Included in this issue: Changes to exemptions from the obligation to publish a prospectus; Panel rulings re Sky plc; FRC publishes 2018 UK Corporate Governance Code and revised guidance and more... 

Equity Capital Markets

Changes to exemptions from the obligation to publish a prospectus

The Financial Services and Markets Act 2000 (Prospectus and Markets in Financial Instruments) Regulations 2018 (FSMA Regulations) have been published. The FSMA Regulations implement Articles 1(3) and 3(2) of Regulation (EU) 2017/1129 (Prospectus Regulation) by amending section 86 of and Schedule 11A to the Financial Services and Markets Act 2000 as follows:

  • increasing the scope of the exemption for offers to the public in section 86(1)(e) from offers with a total consideration in EEA States not exceeding €100,000 to offers not exceeding €8m; and
  • limiting the scope of the exemption for offers to the public in paragraph 9, Part 2 of Schedule 11A to offers of transferable securities where the total consideration for the securities being offered in EEA States is less than €1m (down from the current €5m threshold).

The reason for the threshold for one exemption increasing significantly whilst the other being reduced flows from the approach taken in the Prospectus Regulation, which brings offers of securities where the total consideration exceeds €1m into the scope of the prospectus regime, but confers on Member States power to exempt offers up to the higher €8m figure. However, as different Member States may set different thresholds under national laws, the €8m threshold should only be relied upon for UK domestic offers.

The changes in the FSMA Regulations came into effect on 21 July 2018.

ESMA consults on guidelines on risk factors and minimum information content for prospectus exempt documents

The European Securities and Markets Authority (ESMA) has launched two public consultations relating to the Prospectus Regulation. ESMA is seeking views on (i) its proposed guidelines on risk factors under the Prospectus Regulation and (ii) its technical advice on exempt documents produced for the purpose of offers to the public or admission of securities to trading in connection with a takeover, merger or division. The consultations close on 5 October 2018.

LSE amends AIM Rules for Nomads

Following its consultation launched in April this year, the London Stock Exchange (LSE) has published amended AIM Rules for Nominated Advisers (Nomad Rules). The Nomad Rules have been revised as regards, among other things: eligibility criteria (Rule 2), supervision and disciplinary matters (Rule 27), and moratoriums (Rule 31). The schedule to AIM Notice 52 sets out the changes in more detail. The revised rules come into force on 30 July 2018.

LSE consults on amendments to enable trading of depository receipts representing Chinese A-shares

The LSE has published a consultation proposing amendments to the Admission and Disclosure Standards to enable depository receipts representing Chinese A-shares to be admitted to the LSE's Main Market for listed securities (Main Market) and traded through the LSE's International Order Book trading service. The LSE aims to launch the Shanghai-London Stock Connect Segment of the Main Market in the last quarter of 2018 and the consultation forms part of its preparatory work.

FCA provides update on how it is preparing for the UK leaving the EU

The Financial Conduct Authority (FCA) has published a statement which provides stakeholders with an update on how it is preparing for the UK leaving the European Union, in the context of HM Treasury issuing a paper setting out its approach to amending financial services legislation. 

Government responds to report on social impact investment

The government has responded to the industry-led report on Growing a culture of social impact investment in the UK, which made a number of recommendations to better enable people to invest in line with their values. As part of the response, the government has committed to work with the investment and savings industry to support the launch of further social impact investment funds.  


Panel rulings re Sky plc

In April's Corporate Finance News we covered the confirmation by the Takeover Panel (Panel) that the Walt Disney Company (Disney) was required to make a "chain principle" mandatory bid for Sky plc (Sky) on the completion of its acquisition of Twenty-First Century Fox Inc. (Fox) (after a divestment of certain businesses of Fox), as a result of Fox's holding of approximately 39% of Sky. In late June, the Panel noted Disney's increased offer for Fox which it followed with a further statement on the application of the chain principle in light of that increased offer and its ruling on the price Disney must pay for Sky's shares. Various parties have since requested that the Panel's ruling be reviewed by the Hearings Committee of the Panel. Accordingly, the Committee will be convened on Friday, 27 July 2018. We'll update on the conclusions of the Committee in our next edition.

Panel Statement re Rangers International Football Club plc

The Panel has issued a statement regarding a rejection by the Chairman of the Hearings Committee of a request to convene the Committee. The request had been received from Mr David King in light of the Panel Executive's refusal to agree to his request for an extension of time to send an offer document to the shareholders of Rangers International Football Club plc pursuant to Rule 24.1 of the Takeover Code (Code).

