Included in this issue: FRC consults on changes to its strategic report guidance; Shareholders flex their muscles in 2017 AGM season to reduce FTSE pay; Preventing the facilitation of tax evasion and more...
FRC consults on changes to its strategic report guidance
The Financial Reporting Council (FRC) has published a consultation paper setting out draft amendments to its Guidance on the Strategic Report, which was first published in June 2014. The proposed amendments are not intended as a fundamental review of the Guidance but aim to update it to reflect changes to the strategic report requirements made by the Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016 (Non-Financial Reporting Regs), which apply in relation to the financial years of companies and qualifying partnerships beginning on or after 1 January 2017.
The proposed amendments reflect:
- the FRC's desire to improve the effectiveness of s.172 of the Companies Act 2006 by encouraging companies to provide better information on how they and their directors have discharged this duty in order to improve accountability to shareholders and other stakeholders. The FRC believe that companies need to think more broadly about the impact their activities may have on society as a whole; and
- the enhanced disclosures that certain large companies are required to make by virtue of the Non-Financial Reporting Regs in respect of the environment, employees and social matters, respect for human rights and anti-corruption and anti-bribery matters.
Further targeted changes are also being made to reflect other recent developments in corporate reporting and broaden the view of companies when coming to conclusions on materiality. The closing date for responses to the consultation is 24 October 2017. We will issue a more detailed update once the conclusions of the review have been published.
The FRC has also published a factsheet which provides an overview of the Non-Financial Reporting Regs. The factsheet provides an overview of the new regulations, covering whether a business is in scope (including certain debt issuers whose securities are admitted to trading on a regulated market), what needs to be disclosed and the differences as against the existing disclosure regime.
2017 AGM Season
Shareholders flex their muscles in 2017 AGM season to reduce FTSE pay
The Investment Association has published an analysis of the 2017 AGM season voting which revealed that:
- FTSE100 companies saw a 35% decrease in 2017 remuneration resolutions that received over 20% dissent compared with 2016;
- FTSE250 companies saw a 100% increase in companies getting 20% or more of votes against their remuneration resolutions compared to 2016;
- FTSE350 companies overall saw a 300% increase in votes against a Director re-election; and
- 6 FTSE350 companies withdrew resolutions on pay ahead of their AGMs to avoid a shareholder rebellion.
Governance and Non-Executive Directors
Non-Executive Directors – Monitors to Partners
Tomorrow's Company have produced a report which discusses some of the issues around the current approach to non-executive directors and corporate governance in general.
The report argues that a new direction of travel is needed that supports innovation in governance structures, greater alignment between NEDs and executives, and a focus on long-term investment with appropriate risk-taking. The report analyses these issues and poses questions and actions for how this could be put into practice by boards, investors, policymakers and regulators.
Governance on AIM
As part of its wide ranging discussion paper on proposed changes to the AIM Rules for Companies, the London Stock Exchange has focused on governance and poses the broad question as to whether the current requirements which exist on admission are effective.
The question is also raised as to whether it should be mandatory for AIM companies to "comply or explain" against one of the industry codes of their choosing – i.e. the UK Corporate Governance Code or the Quoted Companies Alliance Corporate Governance for Small and Mid-Size Quoted Companies.
Responses are required to the discussion paper before 8 September 2017.
Preventing the facilitation of tax evasion
Further to our recent G&C update focusing on tax, the Government has confirmed that the new tax-related criminal offences for, among others, UK companies and partnerships created by the Criminal Finances Act 2017 and relating to the failure to prevent tax evasion will come in to force on 30 September 2017.