Included in this update: Government extends temporary COVID-19 measures in CIGA 2020 and more...


CIGA 2020 extensions in force

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 (Extension Regulations) came into force on 29 September 2020. The Extension Regulations extend the duration of various temporary measures introduced by the Corporate Insolvency and Governance Act 2020 (CIGA 2020) beyond their original expiry date of 30 September 2020 including:

  • the relaxation of requirements as regards the manner in which company meetings should be held. These will now expire on 30 December 2020. This means that companies may continue to hold shareholder meetings on a closed basis or virtually in that period. Note that there has been no extension to the deadline by which companies must hold their AGMs. Companies using the CIGA 2020 flexibilities are encouraged to consider the Best Practice Guidance for AGMs, issued by the Department of Business, Energy and Industrial Strategy (BEIS) and the Financial Reporting Council (FRC). On a related note, FTI Consulting and Proxy Insight have published an overview of the 2020 AGM season while analysing proxy voting results particularly in the FTSE 350;
  • the restrictions on use of statutory demands and winding up petitions have been extended to 31 December 2020; 
  • subject to limitations contained in further regulations which have also been laid before Parliament, some of the temporary provisions applying to moratoriums have been extended to 30 March 2021; and 
  • the small supplier exemption from the restrictions on termination of supply contacts has been extended to 30 March 2021.

Market disclosure

ESMA publishes review of MAR

The European Securities and Markets Authority (ESMA) has published its review of the EU Market Abuse Regulation (EU 596/2014) (MAR). The review contains technical advice to the European Commission on various provisions of MAR and builds on feedback received from a consultation published in October 2019. The Commission will use the technical advice to inform its own report on MAR, with formal changes being made in due course. The likely impact of any changes in the UK are uncertain given Brexit, nevertheless, ESMA's report provides useful insight into the current operation of MAR.

ESMA's conclusion is that MAR is fit for purpose and that there should be no changes to the definition of inside information applicable to financial instruments and commodity derivatives, but that "targeted" amendments should be made, with additional or revised guidance produced on certain issues.  

Recommended amendments and clarifications

ESMA proposes that amendments should be made to various areas including:

  • Buy-back programmes – Proposals include improving reporting and transparency by reducing the amount of information which an issuer must disclose and ensuring that issuers only report in one jurisdiction should they have multiple listings;
  • Market soundings – Changes should clarify that compliance with MAR obligations will protect disclosing market participants from allegations of unlawful disclosure and streamline certain procedures, including as regards the need to cleanse those in receipt of inside information when a transaction is subsequently announced.
  • Insider lists – ESMA concludes that insider lists remain a key element in investigating possible market abuse cases. Echoing current FCA practice in many areas, its report clarifies when insider lists are required, which individuals should be included in them and considers who should be responsible for drawing up and maintaining them, including auditors and other categories of consultant. It also analyses the role of the permanent insider section, concluding that it should remain an available option, and makes proposals to reduce the administrative burden of creating and maintaining insider lists.
  • MAR thresholds and requirements for PDMR transaction notifications, and scope of application of trading prohibitions - ESMA recommends keeping the current thresholds set out in MAR as regards the notification of PDMR transactions, and proposes adding further exemptions to the restriction from conducting transactions in a "closed period", including to permit discretionary asset management mandates, transactions resulting from corporate actions and the acceptance of gifts, donations and inheritance. The extension of closed periods to issuers and persons closely associated with PDMR was rejected as being too burdensome; nor does ESMA propose that the criteria for identifying closed periods be amended.

Further or revised guidance

ESMA suggests that additional guidance would be useful in relation to the constituent elements of the definition of inside information. It also proposes to revise its Guidelines on the conditions which must be satisfied to delay disclosure in Article 17(4) of MAR so as to draw out further scenarios. Note that ESMA is not proposing amendments to the underlying conditions relating to delayed disclosure, nor the introduction of formal requirements to establish internal controls relative to the disclosure regime (despite stressing the importance of having such controls) or to inform the relevant competent authority – i.e. the Financial Conduct Authority (FCA) - of inside information the disclosure of which was delayed but which has subsequently ceased to meet the criteria of being "inside".

FCA underlines need for confidentiality in relation to information requests

In its latest Market Watch newsletter, the FCA has issued a reminder of the importance of confidentiality for those in receipt of an information request from the FCA at the outset of an investigation. Therefore requests for the disclosure of information such as insider lists and corporate action chronologies in the context of the FCA investigating circumstances surrounding instances of suspected suspicious trading or inappropriate access to, and communication of, inside information should be kept strictly confidential. Should an issuer need to take "further investigative steps" or engage more widely in order to meet any information request, the FCA should be consulted in advance.


