City of London Law Society and the Law Society Company Law Committees' joint working party publish response to FCA discussion paper on the availability of information in the IPO process
In April 2016 the FCA published a discussion paper (16/3) on the availability of information in the UK's IPO process, and it concluded that prospectuses should play a central role within this process. The discussion paper explored possible avenues for reform to address growing concerns within the market and improve the IPO process in the interest of both issuers and investors. In particular, it sought to make key investor information available earlier so that investors could rely upon it during their decision making. In the discussion paper the FCA noted that, based on its market study, only one transaction featured unconnected research published during the IPO process, resulting in connected research being the only source of information provided to investors during the initial marketing period, aside from any media coverage. The paper also questioned the use and effectiveness of blackout periods.
The City of London Law Society and the Law Society's Company Law Committee joint working party ("The Committee") has now published a response to the FCA's discussion paper. The Committee highlight their support for the suggestion that the issuer's principal disclosure documents (draft "pathfinder" prospectuses or registration documents) should be made available to investors earlier in the IPO process with research available as a commentary on that disclosure. An amended timetable would, according to the Committee, generate the following advantages:
- the research can be much shorter and more focussed, taking less time to produce;
- the risk of inconsistencies between the research and the prospectus is reduced, without requiring issuer involvement in the research production process (checking factual accuracy), which is otherwise necessary but which could be seen as prejudicing the independence of the research; and
- investors will be able to rely principally on the issuer's document for the background information on the company and the risks associated with an investment in its shares.
However, the Committee went on to state that it is not in favour of a prescriptive IPO timetable dictated by rules and that flexibility should be retained to allow issuers to execute transactions quickly should they need to. The Committee also concluded that there is "no basis to suggest that any blackout period (possibly other than one of significantly longer duration than is currently the practice) would make any meaningful difference to questions of liability related to the [connected] research". This said the Committee did also note that simultaneous publication of the prospectus and research may make the research appear less independent.
Impact If the approach adopted by the Committee was implemented it would give greater flexibility to issuers, enabling them to respond appropriately to pressure from investors and execute transactions at a speed that reflected market demand.
Law Society publishes a practice note on the execution of documents using electronic signatures ("E-Signatures")
The Law Society has published a practice note that addresses the use of E-Signatures in commercial transactions. The note has been developed by a joint working party from the Law Society, the City of London Law Society and a number of leading law firms ("The Authors"). The note has also been reviewed and approved by leading counsel, Mark Hapgood QC.
The note has been published to give solicitors greater confidence in the legal framework surrounding the use of e-signatures and increase consensus among the legal industry on their validity. The practice note evaluates the legal basis of e-signatures in the context of commercial contracts in the UK and addresses a number of issues around their use, including:
- compatibility with statutory requirements that a document is in writing and/or signed and/or under hand;
- compatibility with the requirement that deeds must be in writing;
- the use of E-Signatures in minutes and resolutions of companies incorporated under the Companies Act 2006; and
- the validity of using wet-ink signatures and E-Signatures within a single contract.
In all of the situations set out above, the Authors formed the opinion that an E-Signature is an acceptable means of concluding an agreement. However, the Authors go on to highlight that there are a number of matters that must be considered before executing an agreement electronically that extend beyond a simple assessment of whether an e-signature is a valid means of execution. These include, but are not limited to:
- the purpose of the document (if the document is going to be filed with an authority or registry, does that authority or registry accept electronic signatures?);
- does the place of signature or the location of the document have particular legal consequences (e.g. stamp duty)? If so, would it be best to execute the document using a wetsignature to avoid dispute over where the document was signed (server location vs signatory location); and
- will the document give rise to litigation overseas? If so, does the relevant overseas jurisdiction also recognise E-Signatures?
The note also provides a useful overview of the current legislative framework that governs the use of E-Signatures in the UK, as set out under s.7 (1) Electronic Communications Act 2000, and addresses the provisions of Regulation (EU) No. 910/2014 ("The Regulation"). The Regulation establishes an EU-wide framework for E-Signatures and was implemented in the UK by the Electronic Identification and Trust Services for Electionic Transcations Regulations 2016 (that came into force on the 22 July 2016).
Impact-The note provides a very useful summary of E-Signatures in the context of commercial contracts within the UK and will increase confidence among legal practitioners in the UK's E-Signature regime. The Authors have also highlighted key pitfalls that surround the use of E-Signatures, all of which should be considered and assessed before E-Signatures are relied upon.
- ESMA has published draft implementing technical standards ("ITS") on sanctions and measures under Regulation (EU) No 596/2014 on market abuse. The ITS set out how competent authorities should notify ESMA annually about any investigations that they have conducted and any sanctions and measures they have imposed as a consequence. The requirement for competent authorities to provide ESMA with annual reports on investigations, sanctions and measures is set out under Article 33 of the Market Abuse Regulation 2016. The ITS will need to be endorsed by the European Commission and, providing that the European Parliament or European Council do not object to the ITS, then they will become enforceable.
- Following ESMA's publication of guidance in relation to Close Periods under Article 19(11) of the Market Abuse Regulation 2016 ("MAR") (as covered here), the FCA has now removed its supervisory guidance (as previously covered here) and is now directing market participants to ESMA's Q&A document. This ends the confusion that had previously surrounded the interpretation and application of "closed periods" under MAR.
- In December 2015 the European Commission published a proposal for a directive to repeal and codify various company law directives to ensure that provisions could be identified and were clear and transparent. No changes of substance were proposed to any of the codified directives. The European Economic and Social Committee ("EESC") has now published an opinion on the proposed changes and the opinion has been published in the Official Journal of the European Union. The EESC opinion "fully supports the consolidation, codification and thereby simplification of the text of the proposal".
- The FCA has published its July edition of the Regulation Round-up for regulated firms.
- The Takeover Panel has published its Annual Report and Accounts for the year ended 31 March 2016.