Small Business, Enterprise and Employment Act

Company ownership and control: PSC register implementation

BIS are seeking views on the draft Register of People with Significant Control Regulations 2015. These are the secondary regulations needed to set up the registers of persons exercising significant control (PSC registers) as envisaged by the Small Business, Enterprise and Employment Act 2015 (SBEEA). The consultation includes questions relating to:

  • the scope of the PSC register i.e. to which companies the provisions should apply and which are exempt. The consultation proposes to extend the exemption already conceded to listed companies in the UK to UK companies listed on regulated markets in the EEA. Note that the consultation confirms that LLPs will be subject to the regime and will need to compile a PSC register;
  • how to record the nature and extent of control of a company;
  • the fees a company can charge for providing copies of its own PSC register where it has not elected to hold it at Companies House;
  • how to protect information about people who may be at serious risk of harm should their information be made public; and
  • issuing warning and restrictions notices to people or entities that don’t respond to the initial notice requesting information for the PSC register.

Previous responses to the 2014 PSC register consultation have been included in this further consultation. Responses to this consultation are required by 17 July with the government intending to finalise the regulations in autumn 2015. You will remember that companies must start to compile registers in January 2016. From April 2016 they will have to give this information to Companies House when they deliver their confirmation statement (which replaces the annual return).

The consultation also confirms that the implementation of the proposed SBEEA prohibition on Corporate Directors will be delayed from October 2015 to April 2016.

To access the briefings we've issued to date on the SBEEA - click here.

Company Law and Compliance

Companies House warns against late notice of officers' details

Companies House has warned companies that late notification of officers' details could impact on their credit standing. This is due to credit reference agencies using the information provided by Companies House as an indicator to assess a company's reliability.

Figures show that 47% of all public searches within the Companies House database centre are on director appointments. However, only 53% of companies provide adequate notice of a change in their officers' details within the legal timescale.

Corporate Governance

Latest CQC – Compliance for Quoted Companies update

Our latest CQC update covers, among other matters:

  • Financial Conduct Authority's (FCA) £4.6m fine for Asia Resource Minerals plc (formerly Bumi plc) for various breaches of the Listing Rules and Listing Principles primarily stemming from the company's failure to indentify, monitor and disclose related party transactions totalling just over £8m; and

the NAPF's call for meaningful reporting by companies on their workforces.

Equity Capital Markets

LSE guidance on free float requirement and AIM Rule 31

The London Stock Exchange (LSE) has published guidance in a revised format of Inside AIM concerning the free float (shares in "public hands") requirement when bringing a company to AIM. Guidance is also given in relation to the circumstances that a Nominated adviser should consider when looking at the systems, procedures and controls put in place by a company under AIM Rule 31.

The LSE has dedicated a page on its website to AIM Rules guidance. Thus, you can find all back issues of Inside AIM as well as a table setting out on which rules it has issued guidance and in which edition of Inside AIM you can find it.

ESMA to review Proxy Voting

The European Securities and Markets Authority (ESMA) has outlined its plans to conduct a review of the Best Practice Principles for Providers of Shareholder Voting Research and Analysis. This was first published in March 2014 – click here.

ESMA intends to gather information on how stakeholders view the most recent AGM seasons and consider any new trends or changes in the approach of proxy advisors.

Responses are required by 27 July 2015 with the aim being to publish the final results at the end of 2015. The behaviour of proxy voting agencies was the subject of some heated debate at our recent Company Secretaries' Fora. It is something that the Financial Reporting Council is also seeking to address.

Proposed changes to the Listing Rules

The FCA has published its most recent Quarterly Consultation proposing changes to its Handbook. The most noteworthy proposals are those seeking to amend the Listing Rules and Disclosure and Transparency Rules to reflect the publication and contents of the 2014 UK Corporate Governance Code. Responses are required by 5 August 2015.

M&A Trends

Experian Business Research Monthly Review

Experian has published its latest monthly review of M&A transaction activity finding:

  • UK M&A and ECM transactions dipped to under 400 during April for the first time since June 2013 – a decline of 13%;
  • activity in the Financial Services' sector accounted for more than one third of UK deals; and
  • in Asia Pacific, Chinese businesses were most active being responsible for 33.4% of all transactions in the region with manufacturing being the most prevalent sector involved.

Recent M&A downturn in 2015

Merill Datasite has published a new edition of their Monthly M&A Insider which outlines a downturn in worldwide M&A in 2015, compared to the high volume of deals seen in 2014. April 2015 saw 917 deals globally valued at US$293.1bn, which, when compared to the results in previous years, is a decline of 21.5% in value and 39% in volume.

However, despite the overall fall in global numbers, there have been a number of promising sectors and geographies keeping activity afloat.

Upcoming challenges for Private Equity despite a rise in global financial sponsor-related deal activity

Merrill Datasite has predicted a number of imminent challenges for private equity including soaring valuations, lower returns, tougher competition and tighter rules on leverage. Merrill believe that, despite the continuous search for new acquisitions on a global scale, private equity firms are beginning to accept that they will have to lower their returns if they are to survive in a low-growth economic environment.

Case law

Challenging alteration of a company's articles

In Arbuthnott v Bonnyman and others [2015] EWCA Civ 536, the claimant owned shares in a company. Other shareholders formed a corporate vehicle, by which they sought to acquire all shares in the company. All members of the company except the claimant accepted the offer. Minor amendments were made to the drag along provisions in the articles. The claimant brought proceedings, contending that unfair prejudice had occurred, including that the company had sought to expropriate his shares at a gross undervalue. His claim was dismissed. The Court of Appeal set out the principles, extracted from previous authority, as to the conditions for an effective challenge to an alteration to a company's articles.

New sentencing guidelines for large companies applied

In R v Thames Water Utilities Ltd [2015] EWCA Crim 690, the Court of Appeal has applied the new sentencing guidelines put in place to calculate fines for large companies (those with a turnover of £50m or more) who have committed environment offences. The fine imposed on Thames Water for serious pollution of a nature reserve was £500,000, reduced by 50% on the basis of various mitigating factors and a prompt guilty plea. Under the guidelines, fines could be levied up to 100% of a company's pre-tax net profit for the relevant year and the Court stated in its judgment that this would be the case “even if this results in fines in excess of £100m.”