Included in this issue: Small Business Enterprise and Employment Act (SBEEA) implementation updates | Consumer Rights Act 2015 | G20/OECD update Principles of Corporate Governance | NAPF: 2015 AGM Season Report | London Stock Exchange publishes 2016 Dividend Procedure Table | AIM: guidance on disclosures relating to equity financing products | Proposed changes to the Listing and Disclosure Rules | Global Boardroom Insights: Calibrating Risk Oversight | True and fair view: further legal opinion on IFRS and the Companies Act 2006
Small Business Enterprise and Employment Act (SBEEA) implementation update
Second round of implementation in October 2015
The Small Business, Enterprise and Employment Act 2015 (Commencement No 2) Regulations 2015 (Regulations) have been published and will implement various aspects of the SBEEA with effect from 10 October (save for changes to the director disqualification regime which are to come into force on 1 October). Those provisions in force from 10 October include:
- the fact that a director's day of birth (not month or year) will be excluded from the public register at Companies House. Section 1087 of the Companies Act 2006 (2006 Act) will be amended accordingly – for more on this, see the next item;
- the replacement of the current requirement for directors / secretaries to expressly consent to act in their respective roles (such consent to be transmitted by the company to the Registrar), with a requirement for the company to state that the relevant individual has consented to act. The 2006 Act will be amended accordingly;
- a new requirement for Companies House to write to new directors to provide them, as soon as reasonably practicable after their appointment has been registered, with information about directors' duties. A new section 1079B, will be inserted into the 2006 Act;
- shortening of the timescales under which the Registrar may strike off a company. Section 1000 of the 2006 Act will be amended accordingly.
On 1 October 2015, the Regulations also bring into force changes to the directors' disqualification regime including amendments to the Company Directors Disqualification Act 1986. The principal change here is that the Secretary of State may apply for the disqualification of a director convicted of a criminal offence in relation to the running of an overseas company.
Director's day of birth
In connection with the suppression of the day of the month on which a director was born, The Companies (Disclosure of Date of Birth Information) Regulations 2015 have also been published together with an explanatory memorandum. Section 1087B of the CA 2006, as amended, will provide that the Registrar can disclose complete date of birth information to credit reference agencies and gives the Secretary of State the power to make regulations to allow the Registrar to disclose this information to specified public authorities. The Regulations set out the public bodies which may receive this date of birth information (including HMRC, the Serious Fraud Office and the Financial Conduct Authority (FCA)) and specifies the conditions that must be met for the disclosure to be made.
Equivalent changes to other entities
Finally, The Companies and Limited Liability Partnerships (Filing Requirements) Regulations 2015 have been published together with an explanatory memorandum. These implement a number of consequential changes driven by the SBEEA so that the Act applies (as appropriate) to various other entities, including LLPs, Societas Europaea and unregistered companies as from 10 October 2015.
To read those articles we have published to date on the SBEEA, including more detail on the above changes and an overview of the implementation timetable – click here.
Company law and compliance
The Consumer Rights Act 2015 (which makes changes to the current regime of consumer protection law in the UK) came into operation on 1 October 2015. One of the many changes of note is that a corporate entity entering into contracts outside its normal course of business will no longer be treated as a consumer under the Unfair Contract Terms Act 1977 (UCTA). This means it will lose the enhanced protection given to consumers under UCTA (in turn possibly increasing its buying risk). Conversely, for businesses supplying goods, services or digital content, which can be used for both private and business purposes, this is potentially good news.
To read those articles we have published to date on the Consumer Rights Act – click here
G20 finance ministers have endorsed a new set of Principles of Corporate Governance which provide recommendations for national policymakers on shareholder rights, executive remuneration, financial disclosure, the behaviour of institutional investors and how stock markets should function.
2015 AGM's in review
This is the National Association of Pension Fund's third annual review of the preceding AGM season published in advance of updating its Corporate Governance Policy & Voting Guidelines which it will apply in 2016. Overall, the NAPF's review suggests a further year of pay restraint and limited shareholder rebellions.
That said, it identifies 12 companies within the FTSE 350 where a significant proportion of their shareholders have expressed discontent with particular aspects of their governance arrangements.
A press release which summarises the key issues contained within the Report can be found here.
Listed & AIM company regulation
The London Stock Exchange (LSE) has published its 2016 Dividend Procedure Table which listed and AIM companies should comply with when declaring and paying dividends to shareholders. The timetables sets out the timing of announcements, record dates, ex dates and payments for dividends in 2016.
The LSE has also published an "Inside AIM" update providing guidance on AIM company disclosures regarding equity financing products involving AIM securities in which a company or its directors are interested. These products can include equity lines of credit, swap facilities and certain crowd funding products for the AIM company, and share sale and repurchase agreements involving AIM company directors.
The FCA has published its latest quarterly consultation paper which outlines proposals for a number of relatively significant amendments to the Listing Rules (LR), and Disclosure and Transparency Rules (DTR) including:
- implementing particular parts of the Statutory Audit Amending Directive (2014/56/EU). The FCA is focusing on the implementation of changes to the requirements for audit committees through amendments to DTR 7. Proposals include requiring a majority of the members of an audit committee, including the chairman, to be independent (instead of a single member as is the case now) and the body as a whole to have competence relevant to the sector in which the company operates;
- amending the corporate governance rules in DTR 7 to reflect the transposition of the Accounting Directive (2013/34/EU); and
- updating references to the former operating subsidiaries of the Financial Reporting Council (FRC), so as to refer only to the FRC.
Responses to the consultation are requested by 5 November 2015.
Business Risk Management
KPMG have published the latest edition of Global Boardroom Insights which invited directors and risk professionals from around the world to share their experiences in relation to how boards are strengthening their oversight of risk.
Questions addressed include:
- Is the board getting the information and context it needs to understand the company’s key risks and add real insight and perspective?
- Are the board’s risk oversight activities appropriately allocated and well co-ordinated among its committees?
- Does the board have access to the expertise it needs to assess specific areas of risk, such as cyber security?
- Are risk and strategy effectively linked in boardroom discussions?
Financial Reporting and returning value to shareholders
The Local Authority Pension Fund Forum has published a second legal opinion by George Bompas QC on IFRS and issues arising in the Companies Act 2006, focusing in particular on the "true and fair view principle" set out in section 393 of the Act. Previously, Mr Bompas had expressed doubt at the existence of an overriding true and fair view requirement in preparing financial statements within international accounting standards, and examined the possibility of financial statements properly prepared in accordance with the framework failing to give a true and fair view.
Mr Bompas notes that his first opinion was published at the same time as various statements from the Department of Business, Innovation and Skills and the FRC and an opinion from, Martin Moore QC, prepared for the FRC, each of which concluded that the overriding objective in preparing accounts is to provide a true and fair view.
Mr Bompas' further opinion responds to two points made in Mr Moore's opinion regarding the "true and fair override" and the connection between the true and fair view objective and the use of accounts for determining amounts which may properly be distributed to members by way of dividend.