GENERAL CORPORATE

Changes to the Companies Act 2006 - 30 June 2016

Various changes to UK company law are coming into effect on 6 April 2016, such as provisions requiring UK companies, LLPs and societas europaea to determine their ‘persons with significant control’. A statutory instrument published this week brings into force, on 30 June 2016, further company law provisions detailed in the Small Business, Enterprise and Employment Act 2015 including:

  • the requirement that companies deliver an annual confirmation statement, instead of an annual return. Companies will be freed from the requirement to submit an ‘annual return’ (a snapshot of their shareholders, officers and capital on a given date each year). Instead companies will be required to confirm (or update where necessary) similar information at any time during a 12 month period, (the new ‘confirmation statement’). This will, going forwards, be the principal method of conveying who is on the company’s PSC register. Transitional provisions clarify that existing companies will have 12 months from the date of their last annual return to deliver their first confirmation statement; 
  • permitting companies to keep certain information on central registers at Companies House, rather than with their statutory books; and
  • slightly simplifying the content of statements of capital. Companies will no longer be required to include the amount paid up and unpaid on each share. Instead they will be required to specify the aggregate amount unpaid on the total number of shares.

Impact – the timing of the above changes reflects the implementation timetable published by Companies House giving companies certainty that the changes will be brought into force on that date.

Court of Appeal’s refusal to pierce the corporate veil

In Boyle Transport (Northern Ireland) Ltd v R. (Rev 1) [2016] EWCA the Court of Appeal considered whether the Crown Court had been right to pierce a company’s ‘corporate veil’. In summary the court concluded that the Crown Court had no inherent jurisdiction of its own and the Proceeds of Crime Act 2002, pursuant to which confiscation orders had been made against two individuals and the enforcement of which had been extended to cover a company’s assets (of which the individuals were directors and shareholders), contained no provision sanctioning a departure from ordinary principles of company law.

The Court of Appeal considered a number of authorities ranging from Salomon v A. Salomon & Co Limited [1897] AC 222, which established the core proposition that a company has a legal status and existence which is separate from that of its shareholders and directors, to the more recent decisions by the Supreme Court in Prest v Petrodel Resources Ltd & Ors [2013] UKSC 34 and the Court of Appeal in R v Sale [2013] EWCA Crim 1306. The court concluded that, on the facts, there was no case for either lifting or piercing the corporate veil. The company was not a ‘sham’. It was set up for a legitimate purpose, had substantial assets and operations and had traded over a long period. Further there was no evidence that it was not a viable business absent the illegal behaviour.

Impact – the court’s decision emphasises again that the decision to pierce or lift the corporate veil is ‘not simply one of “justice”’. It also clarifies that the principles to be applied are the same in the context of confiscation as they are in the civil courts. The court did point out that if the company had itself been charged with an offence then the potential means of recovering the turnover or profits would have been available without resorting to arguments on lifting or piercing the corporate veil.

Background - in prior proceedings an enforcement receiver had been appointed over the realisable assets of two individuals (the “Boyles”) with a view to recovering the amount of confiscation orders made under the Proceeds of Crime Act 2002. The Boyles had a 50.1% shareholding in, and were directors of, a family owned company which ran a profitable road haulage business. They were found guilty of failing to comply with relevant regulations relating to the use of tachographs and drivers hours. In addition to receiving a prison sentence, confiscation orders were made against them. Shortly after they were sentenced a new company was incorporated and all of the old company’s assets were purportedly transferred to it and it continued to operate the old company’s business. The judge at first instance had ‘no hesitation’ in finding the transfer of assets to the new company not to be a genuine transaction and extended the appointment of the enforcement receiver to cover certain of the company’s assets.

