On 28 August 2014, the Financial Conduct Authority (FCA) published a consultation paper proposing to align the implementation of the requirement to report on payments to governments (set out in Article 6 of the Transparency Directive) with the implementation by the Department for Business, Innovation & Skills (BIS) of the reporting requirements set out in Chapter 10 of the Accounting Directive. The effect of such alignment has the benefit of ensuring consistency for UK companies in the relevant industries that fall within the scope of both requirements.

Further to the consultation, the final rules came into force on 22 December 2014 and apply to financial years beginning on or after 1 January 2015.

WILL IT AFFECT YOU?

The implementation of the report on payments to governments requirements, which came into effect earlier than initially envisaged, will impact upon:

  • issuers of securities admitted to trading on a regulated market where the UK acts as its home Member State and the Disclosure Rules and the Transparency Rules (DTRs) apply;
  • listed companies who are required pursuant to the Listing Rules (LR9.2.6BR, LR14.3.23R or LR18.4.3R) to comply with DTR4 as if they were an issuer for the purposes of the DTRs; and
  • issuers of securitised derivatives who, pursuant to the Listing Rules (LR19.4.11BR), the FCA considers should comply with DTR4 as if they were an issuer of debt securities as defined in the DTRs,

and, in each case, that issuer or listed company is or may be active in either the extractive or the logging of primary forest industries.

For these purposes, an issuer will be considered to be actively involved in an extractive industry if either it or any of its subsidiary undertakings are an undertaking with any activity involving the exploration, prospection, discovery, development, and extraction of minerals, oil, natural gas deposits or other materials. An issuer will be considered to be actively involved in the logging of primary forests industry if either it or any of its subsidiary undertakings are an undertaking with activities in the logging of such forests.

SUMMARY OF RULES

A new DTR4.3A shall be inserted into the DTRs, pursuant to which:

  • a company to which the new section applies must prepare a report annually on payments made to governments for each financial year;
  • the report must be made public at the latest six months after the end of the financial year;
  • the content of the report must be in accordance with Chapter 10 of the Accounting Directive; and
  • any payments to governments must be reported at a consolidated level.

In addition, reports prepared in accordance with the Reports on Payments to Governments Regulations 2014 will be in compliance with DTR4.3A.

WHEN WILL YOU NEED TO COMPLY?

As noted above, the rules apply to financial years beginning on or after 1 January 2015.