This week our litigation colleagues look at a recent case relating to Wrotham Park damages, which can sometimes be awarded when little or no loss is suffered. We also take a look at some changes (and proposed changes) by the FCA, new audit committee guidelines by ICSA, and the new regime governing private fund limited partnerships (PFLPs).
New guidance on Wrotham Park damages
In Marathon Asset Management LLP and another v Seddon and another, the High Court provided guidance on when Wrotham Park damages will be awarded and how they should be calculated.
Wrotham Park damages can be a useful remedy for claimants who have suffered little or no loss as a result of a defendant's wrongdoing. In a number of cases, the courts have used Wrotham Park damages as a means of justifying substantial damages awards in circumstances where more conventional rules would have left claimants without a meaningful remedy.
Our litigation colleagues have produced a note on this case, which can be found here.
Private fund limited partnerships get the green light
The government has published the order that gives effect to the new regime for private fund limited partnerships (or PFLPs). Broadly, a PFLP is a limited partnership that has a written partnership agreement and is a collective investment scheme.
Limited partnerships that register as PFLPs will not be subject to some of the more stringent provisions of limited partnership law. In particular, limited partners will not be required to contribute capital and will be able to take part in certain decisions without being regarded as taking part in the PFLP's management. Both measures enhance the limited liability of a limited partner in a PFLP.
New form for major shareholding notifications (TR-1) from June
The Financial Conduct Authority (FCA) is updating its form for notifying major shareholdings in publicly traded companies Form TR-1. A person is required to use Form TR-1 to notify the FCA whenever their holding of voting rights in an issuer falls below or exceeds a certain threshold.
This applies whether that person holds those voting rights directly by holding shares or indirectly by an instrument referable to shares. This applies in respect of issuers on regulated markets (such as the London Stock Exchange Main Market) or on other exchanges in the UK (such as AIM).
The new Form TR-1 is based on the standard form published by the European Securities and Markets Authority, with a few minor changes. It will be operative from 30 June 2017.
ICSA revised guidance on audit committee terms of reference
ICSA has published a revised version of its guidance on the terms of reference for audit committees. The revised version takes into account changes to the UK Corporate Governance Code and the Financial Reporting Council's own Guidance on audit committees. The key changes are as follows:
- The restriction on members of the committee serving more than three terms has been deleted.
- If possible, one member of the remuneration committee should sit on the audit committee. This accompanies the recommendation for companies with risk committees that one member of the risk committee should sit on the audit committee.
- The guidance contemplates an expanded role for the audit committee, including approving the company's internal audit charter every year and considering whether a thirdparty review of internal audit processes is appropriate.
- In particular, when the committee is considering the company's policy as regards non-audit services, it should focus on the nature of and fees for those services, and whether the firm in question is the most suitable supplier.
The revised guidance can be found here.
New requirements when filing information with the FCA
The FCA has issued amendments to Rule 6.2 of its Disclosure and Transparency Rules. DTR 6.2 applies to issuers whose securities are admitted to trading on a regulated market and whose member state is the UK. It sets out the requirements that apply when an issuer files information with the FCA. In short, in the future, when an issuer files regulated information with the FCA, it must also provide:
- its Legal Entity Identifier (LEI); and
- the classifications (set out in Annex 1R to DTR 6) that are relevant to that regulated information.
- An LEI is a 20-digit reference endorsed by the Global Legal Entity Identifier Foundation and used to identify a legal entity. In the UK, LEIs are issued by the London Stock Exchange.
More information can be found here.
The obligations will come into force on 1 October 2017, although the FCA has been allowing issuers to file this information voluntarily since 1 January 2017.
A copy of the amending instrument can be found here.
FCA proposes to update guidance on sponsor conflicts
The FCA is proposing to update its guidance to sponsors on how to identify and manage conflicts of interest. This comes out of the call for views on this topic which the FCA published in September 2014.
- The current "perception test" of whether a sponsor can perform its functions properly would be updated by incorporating an objective test based on a theoretical "reasonable market user".
- A sponsor would be required to contact the FCA before accepting its appointment as sponsor if it intends to provide a loan to an issuer in connection with its sponsor service (e.g. in relation to an acquisition it is advising on) and the loan exceeds 0.5% of the sponsor group's total assets.
- A sponsor would also be required to contact the FCA if it is providing a "fair and reasonable opinion" on a related party transaction and is also acting in another capacity on that transaction (e.g. providing acquisition finance), either for the related party or another party.
The FCA has requested comments by 10 May 2017.
Discussion on more effective disclosures in financial statements
The International Accounting Standards Board (IASB) has published a discussion paper outlining principles designed to promote more effective disclosure in financial statements. The outcome of these discussions may result in amendments to IAS 1 or the development of a new standard. The IASB is requesting comments by 2 October 2017.
A copy of the paper can be found here. The IASB is requesting comments by 2 October 2017.