6 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
New UK listing regime comes into force
On 29 July 2024, reforms to the UK listing regime and final UK Listing Rules (contained in the FCA’s new UKLR sourcebook, which replaced the old Listing Rules sourcebook) came into force. For an overview and summary of the changes, see our earlier client briefing.
FCA publishes consultations on the new Public Offers and Admission to Trading Regulations (POATRs) regime
On 26 July 2024, the Financial Conduct Authority (FCA) published two consultation papers on aspects of the new regime for public offers and admissions to trading under the Public Offers and Admissions to Trading Regulations 2024:
- a consultation (CP 24/12) on the proposed rules relating to the requirement for a prospectus where a company is applying to admit its securities to trading on a UK market and related matters (including content requirements).
- a consultation (CP 24/13) on proposed rules that will apply to an operator of a public offer platform (that will allow firms to facilitate companies making public offers of securities to investors outside public markets when raising more than £5m).
While many of the existing rules relating to prospectuses and admissions to trading will be carried across into the regime, the FCA is proposing to make changes in a few areas to address problems identified in Lord Hill’s Review of the Listing Regime and in the Secondary Capital-Raising Review. Some key changes proposed in CP 24/12 which relate to equity issuers include:
- for secondary fundraisings, raising the threshold for triggering the need for a prospectus from the current 20% of existing share capital to 75%;
- more relaxed requirements in relation to the content and format of the prospectus summary, the possibility of allowing issuers to disclose significant judgements made in preparing the working capital statement, and a requirement to include additional information about an issuer’s management of relevant climate-related risks and opportunities where the issuer has identified climate-related risks as risk factors, or climate-related opportunities as material to its prospects;
- providing a higher liability threshold for certain forward-looking statements that satisfy specified criteria and labelling requirements (protected forward looking statements).
Under CP 24/13, it is proposed that operating a public offer platform will be a regulated activity. An operator of a public offer platform will have to obtain and verify certain information from an issuer, and investors will need to be provided with certain information on the issuer and the offer, as well as a summary in a prescribed format.
Comments on both consultations must be submitted by 18 October 2024, with the FCA aiming to finalise the rules for the whole regime by the end of the first half of 2025. See ‘Publications’ below for our briefings containing further details of the proposed changes, including those relating to debt capital markets.
Private Equity Reporting Group and BVCA launch consultation on updating the Walker Guidelines
On 31 July, the British Private Equity and Venture Capital Association (BVCA) and Private Equity Reporting Group (PERG) published a consultation outlining the options to update the Walker Guidelines, created to increase transparency and public understanding of the performance and activities of large private equity-backed businesses.
The review aims to ensure that the original objective of the Guidelines to support external stakeholders’ understanding of the industry through enhanced transparency of the large businesses backed by private equity is still being achieved and therefore covers both the scope and specific requirements of the Guidelines. Good practice relating to narrative reporting will be benchmarked against constituents of the FTSE 250 (which is deemed to be the most appropriate benchmark). Responses are due by 30 September 2024, following which BVCA and PERG expect to publish a feedback statement in Autumn/early Winter. The final amended Guidelines are expected to be published in January 2025.
Competition and Markets Authority launches consultations on guidance relating to Digital Markets, Competition and Consumers Act
The Competition and Markets Authority (CMA) has announced two consultations. The first consultation (published 31 July 2024) relates to draft guidance and rules for the exercise of the CMA’s new direct consumer enforcement powers under the Digital Markets, Competition and Consumers Act 2024 (DMCCA). These new powers include enabling the CMA to address infringements of consumer protection laws, breaches of undertakings and direct enforcement directions, providing false or misleading information to the CMA, and non-compliance with statutory information notices. The consultation closes on 11 September 2024.
The second (published 1 August 2024) is an open consultation on a package of six draft guidance documents on the mergers regime, which have been updated to reflect current practice, and the reforms to the mergers regime implemented under the DMCCA. The consultation closes on 12 September 2024.
Government consults on turnover and control regulations under the DMCCA
On 30 July 2024, the Department for Business and Trade (DBT) announced a consultation to the draft legislation setting out (i) how turnover should be estimated or calculated and (ii) the circumstances in which a person is considered to have control over an enterprise, for the purposes of determining whether a business should be designated as having Strategic Market Status or to determine the maximum for penalties for breaches under the DMCCA. The consultation will conclude on 10 September 2024.
Financial Reporting Council publishes Annual Enforcement Review 2024
On 25 July 2024, the Financial Reporting Council (FRC) published its Annual Enforcement Review for the year ended 31 March 2024. The report states that the FRC has 35 current investigations and that it had imposed financial sanctions of £48.2 million over the year (before settlement discount). The report includes themes and lessons learned from concluded cases and highlights recurring themes in current audit investigations including objectivity and integrity, lack of professional scepticism, ongoing failures to obtain sufficient audit evidence and audit documentation, audit planning, and issues with going concern assessments, revenue recognition and risk of fraud.
FRC consults on guidance on going concern basis of accounting
On 5 August 2024, the FRC announced a consultation on revisions to its Guidance: Going Concern Basis of Accounting and Related Reporting, which will replace the existing 2016 guidance once finalised. The guidance, which is non-mandatory, is being updated to reflect recent developments in the corporate reporting framework and evolving practice in response to economic and operational uncertainties such as geopolitical conflicts, as well as high-profile UK corporate failures. The new edition will provide guidance for all UK companies within scope, which includes listed companies that apply the UK Corporate Governance Code, but excludes small companies and micro-entities. The consultation closes on 28 October 2024, with final guidance expected in early 2025.
Publications
New public offer and admissions to trading regime: FCA publishes further details
Slaughter and May has published two briefings on the new public offers and admissions to trading regime which will replace the current UK prospectus regime next year. The first sets out key highlights for equity capital markets and the second for debt capital markets. Dovetailing with recent reforms to the UK listing regime, the FCA’s proposals aim to reduce the costs of listing on UK markets, make capital raising easier on UK listed markets and remove barriers to retail participation.