Included in this issue: Market Abuse Regulation Update; Corporate Governance; Prospectus Reform and more...
Market Abuse Regulation Update
Market Abuse Regulation (MAR) updates
Since the last edition of Corporate Finance News, by way of reminder we have issued updates which deal with:
- The publication by the Financial Conduct Authority (FCA) of feedback on its MAR consultation (CP 15/35) and its final rules.
- The publication by the FCA of its approach to the issue of closed periods and preliminary announcements under MAR and Primary Market Bulletin No.15 attaching forms for FCA submissions required by MAR.
- The publication by the London Stock Exchange of feedback on its MAR-related consultation proposing changes to the AIM Rules as well as a consultation (now closed) by ISDX on proposed MAR-driven rule changes.
Commission final regulations on market soundings published
The following regulations, which will apply from 3 July 2016, have been published by the European Commission in final form:
- The delegated regulation supplementing MAR with regard to regulatory technical standards for the appropriate arrangements, systems and procedures for disclosing market participants conducting market soundings. The text is in substantially the same form as the draft published in May.
- The implementing regulation which sets out the systems and notification templates to be used by disclosing market participants and the format of the records required when undertaking market soundings under MAR.
ICSA, GC100 and the QCA specimen dealing code and procedures manual
ICSA, the GC100 and the Quoted Companies Alliance have jointly published a code of share dealing, an accompanying policy document and a procedures manual for use by companies on both the main market and AIM when revising their systems and procedures in light of MAR. For more detail, read our previous CQC Update.
FCA publishes Guide to submitting a STOR
The FCA has published a step-by-step guide to submitting a Suspicious Transaction and Order Report (STOR) using Connect, the FCA’s electronic secure system, under MAR from 3 July 2016. The new STOR regime derives from Article 16 of MAR and a European Commission supplementary delegated regulation.
FRC feedback statement on succession planning
The Financial Reporting Council (FRC) has published a feedback statement, summarising responses to its October 2015 discussion paper on succession planning on UK boards. The feedback statement sets out responses and suggestions for improvement in the six key areas covered by the discussion paper:
- how effective board succession planning is linked to business strategy and culture;
- the role of the nomination committee;
- board evaluation and its contribution to board succession;
- identifying the internal and external "pipeline" for executive and non-executive directors;
- ensuring diversity; and
- the role of institutional investors.
There was support for further guidance, in particular on the role of the nomination committee and reporting on succession planning. This will be considered as part of the revision of the Guidance on Board Effectiveness towards the end of 2016. In the current reporting season, the FRC will analyse nomination committee disclosures and publish its findings in its 2016 Developments in Corporate Governance and Stewardship Report.
New EU Audit Directive and Audit Regulation
The new EU regulatory framework on statutory audit, encompassing the Audit Regulation and new Audit Directive came into force on 17 June 2016.
As a result of this new framework, the FRC has issued revised versions of the 2016 UK Corporate Governance Code, the Guidance on Audit Committees, the Ethical Standard 2016, and the Auditing Standards 2016.
For an overview of the changes - click here and scroll to the last item. Note that the revised Governance Code applies to reporting periods beginning on or after 17 June 2016.
ecoDa guidance on audit committees
The European Confederation of Directors Associations, in conjunction with PwC, has published new guidance on audit committees (following revised versions of various codes and guidance issued by the FRC as reported above). The guidance focuses on the corporate governance implications of the changes required by EU Audit Directive and Regulation. The guidance describes the main changes required by the legislation and is designed to assist audit committee members gain a better understanding of the practical implications. The guidance includes a summary table of the rights and duties of the audit committee, setting out whether the auditor, the audit committee or another body is responsible.
Investment Association letter to FTSE chairs regarding board oversight of profit expectations and dividend policy
The Investment Association has written to the chairs of listed companies informing them of its intention to "Amber Top" the re-election of non-executive directors of companies which make significant changes to profit expectations and write down the value of assets following the appointment of new management. In the Investment Association's view, this practice evidences insufficient oversight by independent directors and the audit committee.
Commission welcomes Council’s agreement to prospectus reform
The European Commission had adopted a proposal for a new Prospectus Regulation intended to repeal and replace the Prospectus Directive along with its corresponding implementing measures (including the current Prospectus Regulation).
The aim of the reform is to simplify the publication of prospectuses but do so in such a way that ensures that investors continue to be well informed. The Council of the EU has now given its backing to the Commission’s proposal – click here. For an overview of the proposed changes – click here.
Equity Capital Markets
Primary Market Bulletin No 14 (smaller related party transactions)
The FCA has published the fourteenth edition of Primary Market Bulletin in which it proposed changes to its technical note dealing with related party transactions - Modified requirements for smaller related party transactions (UKLA/TN/308.3). The proposed amendments reflect the previous rule changes which altered the regime as regards "Smaller" related party transactions under LR 11.1.10R and highlights the potential need for sponsors to contact the FCA for guidance if, in being asked to provide its letter to the listed company that the terms of the transaction is "fair and reasonable", it has concerns about whether the transaction in question has been correctly classified.
Other publications of relevance
QCA publishes May edition of 'Directors' know how'
The Quoted Companies Alliance (QCA) has published its May edition of "Directors know how", a monthly article that highlights what directors should know about key rule changes. The article includes:
- the Pre-Emption Group's (PEG) 2015-2016 Monitoring report, which looks at the implementation of PEG's Statement of Principles on the disapplication of pre-emption rights from 12 March 2015 to 12 March 2016….on which further detail can be found below;
- the joint ICSA and EY research report on how companies are improving their nomination committees; and
- the FRC Plan & Budget and Levies 2016/17, setting out the FRC's priorities for the year ahead.
Disapplication of Pre-emption Rights
Pre-Emption Group template resolution and monitoring report
PEG has published a monitoring report and press release on the implementation of its 2015 Statement of Principles for disapplying pre-emption rights and template resolutions for disapplying pre-emption rights.
The monitoring report shows that, in general, the 2015 Statement of Principles was adhered to and reinforces the importance of engagement between a company and its shareholders. Having considered the monitoring exercise and investor representatives' views on best practice, PEG has published two template resolutions for disapplying pre-emption rights to assist companies.
For more detail on the report and the template resolutions – click here.
According to PEG, the template resolutions represent good practice and, while they are drafted for companies incorporated in the UK, companies with premium listings incorporated outside the UK should adopt resolutions in an appropriate form. Companies are encouraged to use the template resolutions at their next general meeting but will be expected to use them for meetings held after 1 August 2016.
Takeover Appeal Board: decision on appeals in connection with Ladbrokes merger with Gala
The Takeover Appeal Board has published its decision to dismiss three appeals made by a shareholder of Ladbrokes against the Hearing Committee's ruling on several matters arising in connection with the proposed recommended merger of Ladbrokes plc and Gala Coral Group Ltd.
The appeals related mainly to the disclosure of information regarding a certain amendment agreement entered into by Ladbrokes with Playtech plc immediately before the announcement of the merger. It was argued that the shareholder circular containing the notice of general meeting which set out the necessary resolutions required to be passed by the shareholders of Ladbrokes to approve the merger contained material omissions and inaccuracies which meant it was misleading such that shareholders voted on a false premise.