to RRMC under the agreement. The agreement provided that each party may charge simple interest at the Bank of England base rate plus 4% in respect of late payments and that such interest was a substantial remedy for late payment for the purposes of section 8(2) of the Late Payment of Commercial Debts (Interest) Act 1998 and would be the sole remedy available for late payment. The agreement also contained a cap on liability providing that the total liability of either party to the other under the agreement shall be limited in aggregate “for all claims no matter how arising to the amount of €5 million”.

The first issue concerned the sequencing of the set-off and cap: whether the amount due (€8m) was reduced by way of set-off (of €795k) before or after the cap (€5m) applied, i.e. €5m (being €8m minus €795k then capped at €5m) or €4.2m (€8m capped at €5m then reduced by €795k). The Court of Appeal held that, as a matter of construction, the amount was reduced by set-off after the cap was applied (meaning €4.2m was due). The second issue concerned whether contractual interest for late payment fell within the cap. The Court of Appeal held that, based on the drafting and commercial common sense (capping interest in that way would disincentivise payment), the entitlement to interest did not fall within scope of the cap.

This material is provided for general information only. It does not constitute legal or other professional advice.