Included in the February edition of Corporate News; Register of beneficial owners of overseas entities to go live by early 2021; PLSA releases AGM voting review; The importance of complying with contractual requirements in notifying warranty claims and more...
Register of beneficial owners of overseas entities to go live by early 2021
As previously reported, the government intends to establish a public register of beneficial ownership of overseas legal entities that own or buy property in the UK, or that participate in central government contracts. The government's UK Anti-corruption Strategy 2017-2022 identified this as one of the six priorities for the period to 2022. BEIS has now confirmed the government's intention to produce a draft bill in the summer of 2018 with a view to the register going live in early 2021.
The aim of the register is to prevent the use of shell companies to launder illicit proceeds by helping law enforcement agencies track criminal funds. In addition, the register should provide the government with greater transparency on overseas companies seeking public contracts.
The government's response to its call for evidence is due to be published shortly.
Equity Capital Markets
FCA announces reforms to ensure UK primary markets remain effective
The Financial Conduct Authority (FCA) has published various amendments to the Listing Regime designed to ensure that the UK’s primary capital markets remain effective. The amendments to the Listing Rules and related technical notes came into effect on 1 January 2018. The main changes are:
- a re-ordering and clarification of the rules in Chapter 6 of the Listing Rules which deals with eligibility requirements for applicants to premium listing;
- the removal of the reference to the FCA's ability to waive the requirement for a clean working capital statement and for a three-year financial track record for new applicants (as it was never used in practice);
- the introduction of a new concessionary route to listing for certain property companies;
- a revision of the rules in Chapters 10 and 11 of the Listing Rules such that there is more scope for issuers to disregard an anomalous profits test in certain situations; and
- the removal, in most cases, of the rebuttable presumption of suspension when an issuer undertakes a reverse takeover.
PLSA Corporate Governance Policy and Voting Guidelines 2018
The Pensions and Lifetime Savings Association (PLSA) has published the latest version of its Corporate Governance Policy and Voting Guidelines. Principal changes include:
- The addition of a new section on sustainability (section 13), which emphasises the importance of positive relations with key stakeholders to a company's long-term performance and highlights climate change as a key sustainability issue. Shareholders should consider voting against the annual report and accounts or the re-election of the chair where they believe that key stakeholder relationships are being neglected. A vote against the re-election of the chair should also be considered where shareholder attempts have failed to encourage companies in sectors affected by climate change to provide a detailed risk assessment and response to the effect of climate change on their business.
- In relation to auditor appointment (section 6), where an auditor has been in place for more than 20 years, a vote against the audit committee chair and auditor should be considered. In addition, a vote against the re-election of the chair of the audit committee, the re-appointment of the auditor and/or the remuneration of the auditor should be considered where non-audit fees paid to the auditor exceed 50% of the audit fee in consecutive years without an adequate explanation being provided.
PLSA releases AGM voting review
Overall, the PLSA's review of the most recent AGM voting season reveals that shareholder dissent at FTSE 350 AGMs has remained at relatively similar levels over the past two years with approximately 20% of companies experiencing a vote of 20% or more on one item of business.
Government investigates whether share buybacks used to inflate executive pay
The Department of Business, Energy and Industrial Strategy has asked PwC and the London Business School to undertake research to understand whether some companies are repurchasing their own shares to artificially inflate executive pay, how companies use share buybacks, and whether action is needed to prevent buybacks from being misused. The findings are expected to be published later in 2018.
The importance of complying with contractual requirements in notifying warranty claims
The High Court case of TEOCO UK Limited v Aircom Jersey 4 Limited and another  EWCH (Ch) has been affirmed on appeal. This case provides a useful reminder of the key legal principles that govern notices in relation to warranty claims, in particular the need to comply strictly with the wording of the of a notices clause.
Under the limitation provisions of the share purchase agreement (SPA), the buyer was required to give the sellers written notice of the claims in question, including reasonable details of each claim and the grounds on which they were based. The buyer's purported notice did not make explicit reference to which particular warranties it alleged had been breached, but rather merely referred to 'Warranty Claims or Tax Claims'. The court held this was not sufficient and whilst that phrase will have included the relevant warranties, it also 'encompassed a multitude of other possibilities', and so did not identify the 'grounds' of the claims. The Court of Appeal held that the buyer's purported notice did not comply with the requirements of the SPA, and the High Court judge had been correct to strike out the buyer's claims.