PUBLIC COMPANY

Market abuse regulation – new rules for insider lists – 3 July 2016

The EU Commission has published an implementing regulation specifying the format of insider lists and the procedure for updating them (the “Regulation”). The Regulation is based on draft implementing technical standards submitted last year by ESMA. The Regulation is intended to ensure uniformity in application of the provisions in the Market Abuse Regulation (“MAR”) dealing with insider lists. The Regulation includes provisions requiring issuers, or any person acting on their behalf or on their account, to:

  • ensure that their insider list is divided into separate sections relating to different inside information. Each section of the insider list should only include details of individuals having access to the inside information relevant to that section. A supplementary section may detail those individuals who have access at all times to all inside information (‘permanent insiders’);
  • keep the insider list up to date in an electronic format in accordance with the template annexed to the Regulation; and
  • restrict access to the electronic list to clearly identified persons from within the issuer, or any person acting on their behalf or on their account, that needs access due to the nature of their function or position.

Impact – implementation of MAR will significantly change the regulation of market abuse in the UK (and EU) and require increased safeguarding measures to be employed by both individuals and corporates to avoid falling foul of the provisions.

Background - on 12 June 2014 the final form of a new regulation on insider dealing and market manipulation (known as MAR) and a directive on criminal sanctions for insider dealing and market manipulation were published, requiring implementation by member states within two years of that date. MAR updates and strengthens the EU’s current market abuse framework by extending its scope to new markets and trading strategies and by introducing new requirements. It requires the European Securities and Markets Association (ESMA) to develop draft regulatory and implementing technical standards on a number of matters. ESMA published its final report including draft standards last year. MAR, as a regulation, will be directly effective i.e. the UK will not need to implement legislation to adopt MAR in order for it to be applicable. The UK does however have to review existing legislation and regulation to ensure that it is not contrary to MAR. 

OTHER ITEMS

  • Highlights from this week’s Budget are available here.
  • The European Commission has published feedback summarising responses to its consultation last year on changes to the prospectus directive. It sought views on: when a prospectus is needed; what information a prospectus should contain; and how prospectuses are approved. The synopsis of responses suggests that the majority of respondents do not support changes to the exemptions for offers below €5 million or those directed to less than 150 persons. However a ‘very large majority’ of respondents agreed that the obligation to produce a prospectus could be ‘mitigated or lifted for any subsequent secondary issuances of the same securities’ and there was widespread support in favour of a ‘significant revamping’ of the summary requirements with many ideas put forward on how the regime could be improved.
  • The Government has announced that it is abolishing the CRC energy efficiency scheme (CRC) following its announcement to review the ‘business energy efficiency tax landscape’ last year. Instead it intends to move to a single tax, the existing Climate Change Levy (CCL), and consult on a new streamlined reporting framework. Changes will not be implemented until 2019, giving businesses time to adjust.
  • The London Stock Exchange has published a notice (N02/16), confirming certain changes it consulted on last year to its Admission and Disclosure Standards and High Growth Segment Rulebook (“HGS Rulebook”). The majority of the proposed changes will apply from 4 April 2016 and relate to the structure of the standards and are of an administrative or clarificatory nature. One such example is the definition of “Main Market” which has been clarified to make it clear that it encompasses all securities where application is made for admission to trading on the London Stock Exchange’s EU regulated market, whether listed or unlisted. The HGS Rulebook will also be amended so that in the case of companies that would be classified as ‘scientific research based issuers’ under the Listing Rules, the London Stock Exchange may, at its absolute discretion, waive the requirement that the issuer be a trading business, control the majority of its assets and demonstrate consolidated revenue growth of at least 20% over a three year period.
  • A statutory instrument applying the forthcoming PSC regime to societas europaea registered in the UK has been given Royal Assent.
  • The House of Commons Library has produced a web page entitled The UK’s EU referendum 2016 explained, highlighting analysis and comment on the in-out referendum and presenting ‘an impartial view of the different arguments and opinions’.
  • The Bank of England has confirmed that, from 20 June 2016, its Real Time Gross Settlement System, which processes CHAPS payments, will close at 1800 hours instead of 1620.