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
It’s been previously announced and now there’s a further development: LSE nomad censure a reminder of the need to update the market
The London Stock Exchange recently announced that a nominated adviser has been privately censured and fined £90,000. This penalty was for failing to advise an AIM-traded company to disclose to the market that a material payment had not been received within a previously announced timeframe.
The case is a useful reminder for all quoted companies – both Main Market and AIM – of the need to update the market of developments in previously announced matters, in order to avoid a false market arising in the company’s shares.
New law to reveal who controls the UK’s companies
Details of the individuals who ultimately control UK companies will have to be recorded in a new “people with significant control” register – to be known as the “PSC register” – which was passed into law on 26 March 2015 as part of the Small Business, Enterprise and Employment Act 2015. The new law is part of a global move by governments and other organisations towards greater transparency in corporate structures, with the aim of combatting money laundering, terrorist financing and tax evasion.
Every UK company will have to maintain a PSC register, except those publicly listed companies which are subject to Chapter 5 of the FCA’s Disclosure Rules and Transparency Rules (so Main Market and domestic AIM companies will not have to maintain a register). UK subsidiaries, including wholly-owned subsidiaries, of publicly listed companies are not exempt and will have to maintain their own PSC register.
The PSC register will name and contain information on individuals who ultimately own or control more than 25% of the company’s shares or voting rights, or who otherwise exercise significant control over the company or its management. If control is exercised through a UK company which itself has to maintain a PSC register or through a publicly listed company which is subject to Chapter 5 of the DTRs, the details of that company will be included in the register. This should make it straightforward for subsidiaries of companies listed in the UK to maintain their PSC register, as they will simply have to provide the details of their holding company. We await confirmation from Government as to whether equivalent provisions will apply to UK subsidiaries of companies listed overseas.
The UK Government expects companies to start maintaining their PSC register from January 2016. The register will be open to public inspection and will be searchable online via Companies House from April 2016, according to the current Government schedule.
We have a set of resources dedicated to the introduction of the PSC register here.
Abolition of corporate directors: companies can’t have other companies as directors
Every director of a UK company will have to be a living person under changes to company law made by the Small Business, Enterprise and Employment Act 2015. Subject to some exceptions – the details of which are awaited – it will no longer be possible for a company to act as a director of a UK-incorporated company.
This change is expected to come into force from October 2015, with a 12 month grace period for existing non-natural directors until October 2016.
Declaring dividends by reference to interim accounts: a potential trap for public companies
A number of ratification circulars have been published by listed companies in recent years, seeking to put right dividends which could have been lawfully made, but which were unlawful due to the failure to file “interim accounts” demonstrating those distributable profits – and thereby justifying the dividend – at Companies House.
Whilst relatively easy to fix, having to convene a general meeting and ask shareholders to release the directors (and shareholders themselves) from potential personal liability to repay the dividend is time-consuming and potentially costly, amongst other consequences.
Throwing a little grit into the cashbox: the Pre-Emption Group issues revised statement of principles
The Pre-Emption Group, which for many years has represented the views of institutional investors on non pre-emptive share issues by listed companies, has released a revised statement of principles. The revised statement is more detailed than the previous guidance issued by the Group and, for the first time, expressly deals with structures designed to circumvent statutory pre-emption rights, such as “cashbox” transactions.
Mandatory gender pay gap reporting within a year
The Small Business, Enterprise and Employment Act 2015 will require the mandatory reporting of gender pay information by larger companies. The precise details of these new regulations will be subject to consultation, but it is anticipated that private and voluntary sector employers with at least 250 employees will be required to carry out an equal pay review and publish on an annual basis the differences in pay (including starting salaries) within their organisation between their male and female (full and part time) employees.
PIRC publishes its 2015 Shareowner Voting Guidelines: some changes of emphasis
Pensions & Investment Research Consultants Ltd, the corporate governance and shareholder advisory consultancy, has published its “UK Shareowner Voting Guidelines 2015”. Many of the changes from the 2014 edition are symptomatic of current issues in investing and governance, so we’ve picked out some of the more interesting comments and amendments.
Women on Boards 2015: “A revolution in boardrooms of FTSE companies”
It is four years since Lord Davies published his “Women on Boards” review, setting out recommendations aimed at increasing the number of women on listed company boards. March 2015 saw the publication of the latest annual review of progress made on those recommendations.
Shell’s move on BG Group + prohibition on cancellation schemes = £235 million for HM Treasury
From 4 March 2015 the use of cancellation scheme of arrangements on takeovers was prohibited. That meant that it is no longer possible to avoid stamp duty by executing a takeover of a UK-incorporated company via a cancellation scheme. The prohibition equalised the tax treatment of schemes and contractual offers on takeovers from a stamp duty perspective.
On 8 April 2015 Royal Dutch Shell announced its agreed £47 billion cash and shares offer for BG Group. That is to be effected by a transfer scheme of arrangement and so Shell, when the deal completes, will pay stamp duty of around £235 million.
When HM Treasury announced the cancellation scheme prohibition in the 2014 Autumn Statement, it estimated that closing this stamp duty loophole would raise £65 million for the UK taxpayer. Within a few weeks of the prohibition coming into force, Shell’s move meant that that estimate was already out by a factor of three.
- The FCA’s eleventh “Primary Market Bulletin” here.
- ICSA guidance note, “Good practice for annual reports” here.
- “Rebuilding IPOs in Europe; Creating jobs and growth in European capital markets”, a report by the EU IPO Taskforce here. This report is issued in the context of the EU Capital Markets Union initiative, which we discuss here.