World Economic Forum: Measuring Stakeholder Capitalism

The World Economic Forum has published a report focusing on defining common metrics for sustainable value creation. This seeks to improve the ways in which companies measure and demonstrate their contributions towards creating "more prosperous, fulfilled societies and a more sustainable relationship" with the planet, while recognising that companies which hold themselves accountable to their stakeholders and increase transparency will be more viable, and valuable, in the long-term. 

The report defines a core set of "Stakeholder Capitalism Metrics" and disclosures that can be used to align a company's mainstream reporting on performance against environmental, social and governance indicators and track contributions towards the UN's Sustainable Development Goals (SDGs) on a consistent basis. The metrics have been based deliberately on existing standards and comprise:

  • a set of 21 more-established or critically important metrics and disclosures – "Core metrics". These are primarily quantitative metrics for which information is already being reported by many or which can be obtained with "reasonable effort". They focus on activities within an organisation's own boundaries; and
  • a set of 34 metrics and disclosures that tend to be less well-established in existing practice and have a wider value chain scope or convey impacts in a more sophisticated or tangible way, such as in monetary terms – "Expanded metrics".

The metrics are organised under four pillars that are aligned with the SDGs: "Principles for Governance", "Planet", "People", and "Diversity". Companies are encouraged to report against as many of the Core and Expanded metrics as they find material and appropriate on the basis of a "disclose and explain" approach. 

In the same vein, the Institute of International Finance has published a "Playbook" for banks and other financial institutions "at different stages on their journey toward fully aligned" reporting in accordance with the Taskforce on Climate-related Financial Disclosures (TCFD). While it is focused on the banking sector, the document is described as containing information of relevance to all financial institutions, including asset managers and insurers.

Global standard setting organisations commit to solution for sustainability reporting

The CDP (formerly the Carbon Disclosure Project), Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and International Integrated Reporting Council (IIRC) have published a statement of intent to work together towards comprehensive corporate reporting. In particular, the statement sets out a plan to provide, among other things:

  • Joint market guidance on how the frameworks and standards produced by each of the organisations can be applied in a complementary and "additive" way.
  • A joint vision of how these elements could complement generally accepted accounting principles and serve as a natural starting point for progress towards a more coherent, comprehensive corporate reporting system.

By way of reminder, the CDP, CDSB, GRI and SASB set frameworks and standards for sustainability disclosure, including climate-related reporting, alongside the recommendations of the TCFD. The IIRC provides an integrated reporting framework that connects sustainability disclosure to reporting on financial and capital matters.

Modern Slavery

Government to strengthen Modern Slavery Act reporting

The government has published a response to its consultation which sought views on proposed changes to the transparency in supply chain reporting requirements of the Modern Slavery Act 2015 (MSA). Proposed changes to the regime, many of which will be the subject of further consultation, include:

  • Statement contents – The government intends to prescribe the areas of disclosure that a modern slavery statement should cover. If a company takes no steps in relation to a particular area, this must be clearly stated and the reasons given. The mandatory areas to be covered will encompass the existing areas of voluntary disclosure currently set out in section 54, MSA but these may be restructured and augmented as part of the next stage in developing the proposals.  
  • Statement publication – All statements will need to be published via a government-run reporting service. In advance of the necessary legislation being brought forward, companies will be encouraged to use the service on a voluntary basis.
  • Timing of publication - All statements will need to be made in relation to the same reporting period of 1 April to 31 March and published on a single reporting deadline of 30 September. 
  • Reporting formalities – The government intends to clarify that statements must include the date of board approval and the fact of director sign-off. Statements made on behalf of groups will need to state the names of the entities covered. 
  • Enforcement – The government will consider enhanced enforcement options, including possible civil penalties for non-compliance, as part of its development of the Single Enforcement Body for employment rights. 
  • Guidance – The Home Office intends to publish further guidance later in 2020 which will include best practice approaches to reporting against the future mandatory areas of disclosure.

Following further consultation as necessary, Many of these commitments will require changes to the MSA will be brought forward "when Parliamentary time allows".

Companies House

Corporate transparency: Government proposes Companies House reforms

BEIS has published a response to its consultation on options to improve the reliability and accuracy of information at Companies House and increase the transparency of UK corporate entities. 

