SBEEA Alert: Registers of People with Significant Control

We have published an SBEEA briefing looking at the obligation for companies and LLPs to keep a register of people with significant control from 6 April 2016. This information will need to be filed at Companies House from 30 June onwards. This briefing is based on the draft guidance and will be updated and re-issued to the extent that there are any material changes to that guidance in due course.

In addition, BIS has published its amended statutory guidance on the meaning of "significant influence or control" in the context of PSC registers, both in relation to companies and in relation to LLPs.

The guidance for companies has been laid in draft before Parliament and is awaiting approval. The LLP statutory guidance cannot be laid in Parliament until the Limited Liability Partnerships (Register of People with Significant Control) Regulations 2016 have come into force (expected to be 6 April 2016), with the guidance being approved sometime after that – we'll keep you posted.

For ease of reference, the key SBEEA documents published recently include:

ESMA consults on draft guidelines under MAR dealing with instances of "legitimate delay" in disclosing inside information  

You will remember that the Financial Conduct Authority is currently consulting on an amendment to Chapter 2 of the Disclosure Rules which paves the way for the European Securities and Markets Authority (ESMA) to produce its own list of the "legitimate" reasons when an issuer may be able to delay the disclosure of inside information when otherwise it would be required to disclose it as soon as possible.

ESMA has now published its draft guidelines and, in doing so, has set out a non-exhaustive list of instances where the legitimate interests of the issuer are, in ESMA's opinion, likely to be prejudiced by immediate disclosure of inside information:

  • The issuer is conducting negotiations, where the outcome of such negotiations would likely be jeopardised by immediate public disclosure of that information.
  • The financial viability of the issuer is in grave and imminent danger, although not within the scope of the applicable insolvency law, and immediate public disclosure of the inside information would seriously prejudice the interests of existing and potential shareholders, jeopardising the conclusion of the negotiations aimed at ensuring the financial recovery of the issuer.
  • Where decisions taken or contracts entered into by the management body of an issuer which need the approval of another body of the issuer in order to become effective.
  • Where the issuer has developed a product or an invention and the immediate public disclosure of such information may jeopardise the rights of the issuer.
  • Where the issuer is planning to buy or sell a major holding in another entity and the disclosure of such information would jeopardise the conclusion of the transaction.
  • Where a transaction previously announced is subject to a public authority’s approval, and such approval is conditional upon additional requirements, where the immediate disclosure of those requirements will likely affect the ability for the issuer to meet them and therefore prevent the final success of the deal or transaction.

The proposed guidelines also provide for three situations where the delay of disclosure is likely to mislead the public. These are:

  • The inside information whose disclosure the issuer intends to delay is materially different from a previous public announcement of the issuer on the matter to which the inside information refers to.
  • The inside information whose disclosure the issuer intends to delay regards the fact that the issuer’s financial objectives are likely not to be met, where such objectives were previously publicly announced.
  • The inside information whose disclosure the issuer intends to delay is in contrast with the market’s expectations, where such expectations are based on signals that the issuer has previously set.

The consultation paper also includes draft guidelines for persons receiving market soundings and includes guidance on:

  • The person receiving the market soundings' assessment as to whether they are in possession of inside information.
  • Internal procedures and staff training.
  • Written notes of meetings and record keeping.

Comments are required by 31 March 2016. ESMA intends to finalise the guidelines by early in the third quarter of 2016.

CMA issues guidance on how to report a competition or market problem 

The Competition and Markets Authority (CMA) has issued guidance on how to notify it in various scenarios, including:

  • when it is evident that businesses have agreed not to compete with each other (cartels);
  • when a market sector is not working well;
  • when a consumer sales contract contains unfair terms; and of
  • any issues related to poor competition.

Developments in Corporate Governance and Stewardship

The Financial Reporting Council (FRC) has published its annual report focusing on Developments in Corporate Governance and Stewardship in 2015 in which it gives its assessment of corporate governance and stewardship in the UK, reports on the quality of compliance with, and reporting against, the UK Corporate Governance Code and Stewardship Code, gives its findings on the quality of engagement between companies and shareholders, and indicates where the FRC would like to see improvement in both governance and the reporting of governance. For a more detailed summary, please read our CQC – Compliance for Quoted Companies update.  

FRC advises firms of recent key developments relevant to annual reports

The FRC has written to audit committee chairs of larger listed companies summarising key developments relevant to 2015 annual reports and giving its perspective on them. The letter encourages companies to focus on clear and concise reporting and identifies some key themes, including the importance of considering materiality when reporting on risk. For a more detailed summary, please read our CQC – Compliance for Quoted Companies update.

Private Equity Reporting Group publishes 2015 annual report

The Private Equity Reporting Group – formerly the WalkerGuidelines Monitoring Group – has published its annual report which reviews disclosure and transparency practices for the largest private equity-backed portfolio companies in the UK. Key findings include:

  • 95% of the sample reviewed in 2015 achieved a good or excellent/’best in class’ level of compliance, whereas the entire sample achieved this level in 2014. This fall is attributed to a combination of: a) the Guidelines including new requirements; and b) improvements in the quality of reporting by listed companies in the FTSE 350, which is used as the benchmark for judging compliance;
  • only 19 out of 66 portfolio companies reviewed made the audited report and accounts or an alternative report available on the company’s website. The Group continues to reinforce the message that accounts should be readily accessible on the company’s website. In addition, only eight portfolio companies included the required statement of compliance with the Guidelines in their annual report; and
  • due to the improvements in the benchmark FTSE 350 comparator group, it is perhaps unsurprising that the issues where disclosure was weaker were: identity of the private equity firm; details of board composition; business model; and gender diversity.