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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
HM Treasury publishes outcome of the Investment Research Review
As part of the Mansion House Reforms announced in the Chancellor’s annual Mansion House speech, HM Treasury has published a report setting out the outcome of the UK Investment Research Review (led by Rachel Kent). The report makes a series of recommendations for the government, the FCA and the industry to improve the UK market for investment research in order to boost the level of attractiveness of the UK as a listing destination. Recommendations include:
- introducing a Research Platform to help generate research
- allowing additional optionality for paying for investment research
- allowing greater access to investment research for retail investors
- involving academic institutions in supporting investment research initiatives
- supporting issuer-sponsored research by implementing a code of conduct
- clarifying aspects of the UK regulatory regime for investment research and considering introducing a bespoke regime; and
- reviewing the rules relating to investment research in the context of IPOs.
The FCA published a statement welcoming the report and the Chancellor has accepted all the recommendations made by the report.
Digitisation Taskforce publishes interim report
The Digitisation Taskforce, established by the government to work with stakeholders across the financial services sector to drive the full digitisation of UK shareholding ownership framework and improve the UK’s intermediated system of share ownership, has published an interim report and terms of reference setting out its initial recommendations, backgrounds and objectives.
The Taskforce will engage with stakeholders over the next six months, ahead of delivering the final report to Government. Feedback on the interim report should be sent to digitisationtaskforce@hmtreasury.gov.uk by 25 September 2023.
FRC launches call for evidence on the IFRS Sustainability Disclosure Standards
The Financial Reporting Council (FRC) has issued a call for evidence regarding IFRS Sustainability Disclosure Standards in the UK. The call is seeking views from stakeholders with an interest in sustainability reporting on the application of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, published in June 2023 by the International Sustainability Standards Board. These prescribe an entity’s disclosure obligations regarding sustainability and climate-related risks.
Responses should be submitted by 11 October 2023.
Government publishes annual review of the UK financial services sector
HM Treasury and the City of London Corporation have jointly published the State of the sector: annual review of UK financial services 2023. This is the second annual report on the attractiveness and international competitiveness of UK financial services, recommended as part of Lord Hill’s UK Listing Review in 2021.
The report (prepared based on data analysis and industry engagement) monitors and comments on the UK’s position in comparison with other major economies focusing on a number of individual themes and summarises key government work already under way and future workstreams and priorities with respect to each of those themes.
Companies House publishes its annual Business Plan
Companies House has published its Business Plan: 2023-24 to outline how it will achieve its goals as set out in the Companies House Strategy 2020-2025. The Plan highlights priorities for Companies House in the upcoming year, which include implementing the next phase of the Register of Overseas Entities, sharing more data with partners to help tackle economic crime, and the implementation of more secure identity verification. The Plan is to be supported with new legislation, either to be secured or which has been already brought in.
Cabinet Office publishes annual report on the NSIA 2021 regime
On 11 July 2023, the government published its Annual Report 2023 on the National Security and Investments Act (NSIA) 2021. The Report is an annual statutory requirement under the NSIA to aid understanding and transparency of the implementation of the regime.
The Report stated that the vast majority (93%) of notifications in the past year were cleared within 30 days. 866 notifications were received in total, of which 65 transactions were reviewed for further assessment. Ultimately the government intervened on 15 occasions on national security grounds by issuing final orders to block, unwind or impose conditions on acquisitions.
FCA publishes further engagement papers on the new regime for public offers and admissions to trading
Having published four engagement papers regarding the new regime for public offers and admissions to trading on UK public markets as part of the government’s proposed reform of the UK prospectus regime, the Financial Conduct Authority (FCA) has published two additional new engagement papers on its website regarding new rules for the new regulated activity of operating a public offer platform and primary multilateral trading facilities. The deadline for responses is 29 September 2023.
