UK Quoted Company Newsletter Q4 2023
26 January 2024
Introduction
Welcome to the most recent edition of our UK quoted company newsletter, the aim of which is to collate and highlight relevant legal, regulatory and topical developments that we have written about primarily in the fourth quarter of 2023.
Company law
1. Economic crime and corporate transparency
The Economic Crime and Corporate Transparency Act 2023 (the Act) received Royal Assent on 26 October 2023 and introduced a broad package of measures to tackle economic crime and improve corporate transparency, including fundamental reforms to Companies House operations.
Our briefing note on the Act - New economic crime and corporate transparency law: Key implications for UK businesses - is available here.
The Registrar of Companies confirmed that certain measures in the Act will take effect in March 2024 including : (i) a requirement for all companies to confirm their formation is for a lawful purpose; (ii) stronger checks on company names; (iii) new rules for companies to have an 'appropriate' registered office address and to supply a registered email address; and (iv) greater powers for the Registrar to query information, annotate the register and remove inaccurate information.
For more information please see article 5 of AGC 43 (13/11/23) and article 1 of AGC 47 (22/1/24).
2. Companies House paper filings
Companies House announced that from 4 March 2024, all companies wishing to file paper documents will need to post them to the Cardiff office: Companies House, Crown Way, Cardiff, CF14 3UZ.
For more information please see article 8 of AGC 45 (4/11/23).
Corporate reporting
3. Corporate governance reporting
The Financial Reporting Council (FRC) published its annual Review of Corporate Governance Reporting (the review) assessing the quality of reporting against the UK Corporate Governance Code.
The review follows the FRC's Annual Review of Corporate Reporting for 2022/2023 (see AGC Update, Issue 42). Both reports are required reading for those preparing annual reports, particularly for companies with securities admitted to trading on the main market.
Our briefing on the review and its key recommendations is here.
For further information please refer to article 1 of AGC 44 (20/11/23).
4. Annual reporting and AGMs
Practical Law published Annual reporting and AGMs 2023: What's Market practice? which reports on the key trends relating to certain aspects of narrative reporting, resolutions proposed and voting trends of FTSE 350 companies and certain AIM companies from the 2023 reporting and AGM season.
For further information please refer to article 1 of AGC 45.
5. Quoted Companies Alliance (QCA)
The QCA published the 2023 version of its Corporate Governance Code which is principally aimed at small and mid-cap companies and is used by the majority of AIM companies. applies to financial years beginning on or after 1 April 2024.
Our overview of the 2023 version and the key changes it makes is here.
For further information please refer to article 4 of AGC 43 (13/11/23).
6. Materiality and corporate reporting
The Financial Reporting Council Lab published guidance on materiality to assist companies assess materiality in relation to their corporate reporting obligations.
For further information please refer to article 9 of AGC 43 (13/11/23).
7. Structured digital reporting
The Financial Reporting Council Lab published Structured digital reporting - 2023 insights which reports on structured digital reporting in annual financial reports required under Chapter 4 of the FCA's Disclosure Guidance Transparency Rules.
For further information please refer to article 10 of AGC 46 (22/12/23).
8. FRC supervisory focus
The Financial Reporting Council announced its areas of supervisory focus for 2024/25, including priority industry sectors for corporate reporting reviews and audit quality inspections.
For further information please refer to article 1 of AGC 46 (22/12/23).
9. Climate-related disclosures
The European Securities and Markets Authority published The Heat is On: Disclosures of Climate-Related Matters in the Financial Statements to assist issuers in providing more robust disclosures and improving consistency in how climate-related matters are accounted for in financial statements drawn up in accordance with IFRS.
For further information please refer to article 12 of AGC 43 (13/11/23).
10. Artificial intelligence
According to the Chartered Governance Institute UK & Ireland, directors must act quickly to ensure arrangements are in place to take advantage of the developing technology around artificial intelligence and overcome the issues arising from its use.
For further information please refer to article 7 of AGC 43 (13/11/23).
Annual general meetings
11. ISS proxy voting guidelines
Institutional Shareholder Services (ISS) published Proxy Voting Guidelines Updates for 2024. The changes are effective for shareholder meetings taking place on or after 1 February 2024. An overview of ISS's changes can be found at Appendix B of the guidelines.
For more information please see article 3 of AGC 46 (22/12/23).
