Listed company update I

This update summarises the major developments in UK corporate law and regulation for listed companies.

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July 2014

Annual report, strategic report and narrative reporting

The requirement for companies to prepare a strategic report as part of their annual report was introduced in October 2013 and companies have been reporting under the new regulations during 2014.   Whilst much of the content of the new requirements was already contained in annual reports in some form, we have seen a wide variety of practice in presenting the information, suggesting that perhaps there has been some confusion around their application.  However, in June 2014 the FRC issued some helpful guidance on the strategic report, designed to encourage those who prepare annual reports to consider how the strategic report fits within the annual report as a whole.   The guidance is available on the FRC website. 

Directors' remuneration reporting and AGMs

Shareholders have been giving their reactions to the ‘new style' remuneration reports during the 2014 AGM season.  Several companies have seen significant votes against their implementation reports, policy reports or both and  next year's implementation reports will need to include a summary of the reasons for any significant votes against, as well as any actions taken by the directors in response to those concerns. 

Smaller listed and AIM company reporting

The Financial Reporting Council has outlined a project aimed at improving corporate reporting in the AIM and small cap sector, in response to concerns about the quality of reporting.  The project aims to achieve, over a three year period and in three phases, a step change in the quality of reporting in this sector.  Jordans will be contributing to this project.


During 2014 both the Davies Review steering board and Cranfield School of Management published reports on progress in implementing the recommendations in the 2011 Davies Report Women on Boards.   Both reports note that three years on, there has been continued progress towards meeting the target set by Lord Davies of at least 25% of board positions in FTSE 100 companies be held by women by 2015.  However, most of the improvements come from an increase in non-executive Director appointments and so the focus should now move to increasing the number of women executive directors.  Separately, the Business Secretary has welcomed the launch of an Enhanced Code of Conduct for executive search firms to support more women appointments to FTSE 350 boards.

Listing Rule changes

The amendments arising from the rule changes published by the FCA in May 2014 relate to annual report disclosure requirements, related party transactions and the listing principles.  However, the main area of change was to introduce better protection for minority shareholders in premium listed companies with a controlling shareholder (exercising  or controlling 30% or more of the voting rights in the listed company).  Affected companies must put in place a relationship agreement with their controlling shareholder(s) and the election or re-election of independent directors must in future be approved via a two-tier voting structure: by the shareholders as a whole and by a majority of the independent shareholders.  The practicalities of this requirement are yet to be tested by companies and their registrars.

AIM Rule changes

In May 2014 the London Stock Exchange published amendments to its AIM rules for companies and for their nominated advisers.   The changes relate to the disclosure of price sensitive information, statements in admission documents and disclosure on company websites.

UK Corporate Governance Code changes

In April 2014 the FRC announced a consultation on changes to the UK Corporate Governance Code relating to directors' remuneration, AGM voting, risk management, internal control and going concern, along with the location of corporate governance disclosures.  If the proposed changes are implemented, they will apply to financial years beginning on or after 10 October 2014.

Role and contribution of the Company Secretary

The Institute of Chartered Secretaries and Administrators (ICSA) has conducted a collaborative survey with Henley Business School looking at the changing, and at times contradictory, role of the Company Secretary.  The study suggests that the role is changing and the increased focus on corporate governance has raised the profile and visibility of the Company Secretary, who has become the primary point of information and influence between the executive management and the board.  A copy of the study's findings can be found on the ICSA website.

Audit tendering

A package of regulations relating to EU audit reform was published in May 2014.  The regulations will apply in member states from 17 June 2016 and include, inter alia, the mandatory rotation of auditors  every 10 years, restrictions on the provision of non-audit services by audit firms to existing clients, and the prohibition of ‘big four' terms in agreements. 

Market abuse

In June 2014 the new Market Abuse Regulation (MAR) was published.   MAR will change the market abuse and inside information regime in EU countries and will take effect from July 2016.  Key implications for listed companies include an EU-wide harmonised format for insider lists, an expansion of behaviours subject to the regime and enhanced PDMR disclosures. 

ICSA Registrars Group – guidance on dividend payments and articles of association

In April 2014 the ICSA Registrars Group published a guidance note and model articles of association in relation to the payment of dividends.  With the prospect of new payment channels becoming available such as mobile phone payments, and the possibility of traditional methods such as cheques being phased out, the ICSA Registrars Group is encouraging companies to ensure that their articles of association are sufficiently flexible to adopt new payment methods as and when they become available. 

Updated dividend procedure timetable

The London Stock Exchanges has published an updated 2014 dividend procedure timetable, to reflect the reduction of the standard securities trading settlement period from T+3 to T+2 with effect from 6 October 2014. This means that ex dividend dates will move to Thursdays with record dates remaining as Fridays.  The updated timetable can be found on the Stock Exchange website.

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