FCA publishes guidance on issuer sanctions
The FCA has published new guidance on confirmations required from issuers before it can begin work on a vetting, guidance or listing application request that they are not affected by certain sanctions. Issuers are required to confirm that the do not fall within The Russia (Sanctions) (EU Exit) Regulations 2019 SI 2019/855 and The Republic of Belarus (Sanctions) (EU Exit) Regulations 2019 SI 2019/600 (the Regulations).
These sanctions restrict access to the capital markets and dealing with transferable securities in Russia and Belarus. Russia has additional restrictions on providing professional and business services that limit, directly or indirectly, a number of functions such as auditing.
The Office of Financial Sanctions Implementation has also published detailed guidance regarding financial and investment restrictions for Russia and Belarus.
FCA consults on application of financial promotions regime to social media
The FCA has launched a consultation on updating its 2015 guidance on how its financial promotion requirements apply to promotions on social media. The guidance covers obligations under the new Consumer Duty, which comes into force on 31 July 2023, as well as additional clarity on when a communication might constitute a financial promotion (such as for social media influencers).
Responses should be received by 11 September 2023 and the FCA intends to publish final guidance later in 2023.
FRC Lab publishes report on ESG data use and consumption
The Financial Reporting Council (FRC) Lab has published a new report entitled “ESG Data Distribution and Consumption” on how investors obtain and use environmental, social and governance (ESG) data, and what companies can do to facilitate this. It is based on 90 interviews with a wide range of participants including companies, data and rating providers, and consultants and academics, and a supplementary survey of 30 investors.
The report recommends nine actions for companies to facilitate how investors and data providers consumer ESG data. These include aligning the timing of ESG reporting as much as possible to that of the annual report, being clear on the scope of the data and focusing on what is relevant to the company in the annual report and providing further detail in datasheets.
LEGISLATION
Draft Companies (Strategic Report and Directors’ Report) (Amendment) Regulations 2023 published
The government has published draft Companies (Strategic Report and Directors' Report) (Amendment) Regulations 2023, accompanying draft Explanatory Memorandum and guidance. The Regulations introduce new reporting requirements in line with the government’s proposals set out in its response to the BEIS consultation paper on restoring trust in audit and corporate governance.
The draft Regulations amend Part 15 of the Companies Act 2006 for companies “with a high level of employees and turnover” (i.e. have at least 750 employees and an annual turnover of £750 million or more in relation to a financial year) and require them to prepare and disclose the following:
- Annual resilience statement: explaining how they are managing significant risks, and building or maintaining resilience.
- Triennial audit and assurance policy statement: explaining how the company assures the quality and reliability of its corporate reporting.
- Annual distribution policy statement: demonstrating that they have enough realised profits to pay any dividend (or make any other distribution of profit), and explain the company’s approach to making dividends and other profit distributions over the short and medium term.
- Annual material fraud statement: describing the actions taken by the directors to prevent or detect major fraud.
The FRC has welcomed the new draft requirements, and will aim to publish draft guidance for consultation by the end of 2023 or early 2024. The Regulations were laid before Parliament on 19 July 2023 and are expected to go through the affirmative procedure in the Autumn. If approved, the Regulations will have effect for listed companies, in respect of each financial year commencing on or after 1 January 2025, and for other in-scope companies, in respect of each financial year commencing on or after 1 January 2026.
Government publishes draft SI and policy note on Public Offers and Admissions to Trading Regulations 2023
The government has published a near-final version of the statutory instrument and explanatory policy note outlining the new Public Offers and Admissions to Trading Regime. This statutory instrument, which forms a key recommendation of Lord Hill’s UK Listing Review, replaces retained EU law related to the prospectus regime and creates a new regulatory framework for public offers and admissions to trading. The government welcomes any technical comments on the draft statutory instrument by 21 August 2023.
Finance (No. 2) Bill receives Royal Assent
On 11 July 2023, the Finance (No. 2) Bill 2023, also known as the Spring Finance Bill 2023, received Royal Assent. The Act contains extensive legislation for implementing the measures announced in the Spring Budget 2023, including the full expensing of capital allowances, research and development measures and multinational top-up tax.