Corporate Update Bulletin - 5 September 2024

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
• Case Law

NEWS

FRC publishes discussion paper on Future of Digital Reporting in the UK

On 13 August 2024, the Financial Reporting Council (FRC) published a discussion paper on the Future of Digital Reporting in the UK. The paper addresses changes in the regulatory landscape on digital reporting and considers the impact of the recently passed Economic Crime and Corporate Transparency Act 2023, with the aim of seeking feedback from stakeholders on those developments to help shape the future of digital reporting in the UK. The FRC requests responses by 1 November 2024 although no specific decisions will be taken as a result of the paper.

FCA consults on changes to the National Storage Mechanism

On 9 August 2024, the Financial Conduct Authority (FCA) published a consultation paper (CP24/17) on changing the National Storage Mechanism’s (NSM) (the FCA’s free-to-use online archive of information relating to issuers) data requirements for regulated information disclosed in accordance with the Disclosure Guidance and Transparency Rules. Under the proposed new rules, when an issuer is required to file regulated information, it will have to include in the announcement not only its own name and legal entity identifier (LEI) but also the name and LEI of any other issuer that is the subject of the announcement. The issuer will also have to include the relevant headline information from the list (which the FCA is proposing to update) in DTR 8, but will no longer have to classify the regulated information using the classes and sub-classes in DTR 6 Annex 1R (which will be deleted).

The FCA is also proposing to amend the interface through which PIPs transmit regulated information to the NSM. The consultation ends on 27 September 2024. The FCA plans to publish final rules during 2024 and to implement the new requirements in the second half of 2025.

FRC reports on quality of reporting under the Wates Principles

The FRC has published a second report on the quality of corporate governance reporting by private companies following the introduction of the  Wates Corporate Governance Principles for Large Private Companies in 2018 aimed at supporting large private companies in meeting their obligation to report their corporate governance arrangements under the Companies (Miscellaneous Reporting) Regulations 2018. The second report is based on the 2021/22 statements of companies within the scope of the Regulations that did provide a corporate governance statement. The report found that:

• the Wates Principles continue to be the most widely adopted corporate governance code among large private companies, with 30% of companies within scope choosing to apply the Wates Principles in 2021/22.
• Although improvements were made in certain areas of disclosure compared to 2019/20, there continues to be an over-reliance by companies on 'boilerplate' disclosures and a need to foster a disclosure approach which explicitly links a company’s purpose, strategy, culture, and values to its board’s activities and the context in which it operates.

Companies House publishes 2024/25 business plan

Companies House has published its business plan which includes an outline of what it plans to deliver in relation to the Economic Crime and Corporate Transparency Act 2023 from April 2024 to March 2025. Amongst other plans, Companies House will prioritise cleaning up existing information on registers and will introduce the ACSP registration process for third party agents. It also plans to have the technical capability to verify individual’s identity by the end of March 2025 (with a phased roll out of the identity verification regime by Spring 2025 and beyond).

QCA publishes report on proxy advisers

The Quoted Companies Alliance (QCA) (which represents small and mid-sized publicly traded companies) has published a report on the influential role of proxy advisers in making voting recommendations to investors and highlighting the significant challenges QCA member companies face due to the actions of the proxy advisers, and in particular the lack of engagement between such advisors and companies. Key findings include:

• More than half of companies have less than 48 hours to review, challenge or correct voting recommendations published about them by proxy advisers before they are circulated to shareholders.
• Over three-quarters of companies that queried a voting recommendation found proxy advisers to be unresponsive.
• Over half of companies that try to engage with proxy advisers outside the AGM season have found them to be unreceptive.

Takeover Panel increases PTM levy rate

The Takeover Panel has announced the increase in the PTM levy rate from 100p to 150p per contract for trades exceeding £10,000, effective from 2 December 2024. The PTM levy is payable on trades in securities by shareholders who benefit from the protections afforded by the Takeover Code.

CASE LAW

Bland & Anor v Keegan [2024] EWCA Civ 934

Court considers reliance which can be placed upon entries in the register of members when determining the validity of a written resolution

In this case, the Court of Appeal considered the reliance that can be placed upon the entries in a company's register of members in the context of voting on members' written resolutions.

50% of the shares in a company (JDK Construction Ltd) held by the Appellant had purportedly been transferred to the other 50% shareholder (JK) by a stock transfer form executed by JK but unauthorised by the Appellant. JK, purporting to act as sole shareholder, subsequently signed a written resolution for the voluntary winding up of the company and appointment of joint liquidators. The company and the Appellant challenged the validity of the appointment. The High Court had held, at first instance, that the register of members was "conclusive" as to the identity of the members of the company at any particular point in time, even if the register was liable to be rectified on the basis that the stock transfer form was forged and of no effect. As the register would have shown JK as the sole member of the company at the time of the resolution, the resolution was valid and effective.

On appeal, although the Court of Appeal disagreed with the first instance conclusion that the register of members is "conclusive" evidence as to the identity of the members of company, the Court held that except where express provision is made to the contrary, unless and until an order for rectification was made, the person on the register of members at the relevant time is the member to the exclusion of any other person for purposes of determining the validity of the resolution. Accordingly, the trial judge was right to rely on the presumed state of the register in determining the resolution to be valid and effective.