12. Glass Lewis proxy voting guidelines
Glass Lewis published 2024 UK Proxy Voting Policy Guidelines including guidelines for shareholder proposals and ESG-related issues. There are key amendments in the areas of: director accountability for climate-related issues; cyber risk; accounts and reports; executive shareholding requirements; and executive remuneration (relative to ownership structure and relative to peers).
For further information please refer to article 3 of AGC 44 (20/11/23).
Rules and regulations
13. New public offers regime regulations
The government published the draft Public Offers and Admissions to Trading Regulations 2023 ( POAT Regulations), creating a new regulatory framework for the offering of securities to the public and admission of securities to trading in the UK, replacing the EU-derived UK Prospectus Regulation.
Our briefing on the POAT Regulations is here.
For further information please refer to article 6 of AGC 45 (4/11/23).
14. Feedback on the new public offers regime
The Financial Conduct Authority (FCA) published Engagement feedback on the new public offers and admissions to trading regime which sets out the FCA's initial thinking on aspects of the new regime and follows the six FCA Engagement Papers published earlier this year (see AGC Update, Issue 37).
For further information please refer to article 11 of AGC 46 (22/12/23).
15. UK Listing Rules reform
The Financial Conduct Authority (FCA) published Primary Markets Effectiveness Review: Feedback to CP23/10 and detailed proposals for listing rules reforms (CP 23/31), the long-awaited follow-up consultation to CP 23/10 in which the FCA set out its detailed proposals for far-reaching reforms of the UK's listing regime, including the first tranche of the new UK Listing Rules sourcebook (see our update on CP 23/10 - UK Listing Reform - a New Chapter).
CP 23/31 broadly follows the proposals put forward in CP 23/10 with some notable refinements and additions. It retains the philosophy of a shift towards a more disclosure-based framework, which seeks to enhance the attractiveness of the listing regime for a wider range of companies (see FCA press release in relation to CP23/31 here).
For further information please refer to article 1 of AGC 46 (22/12/23).
16. Primary Market Bulletin
The Financial Conduct Authority published Primary Market Bulletin 46 which, among other things, addresses questions raised by stakeholders in relation to unlawful disclosure of inside information and market conduct issues more generally in the context of shareholder co-operation regarding ESG stewardship.
For further information please refer to article 2 of AGC 46 (22/12/23).
17. Market soundings and guidance on market abuse
The Financial Conduct Authority published Market Watch No. 75 in which it shared its observations about market soundings and provided guidance on what firms can do to minimise the risks of insider dealing and unlawful disclosure.
For further information please refer to article 1 of AGC 43 (13/11/23).
18. Censure for market abuse
The Financial Conduct Authority publicly censured a former FTSE 100 company for committing market abuse by publishing financial statements and making announcements containing materially inaccurate information about its debt position.
For further information please refer to article 3 of AGC 45 (4/12/23).
19. Payment Practices Regulations
The government published its response to the BEIS January 2023 consultation (see AGC Update, Issue 32) on amendments to the Reporting on Payment Practices and Performance Regulations 2017, which require large companies and LLPs to report their payment practices on a half-yearly basis in order to enable public scrutiny of them.
For further information please refer to article 5 of AGC 45 (4/12/23).
20. Stamp duty and capital raising
The government confirmed the removal from UK legislation of the 1.5% stamp duty and stamp duty reserve tax charge on issues and transfers integral to capital raising with effect from 1 January 2024.
For further information please refer to article 7 of AGC 45 (4/12/23).
ESG and sustainability
21. Transition Plan Taskforce (TPT)
The TPT published draft guidance for transition plan preparers to interpret the disclosure framework in seven key industry sectors. This provides further detail for these sectors in addition to the TPT Disclosure Framework and Implementation Guidance issued in October 2023 (see Transition Plan Taskforce issues Disclosure Framework and consults on sector guidance).
For further information please refer to article 4 of AGC 44 (20/11/23).
22. Net zero transition in financial sector
The House of Commons' Environmental Audit Committee published The financial sector and the UK's net zero transition, which reports on the financial sector's progress towards achieving net zero greenhouse gas emissions by 2050.
For further information please refer to article 6 of AGC 46 (22/12/23).
23. EU deforestation regulation
Under the EU Deforestation Regulation products and commodities will soon not be able to be placed or made available on the EU market or exported unless they are: 'deforestation-free'; have been produced in accordance with the legislation of the country of production; and are covered by a due diligence statement.
For further information please refer to article 4 of AGC 45 (4/12/23).
