Welcome to the latest edition of Osborne Clarke’s quoted company legal and regulatory news update.
We hope that you find it interesting. If you would like to discuss any of the content, or have a subject that you would like us to cover in next month’s edition, please let one of us know. Our contact details are set out below.
Jon King, Mark Wesker, Tom Harvey and Nick Thody
Dividends and share buy-backs: the introduction of new UK GAAP may affect you sooner than you think
UK GAAP is changing. For accounting periods commencing on or after 1 January 2015, listed companies preparing individual company accounts under UK GAAP will be reporting under brand new accounting standards. UK GAAP reporting remains common for the individual accounts of listed companies, even where (in accordance with the Listing Rules and AIM Rules for Companies) a listed company’s consolidated accounts are prepared under IFRS.
Whilst the first set of annual accounts prepared under “New” UK GAAP won’t be hitting doormats until Spring 2016, the transition to New UK GAAP can have consequences well in advance of next year’s reporting season.
Most significantly, a company’s distributable profits position will need to be assessed by reference to New UK GAAP when it is in its first reporting period under the new regime. Accounting changes introduced by New UK GAAP may reduce or eliminate a company’s distributable reserves, and so listed companies will need to be sure that they understand the impact of those changes to ensure a proposed dividend payment or share buy-back is lawful.
Corporate governance: the “loi Florange” – French listed companies and a controversial new law on weighted voting
The French government has been on a shopping spree on the French stock exchange in the past few weeks. It has increased its stake in a number of listed companies, in order to defeat resolutions designed to negate a controversial new law intended to encourage long-termism amongst investors in public equities.
The “loi Florange” passed into French law last year and provides that shareholders of French listed companies are entitled to exercise augmented voting rights after a two-year holding period, unless such rights are expressly excluded by the company’s constitution. This year’s French AGM saison has seen a number of household names seeking to make such changes to their constitution. We look at the efforts of the French government to frustrate those efforts and give the new law some teeth, and assess the approach to weighted voting on the capital markets in the UK and elsewhere.
Company administration: new ICSA guidance on general meeting notice periods
The Institute of Chartered Secretaries and Administrators has published new guidance on general meeting notice requirements, looking at the position under both the Companies Act 2006 and the UK Corporate Governance Code.
Annual reporting: ICSA spotlight on best practice
ICSA has issued a guidance note on best practice in annual reporting, emphasising the opportunities it presents – in its words, an “annual report can generate more value if viewed as a communications opportunity rather than a compliance obligation.” ICSA also gives the winners of its Excellence in Governance Awards initiative, which identifies some of the best exponents of corporate reporting amongst the FTSE 100, FTSE 250 and AIM.
IoD head: put employees onto Remcos as observers
Listed companies should consider allowing an employee to observe Remuneration Committee meetings, as a way of increasing transparency around the setting of executive pay. That is the argument put forward by Simon Walker, Director General of the Institute of Directors, in a recent speech to the High Pay Centre.
As reported by The Times, Mr Walker said that:
“Bringing an employee on to the board and the remuneration committee as an observer, on a voluntary basis, could be a good step. It would make the process more transparent and it would make executives consider how their pay requests are going to go down with employees and with the public.”
Takeovers: Panel consults on Takeover Code changes to provide certainty on treatment of offer period dividends
The Code Committee of the Takeover Panel has published Public Consultation Paper 2015/1 on the treatment of dividends paid by an offeree company to its shareholders during an offer period. The proposed changes to the Takeover Code set out in the consultation paper are, in the Committee’s words, “intended to clarify the existing provisions of the Code and to ensure greater alignment of the Code with the existing practice of the Panel Executive”.