The government proposes to, among other things:

  • introduce compulsory identity verification for all new directors and persons with significant control (PSCs), designated members in LLPs, and all individuals who file information on behalf of an entity. Existing directors and PSCs will also need to verify their identity, with sanctions for non-compliance being introduced;
  • continue to allow company incorporations and filings to be made either directly at Companies House or via an agent. However, in future, only "supervised" agents will be able to undertake this work;
  • introduce a digital verification process, working with other agencies to avoid duplication in identity checks;
  • increase the Registrar's powers, to allow it to query information submitted to Companies House and to remove information from the register in certain circumstances;
  • consider introducing iXBRL tagging in accounts in line with international standards;
  • tighten regulation on amendments to accounting reference periods so as to impose a new limit on the number of times a company can shorten such a period, and review some broader aspects of accounts' filings, including the exemptions that allow companies to submit micro- or dormant- accounts;
  • remove restrictions to enable certain personal information to be removed from the Register;
  • introduce an obligation on bodies that fall under anti-money laundering regulations to report discrepancies between the Register and the information they hold on their customers, and to permit cross-referencing of Companies House data against other data sets;
  • give Companies House power to query, and possibly reject, company names before they are registered;
  • reform how and under what circumstances Companies House issues certificates of good standing; and
  • cease asking directors to list their occupations and create a system which allows existing directors to suppress from the Register any statement of their occupation, day of birth, signature and residential address.

Many of the proposals will require significant amendments to be made to the Companies Act 2006 and further consultation. We will provide updates on detailed implementation in due course. 

Companies House records and corporate dissolutions

Companies House has announced that, following the government’s announcement on the issue of corporate transparency (see above), it has stopped removing records of dissolved companies from the Companies House Service (CHS) with immediate effect and will put the records of all companies dissolved since 2010 back onto the CHS from January 2021. 

Voluntary strike off process to resume

Temporary measures introduced in April in light of COVID-19 which suspended voluntary strike off action have come to an end. Companies that applied to be struck off before July 2020 will be struck off in a phased approach which commenced on 10 September 2020. For companies that applied to be struck off from July 2020 onwards, the voluntary strike off process will commence as normal from mid-October. 

Guidance on protecting or removing personal information

Companies House has published new guidance dealing with:

  • Protecting personal information on the Companies House register, specifically for those individuals at serious risk of violence or intimidation as a company director, LLP member, or a person with significant control due to the activities with which the relevant entity is associated.
  • Removing home addresses from the Companies House register. 

Other news

New Money Laundering Regulation expands notification regime for certain trusts

The government has published the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020. These expand the UK’s Trust Registration Service, which, among other things, requires certain “taxable trusts” to provide details of their beneficial owners to HM Revenue & Customs (HMRC). 

The regulations require that, in broad terms:

  • from 10 March 2022, information on the register is made available in certain circumstances to those members of the public with a "legitimate interest" in accessing it, and not just, as at present, to law enforcement agencies; and
  • by 10 March 2022, trustees of all express trusts created in the UK, as well as non-UK trusts which have sufficient connection with the UK, will need to provide details of their beneficial owners to HMRC if they were created before 9 February 2022. Beneficial owners of relevant trusts created after that date will need to be notified within 30 days of the trust falling within the regime. The regulations contain a series of exclusions which mean that most trusts created in connection with M&A activity or by virtue of the holding of shares in a company will fall outside the regime. Guidance on which trusts will be exempted will be published in due course. 
Diversity: FTSE 350 boards are one-third female for the first time but there's work still to do

For the first time more than a third of board members in the UK’s top 350 companies when taken as a whole are women, according to data published by BEIS. This means that female representation has risen by 3.8% in the last year. Nevertheless, 41% of FTSE 350 companies have not reached the 33% target set by the Hampton-Alexander Review, and 18 boards in the FTSE 250 remain "one and done" boards. Business Secretary Alok Sharma has urged all FTSE 350 companies to meet the mark of 33% women on boards by the end of December 2020.

The phase out of LIBOR

The Bank of England, FCA and CBI (among others) have published a factsheet which sets out steps to consider in the transition away from LIBOR. By way of reminder, LIBOR will cease to exist after the end of 2021. The factsheet provides links to further sources of information and instructional videos on the implications and next steps to consider. 

Financial Reporting Lab project on risks, uncertainties and scenarios – call for participants

The FRC's Financial Reporting Lab has issued a call for investors and companies to participate in a new project focusing on corporate disclosures on risks, uncertainties and scenarios, as part of which they will be asked to consider what users want from these disclosures. The Financial Reporting Lab expects to publish its findings during 2021. 

Key Contacts

Richard Preston

Richard Preston

Managing Associate, Corporate Finance
London, UK

View profile