24. UK deforestation regime
The UK government announced that it would bring forward legislation to tackle illegal deforestation in UK supply chains. This will apply to businesses with a global annual turnover of over £50 million and that use over 500 tonnes of regulated commodities a year. The announcement does not specify when the legislation will be introduced.
For further information please refer to article 4 of AGC 46 (22/12/23).
Audit reform
25. Audit reform paused
As predicted in AGC Update, Issue 42, the King's Speech did not include plans for an Audit Reform Bill in the next session of Parliament. This follows the withdrawal of draft regulations which required enhanced corporate reporting by a new category of 'size-based' public interest entities.
For further information please refer to article 1 of AGC 43 (13/11/23).
26. Strengthening auditor reporting
The Financial Reporting Council launched a consultation to strengthen auditor requirements to detect and report material misstatements for non-compliance with laws and regulations and to clarify instances when auditors should report such breaches to the relevant regulators.
For further information please refer to article 3 of AGC 43 (13/11/23).
Corporate cases
27. Conversion of shares: invalid conversion of preferred shares
In DnaNudge Ltd v Ventura Capital GP Ltd [2023] EWCA Civ 1142 the Court of Appeal confirmed that the conversion of preferred shares into ordinary shares under a company’s articles of association was invalid as this amounted to a variation of the rights attached to the preferred shares for which the procedure in the articles had not been followed.
This decision reiterates that companies should ensure that the drafting in their articles dealing with the conversion and the variation of shares is clear and consistent. Particular care may need to be taken in relation to provisions that purport to enable a share conversion to be effected without the consent of the relevant class of shareholders other than on the occurrence of a limited set of agreed specified events.
For further information please refer to article 1 of Ashurst and Practical Law Corporate Update Q4 2023 (19/1/24).
28. Auditors: duty to buyer of shares
In Amathus Drinks Plc v EAGK LLP [2023] EWHC 2312 (Ch) the High Court held that the buyers of shares in a company had a realistic prospect of proving that auditors owed them a common law duty to exercise reasonable skill and care in preparing the company’s statutory accounts and completion accounts for the transaction.
The decision does not create new law but suggests that there is a risk that a professional adviser advising a target company on completion accounts may, under certain circumstances, be held to owe a duty of care to the buyer of shares in the target company. Where there is doubt about whether professional advice is covered by a previous disclaimer, it is prudent to remove uncertainty by entering into a new engagement letter. Advisers should ensure that the scope of work is addressed in each engagement letter and that clear disclaimer language is included with the objective of preventing a duty of care arising to anyone other than the immediate client.
For further information please refer to article 2 of Ashurst and Practical Law Corporate Update Q4 2023 (19/1/24).
29. Company names: similar names
In AXA Wholesale Trading v AXA [2023] EWHC 1339 (Ch) the High Court held that a company had to change its name on the grounds that it was sufficiently similar to the name of another company and confirmed that the court will not overturn a Company Names Tribunal decision unless there has been a distinct and material error.
This decision provides clarity on the approach that the court will take to appeals against decisions of the tribunal. Where the tribunal has reached its decision by using a multifactorial assessment of the evidence and the correct application of the law, an objector would be better advised to avoid the time and expense of an appeal that is likely to be unsuccessful.
For further information please refer to article 3 of Ashurst and Practical Law Corporate Update Q4 2023 (19/1/24).
Other Ashurst publications
30. Board priorities in 2024 (11/1/24)
In this series of articles, Ashurst governance, sustainability and risk advisory experts identify their top 10 priorities for Boards to consider, and address, this year.
31. Bribery and Corruption: UK Guide (5/12/24)
This guide provides an overview of the steps taken in recent times in the UK to tackle bribery and corruption and includes practical advice for businesses to help them falling foul of anti-bribery and corruption laws.
32. Ashurst and Practical Law Corporate Update Q4 2023 (19/1/24)
This briefing features articles written by Ashurst LLP and Practical Law Corporate in Q4 2023 and first published in the company law section of PLC Magazine, the leading monthly magazine for business lawyers advising companies active in the UK.
33. The EU Digital Markets Act- What do you need to know? (8/1/24)
This briefing provides an overview of the EU Digital Markets Act (DMA) which aims to make the market for digital services in the EU more competitive and innovative.
34. Ashurst Quarterly Debt Capital Markets Update Q4 2023 (9/1/24).
This briefing summarises key developments in debt capital markets in the fourth quarter of 2023.
35. Business immigration 2024: what do employers need to know? (19/12/23)
This article outlines the most significant immigration-related changes for businesses in 2024 and highlights the areas which employers should keep under review.
