5 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
PLSA publishes 2024 Stewardship Guide and Voting Guidelines
On 15 February 2024, the Pensions and Lifetime Savings Association (PLSA) published its Stewardship and Voting Guidelines for the 2024 AGM season along with a summary of the voting recommendations in the guidelines. Some of the key areas highlighted in the 2024 guidelines include:
- Cybersecurity: companies should disclose governance and oversight structures to identify and manage cybersecurity risks as well as provide timely reporting of any breaches and response measures. Cybersecurity should also be an active consideration in supplier selection and contract negotiation.
- Artificial intelligence (AI): companies should adhere to any new standards and requirements to promote the safety and security of AI and investors should to consider voting against the re-election of a director if there is evidence of egregious conduct attributable to them around the development and deployment of AI.
- Dual-class share structures: good company behaviour involves adopting single-class structures at IPO or as soon as possible thereafter. In the absence of dual-class share structure sunset clauses, companies should adopt provisions that require periodic approval of them (at least every 7 years).
- Executive remuneration: companies should exercise restraint in making executive pay awards, encouraging investors to evaluate all aspects of a company’s remuneration policy to ensure that it is closely aligned with investors’ interests and is in line with wider workforce policies.
- ESG: investee companies in at-risk sectors should engage with the Taskforce on Nature-related Financial Disclosures on approaches to better integrate the impact on nature into decision-making, as well as on approaches to identify and access biodiversity data.
Enhanced Companies House powers expected to come into force in March 2024
On 14 February 2024, Companies House published a blog post in relation to its new and enhanced powers introduced by the Economic Crime and Transparency Act 2023 (ECCTA 2023) to query and reject information and documents delivered to Companies House and to request supporting evidence in respect of any filing.
As the relevant ECCTA 2023 commencement regulations have not been made yet, the date on which these enhanced powers will come into effect remains subject to change although Companies House expects this to be on 4 March 2024.
Legislation
Regulations relating to the Economic Crime and Corporate Transparency Act 2023 published
On 19 February 2024, draft Economic Crime and Corporate Transparency Act 2023 (Financial Penalty) Regulations 2024 were published, together with a draft Explanatory Memorandum. The draft regulations will introduce the new civil penalties regime under the ECCTA 2023. The new regime will enable Companies House to impose a financial penalty for various Companies Act offences (rather than having to pursue a criminal prosecution via the courts).
On the same date, the Registrar of Companies (Fees) (Amendment) Regulations 2024 and the Registrar of Companies (Fees) (Register of Overseas Entities) Regulations 2024 were laid before Parliament. These Regulations amend various Companies House fees, particularly to reflect the expansion of its role and functions under the ECCTA 2023. For Companies House fees effective from 1 May 2024, see the Companies House list of new fees. It should be noted that the fees have increased significantly.
Case Law
Motoring Organisation Ltd v Spectrum Insurance Services Ltd [2024] EWHC 261 (Comm)
Defendant in breach of contract, fiduciary duties and confidence for exploiting a business opportunity presented to it as part of merger talks
The claimant (“TMO”) brought claims under several headings against the defendant (“Spectrum”) in relation to Spectrum’s allegedly wrongful exploitation of certain business opportunities sourced by TMO which TMO passed to Spectrum as part of merger talks between them.
TMO alleged there was an agreement that the business opportunities presented to Spectrum would remain theirs and Spectrum would only profit if a merger between them was completed. This was disputed by Spectrum which argued that there was no agreement on the basis of the lack of any written record. In a context where the parties often had unwritten dealings with each other, the judge concluded there was an oral contractual agreement to the effect alleged by TMO which was subsequently breached by Spectrum.
In relation to fiduciary duties, the judge noted that while it was uncommon for fiduciary duties to arise in purely commercial relationships outside of fixed categories (e.g. a partnership) as a commercial party will not usually subordinate their interests to another, in this case the terms of the parties’ oral agreement prevented Spectrum from preferring its own interests over TMO’s. Although parties can trust each other without there being any fiduciary relationship, the judge ruled that a fiduciary relationship existed in a position where one party trusted and confided that the other party would act exclusively in the interests of the first party, as was the case here as a result of the agreement between TMO and Spectrum.
Additionally, there was a breach of confidence by Spectrum as TMO passed the information to Spectrum for its own reasons, not as a mere conduit, and had sufficient interest in it to prevent unauthorised use.
Publications
FRC publishes updated Corporate Governance Code and associated guidance
Slaughter and May has published a briefing looking at the key changes in the recently published final version of the Corporate Governance Code 2024 and accompanying Corporate Governance Code Guidance, and highlights some issues that companies and boards should be thinking about.