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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
FRC publishes Three Year Plan and Budget 2022-2025
The Financial Reporting Council (FRC) has published its draft Three Year Plan and Budget 2022-2025, which sets out the FRC’s priorities and expected expenditure for 2022-2023 as well as its overall costs and headcount growth for 2023-2025. The plan is presented in the context of the government’s reform proposals as set out in the BEIS White Paper: consultation on restoring trust in audit and corporate governance, which would grant FRC additional regulatory powers and funding as the new Audit, Reporting and Governance Authority (ARGA).
Treasury confirms that most cryptoassets to be regulated by the financial promotion regime
On 18 January 2022, HM Treasury published a response to its consultation on cryptoasset promotions, which sought views on expanding the remit of the financial promotion regime to include certain cryptoassets. The government confirms that it will amend the Financial Promotion Order 2005 (FPO 2005) to include “qualifying cryptoassets” within the list of controlled investments. This will include any cryptographically secured digital representation of value or contractual rights which is fungible and transferable, but will not include electronic money and central bank currencies. The government has not yet indicated a timeframe for publishing draft legislation, but has indicated that there will be a six month transition period after publication of an amended FPO 2005.
FCA launches consultation on strengthening financial promotion rules for high-risk investments (including cryptoassets)
Following the response above, the Financial Conduct Authority (FCA) has also published a new Consultation Paper outlining proposals to strengthen financial promotion rules for high-risk investments, and for authorised firms that approve financial promotions. The FCA is proposing a distinct “Restricted Mass Market Investments” category for high risk investments (which would include qualifying cryptoassets and unlisted shares and bonds). This is aimed at ensuring that investments with similar characteristics are treated in the same way under the financial promotion rules. The FCA is intending to finalise the rules in mid-2022, with authorised firms then having three months from publication of the final rules to comply.
Legislation
Climate-related Financial Disclosure Regulations 2022 made
On 17 January 2022, the following (and long-trailed) regulations which require in-scope companies and LLPs to disclose climate-related financial information in line with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) were made:
- Limited Liability Partnerships (Climate-related Financial Disclosure) Regulations 2022
- Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022
These regulations will come into force on 6 April 2022 and apply to accounting periods starting on or after that date.
Market Insights
Activistmonitor publishes report on key trends in investor activism in Europe
Activistmonitor has published Activist Investing in Europe 2022, which sets outs key trends in Europe’s activist investing space based on a survey of listed companies’ executives and activist investors from across Europe.
Case Law
Court of Appeal strikes out certain matters pleaded in an unfair prejudice petition relating to personal actions of a party
In this case, the appellant majority shareholders had appealed against a High Court decision refusing to strike out certain paragraphs of a statement of case in an unfair prejudice petition under section 994 of the Companies Act 2006 brought by the respondent minority shareholders. The paragraphs in question contained allegations that the majority shareholders had pursued a campaign against the minority to obtain their shares as cheaply as possible and to exclude them from the company’s business. In holding for the appellants, the Court of Appeal held that the paragraphs in question could not, in themselves, fall within the scope of section 994, as there must be a causal connection between the personal actions of a shareholder or third party and some other act or omission constituting conduct of the company’s affairs in order for such matters to be pleaded in an unfair prejudice petition.
Publications
Listed Companies: What to Expect in 2022
Slaughter and May has published a briefing, in two parts, considering the developments expected this year that will affect the rules and expectations around listed companies. The first part focuses on expected developments in capital markets, with particular focus on secondary fundraisings; possible changes to the listing segments and FCA rules for listed companies; and developments relating to financial reporting, including expected audit reform.
The second part focuses on non-financial reporting, including disclosure of climate-related information aligned with the TCFD framework, diversity on boards and other climate change and ESG developments.