Included in this issue: ESMA publishes guide to major holdings notifications in the EEA; FCA reminds firms of obligation to support Takeover Panel's functions;FRC publishes annual report on developments in corporate governance and stewardship and more...  


Equity Capital Markets

ESMA publishes guide to major holdings notifications in the EEA

The European Securities and Markets Authority (ESMA) has published a practical guide to national rules across the EEA on major shareholding notifications. The guide is intended to help market participants navigate the different requirements across the EEA.

The guide contains a fact sheet which summarises the national requirements in relation to making and publishing notifications of major holdings as well information on rules and practices in table form to enable a comparison between the rules of different jurisdictions.

ESMA updates its MAR Q&A

ESMA has published an updated version of its Q&A on the EU Market Abuse Regulation (No. 596/2014) (MAR). Changes since the last version include new questions and answers in which ESMA confirms:

  • the rules to be followed to calculate the price of options granted for free to managers or employees for the purpose of the notifications and disclosure of managers' transactions under Article 19 of MAR. ESMA confirms that the value of these transactions needs to be taken into account when calculating the cumulative amount of the transactions of a PDMR or a person closely associated with a PDMR, to assess whether the €5,000 threshold has been crossed, thereby triggering the duty to notify the FCA and issuer and disclose all subsequent transactions (prevailing market practice is that companies are ignoring the €5000 threshold and disclosing all PDMR transactions and those of persons closely associated with them); and
  • that, when a notification has to be made to the market, the price field for options granted for free to managers or employees is expected to be populated with "0" (zero). 


The Q&A on MAR also includes new questions and answers relating to investment recommendations.

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ESMA publishes further version of its Q&A on prospectuses

ESMA has published version 26 of its Q&As on prospectuses. Changes since the last version include a new Q&A on the application of ESMA's guidelines on alternative performance measures. The new answer clarifies how to apply the guidelines when constituent parts of a prospectus straddle the date on which the guidelines came into force (3 July 2016). See the answer to Qn 101.

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Public M&A

Re: Dee Valley Group plc: High Court rules on effect of share-splitting

Last week, the UK High Court issued a ruling sanctioning a scheme of arrangement (takeover scheme) in respect of Dee Valley Group plc (Dee Valley) and its proposed takeover by Severn Trent Water Limited (Severn Trent). Leave to appeal the scheme sanction decision has, however, been granted by the Court and the takeover scheme's implementation has been delayed, pending a possible Court application to appeal being lodged by 13 February.

Severn Trent's takeover offer for Dee Valley is in competition with an offer from Ancala Fornia. Shortly in advance of the Dee Valley's shareholder meetings to approve the takeover scheme, it came to Dee Valley's attention that approximately 445 transfers of small holdings of Dee Valley shares by one or more transferors had been made (multiple share transfers). Those transfers were subsequently discovered to have been made by Dee Valley employees who objected to the takeover by Severn Trent. In order to become effective, a scheme of arrangement needs, amongst other things, in accordance with the requirements of the Companies Act 2006, to be approved at a court convened meeting of shareholders, at which meeting a majority in number of shareholders voting (the Majority in Number Test), representing 75% in value of those shares voted in person or by proxy (or 75% of any class of shares, if applicable) vote in favour. As a result of the multiple share transfers, and on the basis that the shares transferred were voted by the transferees against the takeover scheme, if the votes of the transferees of the multiple share transfers were treated as counting towards the Majority in Number Test, it could be argued that such test had not been satisfied and that, therefore, the takeover scheme would not have been validly approved by shareholders. Dee Valley sought and obtained a Court direction to the effect that the votes attaching to certain of the multiple share transfers may be ignored by the chairman of the meeting. The Court subsequently issued its ruling, sanctioning the scheme and confirming that the votes attaching to certain of the multiple share transfers could be ignored. The Court also ruled, however, that the filing of the scheme sanction order (in order to make the takeover scheme effective) be delayed, pending a possible Court appeal of its ruling.

The Court sanctioned the scheme on the basis that:

  • shareholders voting at a court convened meeting should exercise their voting rights for the purpose of benefiting the class of members as a whole, and not merely as individual members for a collateral purpose;
  • the chairman of the meeting has an inherent power to reject votes to protect the integrity of the meeting against practices such as share-splitting, which could frustrate the statutory purpose of the meeting; and
  • in the present case, the chairman had sufficient evidence to conclude that the only possible explanation for the conduct of the shareholders who split their shares was to further a share manipulation strategy to defeat the scheme under the Majority in Number Test.

We will provide a further update should this ruling be reconsidered on appeal.