Panel publishes 2018 Annual Report

The Panel has published its 2018 Annual Report. As well as reiterating various changes to the Panel and the principal changes to the Code during the year, it also highlights, in the Chairman's Statement, the fact that the Panel has had to take its first statutory proceedings in the case of Mr King despite being put on a statutory footing 12 years ago.

Corporate Governance 

FRC publishes 2018 UK Corporate Governance Code and revised guidance

The Financial Reporting Council (FRC) has published the 2018 UK Corporate Governance Code (2018 Code) and revised Guidance on Board Effectiveness including feedback on the 275 responses it received to its December 2017 consultation. It has also published a version of the 2018 Code highlighting changes from the initial consultation draft. The 2018 Code applies to companies with a premium listing in relation to financial periods beginning on or after 1 January 2019. For an overview of the FRC's feedback, please read our Governance & Compliance update.

Public Register of Shareholder Dissent reveals directors in the firing line

The Investment Association (IA) has published statistical analysis of shareholder dissent in the 2018 AGM season based on an analysis of the Public Register of Shareholder Dissent. By way of reminder, the Register was established and is run by the IA and records those FTSE All-Share companies which have received 20%+ votes against any resolution at an AGM or general meeting. It also records details of any shareholder resolutions which were withdrawn by a company prior to such a meeting.

The data shows that:

  • 94 companies have been added to the Register in 2018, 34 of which were added due to director-related resolutions - an increase of 62% when compared with the same point in 2017;
  • the number of individual director-related resolutions included in the Register rose from 27 in 2017 to 54 in 2018, an increase of 100%;
  • the number of companies on the Register due to pay related issues rose by 14%;
  • there are 28 instances of companies appearing on the Register in 2017 and 2018 in relation to resolutions dealing with the same subject matter; and
  • 74% of companies added to the Register so far in 2018 (55% in 2017) acknowledged shareholder dissent in their AGM results announcement and set out the actions they intend to take. 

Andrew Ninian, Director of Stewardship and Corporate Governance at the IA, said "An emerging trend midway through this year’s AGM season is the increase in directors receiving high votes against their re-election. Directors are getting a very clear message from shareholders that they will be held accountable for their actions".

The 2018 Code requires, among other thing, companies to publish an update on the views received from shareholders and actions taken to consult shareholders in order to understand the reasons behind the vote no later than six months after the shareholder meeting. This is in addition to the board providing a final summary in the company's next annual report and, if applicable, in the explanatory notes to resolutions at the next shareholder meeting, on what impact the feedback has had on the decisions the board has taken and any actions or resolutions proposed. The FRC has indicated that this Provision applies in 2019.

Hampton-Alexander Review publishes progress update

Figures have been released by the Hampton-Alexander Review to chart progress on the targets it set in 2016. The announcement revealed that:

  • FTSE 100 firms are on track to reach the government-backed target of 33% of board positions going to women by 2020 but the FTSE 350 may fall short;
  • approximately 25% of FTSE 350 board positions are held by women but there remain 10 all-male boardrooms;
  • the online portal for FTSE 350 companies to submit their gender leadership data is now open; and
  • progress made on women in executive and leadership roles will be revealed in November 2018.

The statistics show that if progress continues at the same rate as over the last three years, FTSE 100 companies are on track to meet the target of 33% of board positions going to women by 2020 (currently 29% of FTSE 100 board positions are held by women). However, while the number of women on boards has increased to 25.5% in FTSE 350 companies, around 40% of all appointments need to go to women in the next two years for companies in that bracket to achieve the 33% target. 

Financial Reporting 

FRC Lab Report: Reporting of performance metrics

The FRC's Financial Reporting Lab (Lab) has published a new report which sets out investors’ views on the reporting of performance metrics. It also includes a framework, based on five key principles, and questions for companies and their boards to consider when deciding on how they report their performance.

The next phase of the project will seek to identify examples of how these principles can be put into practice. Investors and company representatives should contact: to take part. 


Government proposes much tougher powers for Pensions Regulator

The Government has published a consultation on proposals for a major overhaul of the powers of the Pensions Regulator. The proposed changes could have a significant impact, particularly on the way in which pensions are dealt with on corporate transactions. The consultation, which runs until 21 August 2018, fleshes out the proposals contained in the White Paper on Defined Benefit Pension Schemes published in March.

The proposed changes would amount to a significant increase in the powers of the Pensions Regulator, giving it a very broad discretion to impose significant liability on persons associated with a defined benefit pension scheme. In many cases, liability can be imposed without any need to prove deliberate wrongdoing, and possibly with the benefit of hindsight years after a relevant event.

For further information, please read this e-bulletin prepared by our Pensions team.

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