Pensions and Lifetime Savings Association (“PLSA”) – updated corporate governance policy and voting guidelines

The PLSA (formerly the National Association of Pension Funds or NAPF) has updated its Corporate Governance Policy and Guidelines to reflect current market best practice. Changes include:

  • guidance that the strategic report should provide a clear articulation of how the company’s key assets (both physical and intangible) are engaged in the generation of sustainable value creation;
  • an emphasis on non-executive directors having sufficient time and energy to fulfil their roles properly. New voting guidelines are included indicating that for complex companies it may be appropriate to vote against the (re)election of a director who holds more than four directorships and that where a director chairs a number of key committees, a stricter view may be adopted, especially where an individual is a director of two or more companies in heavily regulated industries. A chair’s time commitment may also be questioned where they are a director of more than four companies and/or a chair of two or more global and highly complex companies;
  • support for the limits set out in the revised Pre-emption Group Principles, which were issued earlier this year although the PLSA encourages companies to “clearly signal their intention to undertake a non-pre-emptive issue at the earliest opportunity and establish a meaningful dialogue with their shareholders” and “keep shareholders informed of issues” related to a disapplication of pre-emption rights; and
  • new voting guidelines on shareholder resolutions and an emphasis on management providing a comprehensive outline of their position on a resolution and being available to engage with shareholders to facilitate an understanding of the rationale and merits of the resolution.

Impact – the revised policy and guidelines aim to assist investors and their proxy voting agents in their interpretation of the UK Corporate Governance Code (and thereby in assessing a company’s compliance with the Code) and in forming judgements on the resolutions presented at a company’s AGM. They are therefore most relevant for premium listed companies and those companies that choose to voluntarily comply with the Code.


Private Equity Reporting Group (“PERG”) – report on conformity with Walker Guidelines

In addition to EU governance of private equity managers, following implementation of the Alternative Investment Fund Managers Directive, the UK’s ‘voluntary’ guidance for private equity firms, the Guidelines for Disclosure and Transparency in Private Equity (informally known as the Walker Guidelines) (the “Guidelines”), remain in place. Each year, compliance by the UK PE industry with the Guidelines is reviewed by PERG (previously called the Walker Guidelines Monitoring Group).

PERG’s eighth report was recently published and indicates that overall, a lower percentage of the sample achieved a good or excellent level of compliance this year when compared with the previous year. The report attributes this change to: improvements in the quality of reporting by FTSE 350 companies (the benchmark for judging compliance with the Guidelines); and the introduction of new requirements (e.g. the Guidelines were amended in 2014 to incorporate changes to narrative reporting in the UK including the introduction of the strategic report). Excluding the new requirements, there has been a general improvement in the standard of corporate reporting although the quality of disclosures remains variable. In particular, the quality of disclosures covering the identity of private equity firms and details of board composition were weaker this year and disclosures related to business models and gender diversity (new requirements this year) were comparatively weak. In addition, not all of the companies reviewed made the full audited account and reports, or an alternative report, available on the company’s website.  However, portfolio companies also improved the level of disclosures in various areas including environmental matters and social and community issues, which had been highlighted as weaker areas in last year’s report.

Impact – the information disclosed on private equity firms’ websites in compliance with the guidance can be a useful source of data. Awareness of when a firm or portfolio company may fall within scope should be borne in mind when working on sizeable transactions. The PERG report provides a detailed best practice guide to compliance.

Background - the guidelines require private equity firms to provide certain financial, employment and environmental information on their UK portfolio companies and comply with certain obligations (and limited disclosures) themselves. The guidelines broadly apply to FCA authorised private equity firms which either have acquired a company in: a public to private transaction where the market capitalisation was in excess of £210m; or a non-market deal, where enterprise value at the time exceeded £350m, and (in both cases) more than 50% of revenues were generated in the UK or the number of UK employees exceeded 1,000.


  • The Small Business, Enterprise and Employment Act 2015 (“SBEE”) materially reforms UK company law with key changes being implemented in different stages. Some points to flag this month are:
    • a reminder that the introduction of a central public registry of those individuals who have significant control of UK companies (a PSC register) does not now come into force until April 2016. It was originally proposed that the obligation on companies within scope to maintain a PSC register would come into force in January 2016. However, as previously reported, that date has been postponed until April 2016;
    • a reminder that bearer shares have been abolished. Any bearer share remaining by 26 December 2015 can no longer be transferred (any purported transfer is void) and has no rights attaching to it (including voting rights and rights to a dividend/distribution);
    • the requirement that a director or secretary provide a formal “consent to act” was replaced in October 2015 with an obligation on the company to make a statement that the appointee has consented to act as a director or secretary. SBEE is also introducing a new right for any person appearing on the public register as a director to be able to apply to have their name removed if they did not consent to act. This provision was, until recently, proposed to come into force in December 2015 but, according to the provisional implementation plan published by Companies House, it will now come into force in April 2016; and
    • implementation of the ability to apply to the registrar to change a company’s registered office if the registrar is satisfied that the company is  not authorised to use the address has also been postponed from December 2015 to April 2016. An overview of key corporate aspects of SBEE is available here.
  • The Financial Reporting Council (“FRC”) has written to the audit committee chairs of larger listed companies summarising key developments for 2015 annual reports. Amongst other things, the letter focuses on clear and concise reporting and emphasises the need to avoid boilerplate disclosures and ensure that the annual report contains only information that is material to investors. The letter also identifies some key themes in corporate governance and reporting and contains advice on risk reporting.
  • The FRC has announced that it is introducing public tiering of signatories to the Stewardship Code in July 2016. The assessment will be made public in order to promote commitment to stewardship. Signatories will be assessed as being Tier 1 (meeting reporting expectations) or Tier 2 (not meeting expectations). Asset managers will also be asked to provide evidence of their approach to stewardship. The FRC will contact firms with feedback before the assessment is made public to allow time for improvements. The Stewardship Code sets out a number of areas of good practice to which institutional investors should aspire and it also describes steps that asset owners can take to protect and enhance the value that accrues to the ultimate beneficiary. It operates on a comply or explain basis. Details of signatories and a link to their statements on commitment to the Stewardship Code are already publicly available.