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Takeover Panel gives pair the cold shoulder

The Hearings Committee of the Takeover Panel (Hearings Committee) has issued a statement following a ruling by it relating to a breach of the City Code on Takeovers and Merger (City Code). Both Bob Morton and John Garner were found to have committed serious breaches of section 9(a) of the Introduction to the City Code, which provides for the way in which the Panel expects those subject to its jurisdiction to deal with it, in particular to do so in an open and co-operative manner.

The Hearings Committee found that both individuals had provided false information to the Takeover Panel during the course of an investigation into a potential breach by Mr Morton of an obligation to announce a mandatory offer under Rule 9 of the City Code. In doing so, documents had been created and backdated with the intention of deceiving the Takeover Panel.

As a result, the Hearings Committee imposed the cold-shouldering sanction effective for six years in relation to Mr Morton, and for two years in relation to Mr Garner. Cold-shouldering is the most severe sanction available and indicates that the offender is someone who, in the Hearings Committee's opinion, is not likely to comply with the City Code. To view the full statement issued by the Hearings Committee - click here.

FCA reminds firms of obligation to support Takeover Panel's functions

On the back of the Takeover Panel's ruling in relation to Messrs Morton and Garner, the Financial Conduct Authority (FCA) has issued a statement reminding regulated firms of their obligations under the provisions of the FCA's Market Conduct sourcebook, in particular to support the Takeover Panel and not to deal with individuals given the cold-shoulder sanction on any transactions to which the Takeover Code applies.

Corporate Governance

Industrial strategy: BEIS Green Paper published

The Department of Business, Energy and Industrial Strategy (BEIS) has published a Green Paper entitled 'Building our Industrial Strategy', the aim of which is to build on Britain's strengths and tackle its underlying economic weaknesses. This strategy is to be underpinned by ten 'strategic pillars' and the Green Paper sets out the government's proposals in each area.

The ten pillars identified are: investing in science, research and innovation; developing skills; upgrading infrastructure; supporting business growth and investment; improving procurement; encouraging trade and investment; delivering affordable energy; cultivating world leading sectors; driving growth across the whole country; and creating the right institutions to bring together sectors and places. The deadline for responding to the Green Paper is 17 April 2017.

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FRC publishes annual report on developments in corporate governance and stewardship

While compliance with the principles of the UK Corporate Governance Code (Governance Code) remains high according to the Financial Reporting Council's (FRC) annual review of governance and stewardship, boards which choose not to follow its provisions continue to provide poor quality explanations. Consequently, the FRC is calling for greater oversight powers to encourage more focussed reporting. While the FRC had intended to leave the Governance Code unaltered until 2019, the government's renewed focus on governance means that further changes will be proposed during 2017 together with guidance for nomination committees. For more information, please read our Governance & Compliance update.

Company Compliance and Transparency

Guidance published on the duty to report on payment practices and performance

BEIS has published its guidance for companies and LLPs in relation to the new obligation to report on their payment practices and performance. The obligation commences for companies in scope in relation to financial years beginning on or after 6 April 2017. Among other things, the guidance sets out:

  • which companies and LLPs are within scope, and when parent companies and parent LLPs will be required to report;
  • what needs to be reported in respect of payment terms and payment performance; and
  • when and where the information must be reported.

For further detail on these requirements, see our Governance & Compliance update produced following the publication of the first draft of the relevant regulations. A further, more comprehensive update will be produced shortly.

Gender Pay Gap reporting

On 6 April 2017, new regulations come into force requiring all employers in the private and voluntary sectors with 250 or more employees to publish certain data outlining the differences in pay between their male and female employees. The information collected must be published annually and retained for a minimum of 3 years. For more information click here.

Narrative Reporting

New ESMA Q&As on Alternative Performance Measures

ESMA has published a new set of Q&As on its guidelines for issuers when presenting alternative performance measures (APMs) in publically available documents containing regulated information and in prospectuses. This is an update from the Guidelines published in October 2015 which applied to communications (including annual and half yearly results and RNS announcements) by listed companies from 3 July 2016.

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Further narrative reporting requirements for larger listed companies implemented 

The Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016 implement part of the EU Non-Financial Reporting Directive. The regulations, which apply in relation to the financial years of companies and qualifying partnerships beginning on or after 1 January 2017, require companies and groups of a certain size and which have more than 500 employees, to produce a non-financial statement as part of their annual report. For more details, please read our Governance and Compliance update issued on the publication of the near final draft of the regulations.

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Key contact

Will Chalk

Will Chalk

Head of Corporate Governance
United Kingdom

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