Included in this issue: Register of People with Significant Control guidance finalised; PSC regime – application to LLPs and SEs; Sweett Group plc fined £2.25 million in first s.7 Bribery Act conviction and more...
Small Business, Enterprise and Employment Act 2015 (SBEEA)
Register of People with Significant Control guidance finalised
The requirements of the Small Business, Enterprise and Employment Act 2015 for companies and LLPs to create registers of "persons with significant control" come into force on 6 April 2016. To read our comprehensive briefing on the subject, which contains links to all statutory and non-statutory guidance – click here. The Department of Business, Innovation and Skills (BIS) continues to published further guidance and clarificatory statements on the regime. You can find updates on all these developments on the Insights page of our website.
BIS has also published a discussion paper on enhancing transparency of beneficial ownership information of foreign companies undertaking certain economic activities in the UK.
PSC regime – application to LLPs and SEs
The PSC regime also applies to UK LLPs and to European public limited liability companies (or SEs) registered in the UK. In both cases, the obligation to create and maintain a PSC register starts on 6 April 2016. As part of this:
- The Limited Liability Partnerships (Register of People with Significant Control) Regulations 2016 have now been published in final form, without amendment from the draft published in January. These apply the PSC provisions in new Part 21A of the Companies Act 2006 to LLPs; and
- The European Public Limited Liability Company (Register of People with Significant Control) Regulations 2016 have been published and modify the PSC regime to ensure that it operates appropriately in respect of SEs.
Sweett Group plc fined £2.25 million in first s.7 Bribery Act conviction
The Serious Fraud Office (SFO) has reported that the construction and professional services company, the AIM-quoted Sweett Group PLC, has been convicted and ordered to pay £2.25 million (which includes an element of confiscation and costs) following an investigation into its activities in the United Arab Emirates and the fact of its operating subsidiary bribing a foreign public official. A deferred prosecution agreement was deemed not to be appropriate in this case and it is, therefore, the first conviction secured by the SFO under section 7 of the Bribery Act 2010.
HM Treasury Budget 2016
The Chancellor of the Exchequer gave his Budget to Parliament on Wednesday 16 March 2016 in response to which AG has published the following updates dealing with:
As part of the Budget, the government also announced that it will abolish the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme following the 2018-19 compliance year. Businesses will be required to surrender allowances for the final time in October 2019.
Companies House fees
Further to the announcement last month that Companies House were increasing fees on 6 April 2016, they have now announced that fees will not be changing on this date.
New SH19 and NAC01 Companies House forms
Companies House have added two new forms to reflect the implications of the abolition of bearer shares as a result of the SBEEA:
- Statement of capital on cancellation of share warrants (SH19); and
- Notice of an application to court to cancel share warrants (NAC01).
Company law and compliance
New procedure facilitating rectification of company registers
The Registrar of Companies and Applications for Striking Off (Amendment) Regulations 2016 (SI 2016/441) have been published and, on 6 April 2016, will introduce a new administrative procedure for removing material naming a person as a company director from the public companies register. The aim of these regulations is to make it easier to remove the details of falsely or incorrectly appointed directors from the register (i.e. those that did not consent to be appointed). Companies House will publish guidance on the new procedure in due course.
Preventing the unauthorised use of registered office addresses
The Companies (Address of Registered Office) Regulations 2016 (SI 201/423) have been published and, on 6 April 2016, introduce a new administrative procedure to allow the registrar of companies to change the registered office address of a company or LLP where, upon application, the registrar considers that the entity is not authorised to use that address. Companies House will publish guidance on the new procedure in due course.
Determining realised and distributable profits
Distributions: exposure draft on updated guidance on realised and distributable profits
The Institute of Chartered Accountants in England and Wales (ICAEW) has published an exposure draft of updated guidance on the determination of realised and distributable profits and losses in the context of distributions under the Companies Act 2006. As well as updating references to accounting standards and removing obsolete material, it also contains additional guidance on what constitutes a distribution, distributions in kind and dealing with intra-group loans in off-market terms. While comments on the exposure draft must be submitted by 9 June 2016, to the extent that it deals with issues concerning the interpretation of the law, the ICAEW state that it should be regarded as having immediate effect.
