Listed company update IV

This update summarises the major developments in UK corporate law and regulation for listed companies since our last update in February 2015.

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2015 AGM season – a reminder

Company Secretaries and their advisers were faced with a range of new requirements in annual reporting and AGM approvals last year. As we noted in our February update, the good news for this year is that this season is more settled for companies, with no major changes to grapple with. Please see our February update for a reminder of the minor changes introduced this season.

PIRC 2015 shareholder voting guidelines

PIRC has published its latest edition of its voting guidelines. PIRC is an independent advisor to institutional investors in listed companies and the guidelines reflect PIRC's interpretation of good corporate governance.

Pre-Emption Group Statement of Principles

The Pre-Emption Group has issued a revised version of its Statement of Principles, replacing the previous version issued in 2008, providing guidance to companies and shareholders on the factors to take into account when dis-applying pre-emption rights. Companies are encouraged to use the revised Statement with immediate effect, but the Group recognises that this may not be practical given that some companies may be in the final stages of their AGM preparations. No changes have been made to the key thresholds for general disapplication of pre-emption rights, but there are a number of clarifications in the guidance. The statement can be found here.

BIS research paper on Directors' remuneration

BIS has published a research paper on how companies and shareholders have responded to the new reporting and governance requirements for directors' remuneration. Most of the companies sampled complied with the majority of the requirements, although compliance in some areas was patchier, such as disclosures around pension entitlements, payments to past directors and future salary policy.

ICSA good practice guidance on annual reports

The ICSA has published useful guidance on best practice/contents of annual reports. The guidance sets out what the ICSA believes to be the features of the best annual reports and gives examples of companies that have demonstrated good corporate reporting. Both publications can be downloaded from the ICSA website: Good practice for annual reports 2015 and Contents list for the annual report of a uk company.

ICSA clarification on UK Corporate Governance Code provision E.2.4

The ICSA has published guidance on the 2014 edition of the UK Corporate Governance Code (the ‘Code') to clarify provision E.2.4 in relation to notice of meetings. Provision E.2.4 states that companies should arrange for notices of the AGM to be sent to shareholders at least 20 working days before the meeting. The 2014 edition of the Code also includes a new requirement that "for other general meetings, this should be at least 14 working days in advance". The Companies Act 2006 (the ‘Act') states that an annual general meeting of a listed company should be held on not less than 21 clear days' notice and any other meeting on not less than 14 clear days' notice. The ICSA guidance states that the Code recommends earlier publication dates for notices of meetings than the Act and where companies are not able to meet the Code requirement, this should be explained in the next Annual Report in line with other departures from the Code. The guidance can be found here.

FRC to look at ‘comply or explain' disclosures

The FRC has announced that it is planning to monitor the quality of explanations given by companies that choose not to comply with the UK Corporate Governance Code. The objective of the ‘comply or explain' principle is to give companies flexibility and operates on a principles basis rather than relying on strict regulation. The FRC's work will ensure the companies are not just paying lip service to ‘comply or explain', but have instead given proper regard and consideration to the issues before deciding not to comply.

Modern Slavery Act

We reported in our last update that companies of a certain size will be required to prepare an annual slavery and human trafficking statement under the Modern Slavery Bill. The Modern Slavery Act 2015 has now received Royal Assent and will be brought into force on a date still to be determined. Section 54 of the new Act imposes new reporting obligations on listed companies to prepare a ‘slavery and human trafficking statement' for each financial year. This statement should include the steps the company has taken to ensure that slavery and human trafficking is not taking place in any of its supply chains, must be approved by the Board and signed by a director and be published on a company's website. BIS is currently consulting on the financial thresholds applicable and the areas to be covered by statutory guidance. The Modern Slavery Act 2015 can be found on the website.

Market Abuse Regulation

The European Securities and Markets Authority (ESMA) has published its final technical advice on various aspects of the EU Market Abuse Regulation, which is due to come into force in July 2016. The advice covers disclosures that will be required by PDMRs under the new regime and an exemption which allows PDMRs to deal during a close period in exceptional circumstances. The new regime will have an impact particularly on AIM-listed companies, which currently do not have to comply with the same standards as main market companies on PDMR dealings, disclosure of inside information and insider lists. Contact us if you need our help in navigating the new regime.

Amendments to the Listing Rules

The FCA has made various changes to the Listing Rules, Prospectus Rules and Disclosure and Transparency Rules. LR 13.2 was amended with effect from 1 April 2015 such that certain circulars issued by premium listed companies no longer require prior approval by the UKLA. Circulars that still need to be approved before despatch to shareholders include those relating to class 1 transactions, related party transactions, share buybacks of more than 25% of the company's share capital and reconstruction and refinancing transactions.

ISDX growth market – changes to rulebooks

We reported in our February issue that ISDX had launched a market consultation in relation to proposed changes to the ISDX Growth Market Rules for issuers and the ISDX Corporate Adviser Handbook. ISDX has published revised versions of the above publications and they are in substantially the same form as consulted on.

Requests to inspect a company's register of members

The recent Burberry Group plc case has put the spotlight on the requirements around section 116 of the Act regarding the right to inspect and ask for a copy of the company's register of members. Burberry received a s.116 request from a company purporting to trace lost members in listed companies. However, the request did not include all the information which s.116 requires and Burberry considered the request to be invalid. The court held this position and further ruled that the request was not for a proper purpose. Companies are reminded that they have five working days to either comply with s.116 requests or apply to court. The five working day limit is strict and companies should ensure that they have proper procedures in place to enable them to deal with such requests. Please contact us if you would like us to review your procedures in this area.

Investment Association and EY report on board effectiveness

The Investment Association and EY have published a report sharing best practice for improving board effectiveness. Key points within the report include the importance of having a robust board evaluation strategy, having a pipeline of future talent and the need to ensure that information presented to the board is relevant and useful, stressing quality over quantity of information. The report can be found here.

Nomad fined £90,000 for breach of AIM rules

The London Stock Exchange has announced that a nominated adviser has been privately censured and fined £90,000 for breaches of the AIM rules for Nomads. The Nomad breached rule 16, which relates to due skill and care, 17 (advising and guiding an AIM company) and 19 (liaison with the LSE) in failing to advise its AIM quoted client of its disclosure obligations.


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