Small Business, Enterprise and Employment Act

Implementation update

On 23 July 2015, the government published changes to the implementation dates for certain measures within the Act. In particular the restrictions on corporate directors will (with limited exceptions) apply as from October 2016. To access the briefings we've issued to date on the SBEEA - click here

Company reporting and governance

Disclosure of subsidiaries in parent company accounts

Changes to the Companies Act 2006 came into force on 1 July 2015. These removed the option for companies to disclose either a full list of subsidiaries in their accounts or only the primary subsidiaries in the accounts and provide a full list of subsidiaries on their annual return. Accounts approved after that date must contain the full disclosure. For our CQC update on the changes to the disclosure of 'related undertakings' in accounts – click here

Shareholder Rights Directive: EU resolution on amending directive

The European Parliament has agreed to adopt various amendments to the Shareholder Rights Directive which is currently making its way through the EU legislative process. These include expanding and clarifying the provisions relating to the transparency expected of proxy advisors and clarifying the provisions relating to directors remuneration. For more information – click here.

Financial Reporting Lab : Business model reporting

The Financial Reporting Lab is to undertake a series of projects to consider the following interrelated areas of disclosure: (i) business model reporting; (ii) principal risk reporting; and (iii) viability statement reporting.

The aim is to assist companies in understanding how the investment community uses these disclosures in their decision making processes, what information is most useful and how it may be best presented. This will enable companies to refine their reporting in these areas to better meet the investment community's needs. The Lab is seeking participants for the business model reporting project with the cut off date being 15 September 2015. A report is expected to be published in Q1 2016.

Equity Capital Markets

CREST and CHAPS: extension of settlement day

The Bank of England announced on 23 July that the settlement day for CREST and CHAPS will be extended by one hour and forty minutes. Once in force (expected to be summer 2016) these systems will close at 6:00pm for direct participants, such as the major banks. This will better align the CREST and CHAPS settlement day with the typical business hours of many system users.

Investor Relations Society Conference speech "Investor engagement in a changing regulatory landscape"

Marc Teasdale, Director, Market Oversight, FCA, delivered a speech at the Investor Relations Society Conference in London, the text of which is in the link above. Of particular interest are his comments on the disclosure regime in light of the Ian Hannam case, which underlines the importance of understanding the conclusions of that decision.

Gender pay gap reporting

Government Consultation: Closing the Gender Pay Gap

The government is seeking comments on its manifesto commitment to require larger companies to publish gender pay information. Regulations will cover private and voluntary sector employers in England, Scotland and Wales with at least 250 employees. The consultation ends on 6 September 2015.


EU Statutory Audit Directive update

As covered in previous editions of Corporate News on the UK implementation of the EU Statutory Audit Directive, the government is required to implement the Directive in 2016. As part of that, the FRC and BIS issued a joint consultation in December 2014. Building on that, the government issued a written statement on the 21 July 2015 confirming the audit and auditor regulation will require all public interest entities to put their audit out to tender at least every ten years and change their auditor at least every 20 years. The government also stated that public interest entities that retendered audit engagements should, where possible, benefit from transitional recognition of that retender.

Although the full scope of the Directive is yet to be announced, we are aware that when implemented the Directive will apply to companies with Officially Listed securities, such as those on regulated markets such as the main market of the London Stock Exchange. However, it is yet to be decided whether the definition of a "public interest entity" will apply to companies with securities traded on AIM.

Financial Reporting

FRS 105 (Micro-entities regime) and amended FRS 100, 101 and 102

The FRC has published a suite of new and revised accounting standards, including:

  • A new standard FRS 105 - The Financial Reporting Standard applicable to the Micro-entities Regime)
  • Amendments to each of FRS 100 (Application of Financial Reporting Requirements), FRS 101(Reduced Disclosure Framework) and FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland)

Click here for the FRC's overview of the financial reporting framework.

Public M&A

Panel Statement 2015/8 - Code Committee Issue of Public Consultation Papers 2015/2 and 2015/3

The Code Committee of the Takeover Panel has published two public consultation papers, comments on each of which are required by 11 September 2015:

  • PCP 2015/2 sets out proposed amendments in relation to restrictions and suspensions of voting rights and certain related amendments. It focuses on shares which are subject to a restriction on the exercise of voting rights, or to a suspension, which should nonetheless be regarded for the purposes of the Code as having voting rights. The amendments intend to provide clarity on the idea that shares (other than treasury shares) should be regarded as having voting rights which are currently exercisable at a general meeting
  • PCP 2015/3 proposes to introduce new presumptions to the definition of "acting in concert" in relation to certain categories of person, such that those persons will be presumed to be acting in concert with each other 
    Limited Partnerships

Consultation on amendments to the Limited Partnerships Act 1907 for private equity investments

HM Treasury published a consultation paper on 23 July 2015 seeking views on a number of proposed amendments to the Limited Partnerships Act 1907. The amendments are mainly aimed to ensure that the UK LP remains the market standard structure for European private equity and venture capital funds as well as many other types of private fund. To access the draft Order click here: The Legislative Reform (Limited Partnerships) Order 2015.

Case law

‘Material Adverse Effect’ clauses (MAE) in a share purchase agreement

In the case of Ipsos SA v Dentsu Aegis Network Limited (SPA) [2015] EWHC 1171 the Commercial Court has held that an MAE provision in the share purchase agreement was not triggered by a revision to the target company’s profit forecasts. The court's reasoning provides some useful guidance on the drafting and interpretation of MAE clauses.

High Court decision on repudiatory breach and LLP agreements

The High Court has held, in the case of Flanagan v Liontrust Investment Partners LLP [2015] EWHC 2171 (Ch), that the doctrine of repudiatory breach does not apply to LLP agreements (at least where there are more than two members).