PIRC Shareholder Voting Guidelines 2016
Pensions & Investment Research Consultants Ltd has published its UK Shareowner Voting Guidelines for 2016. As regards the 2016 AGM season it states that:
- PIRC will not support authorities for the disapplication of pre-emption rights up to an amount equal to 10% of the company’s issued ordinary share capital in accordance with the revised Pre-Emption Group Guidelines unless the board has made a "clear, cogent and compelling" case why the 10% level is appropriate;
- PIRC recommends voting against future share buyback authorities unless the board has made a "clear, cogent and compelling case" demonstrating how the authority benefits long-term shareholders and that the directors are not conflicted in recommending the authority;
- In relation to the re-appointment of auditors, PIRC recommends abstaining on such a resolution where non-audit fees are between 25% and 50% of audit fees and opposing the resolution where non-audit fees exceed 50% of audit fees for either the year under review or the previous three years; and
- Considers the provision of remuneration consultancy by audit firms to be wholly unacceptable.
Improving board diversity - A six-step guide
The Equality and Human Rights Commission has issued guidance on the steps that organisations should consider to promote fairness and diversity. They have also published an inquiry into the fairness, transparency and diversity of FTSE 350 board appointments.
Viability Statements in December 2015 annual reports year ends
KPMG has published a briefing on viability statements following a review of 18 FTSE 350 companies which have published their December 2015 annual reports. KPMG find:
- The majority (72%) have placed the statement in the Strategic Report;
- Every company placed the statement so as to take advantage of the Companies Act 2006 s.463 "safe harbour"; and
- The viability assessment periods appear to be based on companies' existing medium-term planning cycle. 78% of companies surveyed had a statement indicating viability for 3 years, while the remaining 22% disclosed 5 years.
Reproduced with KPMG's kind permission.
FTSE 100 companies are failing to provide shareholders with information on ethics
The Chartered Institute of Internal Auditors has published research finding FTSE 100 companies are failing to provide evidence to shareholders to prove that they are taking ethics seriously in their annual reports.
FRC highlights recent changes in reporting ahead of 2016 AGM season
The Financial Reporting Council has written to investors ahead of the 2016 AGM season to highlight recent changes in financial reporting and suggests how they may be dealt within a company's annual report.
Market Abuse Regulation
Final implementing technical standards published
The European Commission has begun the process of publishing finalised implementing technical standards which sit alongside the Market Abuse Regulation (MAR) and need to be read in conjunction with it. The first tranche deal with:
- Buybacks and stabilisation, which acts as a safe harbour from the offences of insider dealing and market manipulation – click here; and
- Insider lists, containing the final form of such lists for issuers and those acting on their behalf to compile when in possession of inside information – click here.
Partnerships and private equity
Responses to government consultation on changing legislation for private equity investments
HM Treasury has published a summary of responses it has received to its consultation proposing changes to partnership legislation for private equity investments.
The government has decided to establish a scheme for private funds structured as a limited partnership. It notes that some of the proposals may be beneficial if applied to all limited partnerships, not only private funds, but that wider ranging proposals would require further consideration to include an assessment of risks and impacts and will consider appropriate next steps.
Supreme court case underlines directors' responsibility to use their powers for a "proper" purpose
The case of Eclairs Group Ltd and Glengary Overseas Ltd v JKX Oil & Gas plc  UKSC 71 arose out of a dispute in the context of an alleged 'corporate raid' by Eclairs and Glengary, two of JKX Oil & Gas Plc's (JKX) largest shareholders.
Eclairs and Glengary wrote to JKX requiring it to convene a general meeting to consider resolutions to remove the chief executive and commercial director from the board and appoint three new directors proposed by them.
Suspecting a 'corporate raid', the board of JKX issued disclosure notices to Eclairs and Glengary requesting that they disclose certain information relating to their interests. Unconvinced of the accuracy of the information provided in response, the board of JKX suspended Eclairs and Glengary's right to vote at general meetings just two days before the shareholder meeting where Eclairs and Glengary intended to oppose certain significant resolutions proposed by the Company as well as voting in favour of those resolutions which they had added to the business of the meeting.
Eclairs and Glengary challenged the suspension of their voting rights claiming that the board had not acted for a 'proper purpose' in accordance with s.171(b) of the Companies Act 2006.
Following judgements in the High Court and the Court of Appeal, the Supreme Court held that, in seeking to influence the outcome of a general meeting, the directors had not used the power granted to them under s793 of the Companies Act for a proper purpose.
This judgement underlines the need for directors to consider the proper purposes behind a power granted to them as distinct from the general interests of the company.
If you have any general queries, please email the corporate news team.