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When is a contractor one too many?
A recent decision by a Full Court of the Federal Court of Australia (Court) examined the concept of "genuine redundancy" in the context of redeploying workers to contractor roles.
Global | Publication | March 23, 2018
Welcome to Essential Corporate News, our weekly news service covering the latest developments in the UK corporate world.
On March 15, 2018 the Department for Business Energy and Industrial Strategy (BEIS) announced that it would be introducing to Parliament updated rules to strengthen the Government’s powers to scrutinise takeovers that may raise national security concerns in specific areas of the economy.
This follows publication of the National Security and Infrastructure Review Green Paper in October 2017 which outlined the Government’s plans to take a staged approach, through short and long-term measures, to reform how it scrutinises the national security implications of business transactions. BEIS has now published the Government’s response to its consultation on the short-term proposals, together with draft guidance on the changes to be made to the turnover and share of supply tests for mergers under the Enterprise Act 2002 and a draft statutory instrument, The Enterprise Act 2002 (Share of Supply Test) (Amendment) Order 2018.
Currently under the Enterprise Act 2002, the Government can intervene in mergers (foreign or domestic) that give rise to specific public interest concerns of national security, financial stability or media plurality. However, intervention can only take place if the transaction meets certain thresholds. These are that the target company has a UK turnover of over £70 million, or that the merger takes the merging parties’ combined share of supply to 25 per cent or more (or increases an existing share of supply of 25 per cent or more). There are limited exceptions to this related to some defence and media transactions.
Following the October 2017 consultation, the Government has decided to lower the UK turnover threshold from £70 million to £1 million and remove the current requirement for the merger to increase the share of supply to or over 25 per cent in relation to mergers in the areas of military and dual-use goods, multi-purpose computing hardware and quantum-based technology (the “specified activities”).
The Enterprise Act 2002 (Share of Supply Test) (Amendment) Order 2018 amends the share of supply test so that it is additionally met where a merger or takeover concerns a target involved in any of the specified activities with a 25 per cent or more share of supply of goods or services in the UK before the merger or takeover, as well as where the deal leads to an increase of supply to, or above, this threshold. Subject to Parliamentary approval being obtained for this statutory instrument, a second statutory instrument will be laid to amend the turnover test to allow the scrutiny of more mergers of businesses engaged in any of the specified activities. It is intended that both Instruments will come into force at the same time.
The Government has published draft guidance explaining why the Government is amending the Enterprise Act 2002. The guidance describes the legal and practical effect of the amendments and offers advice to businesses and others about what they should do (and not do) as a result of these changes. It also considers the process for any Government interventions in mergers. At the same time, the Competition and Markets Authority (CMA) has published draft guidance on its approach to the changes to the jurisdictional thresholds for UK merger control. The CMA has requested comments on its draft guidance by April 12, 2018.
The Government will continue to access risks in other sectors, including emerging technologies, and states that if there is evidence to suggest that it should take action in additional areas of the economy, then it will bring forward further legislation. It also intends to bring forward long-term reforms as set out in its October 2017 Green Paper. It is currently considering responses received to that and will lay out its plans for long-term reform in due course.
(BEIS, National security & infrastructure investment review, 15.03.18)
On March 20, 2018 the Department for Business, Energy and Industrial Strategy (BEIS) announced it will launch a consultation to improve the UK’s corporate governance framework and ensure the highest standards of behaviour in those who lead and control companies in, or approaching, insolvency.
Among other things, the consultation seeks views on a number of proposed measures, including the following:
Following recent company failures, the consultation also seeks views on certain aspects of the wider corporate governance framework that have been highlighted where existing processes and rules may need updating. These include the following:
Next steps
The consultation seeks views from directors of companies, institutional shareholders and the investment community as well as the wider public. Responses are requested by June 11, 2018.
The Department for Business, Energy and Industrial Strategy (BEIS) published a call for evidence on April 5, 2017 on proposals for a register showing who owns and controls overseas companies and other legal entities that own UK property or participate in UK government procurement. This response, published on March 22, 2018, sets out how the Government plans to implement the register in the light of the responses to the call for evidence and other views gained through the wider consultation process.
The response includes the following:
Next steps
The Government will develop legislation to create the new register and intends to publish a draft Bill for scrutiny this summer. The Government intends to introduce the Bill to Parliament early in the second session. Following Royal Assent and the making of secondary legislation, the Government intends that the register will be operational in 2021.
On March 12, 2018 the European Commission announced that it had taken a major step towards the development of a Capital Markets Union (CMU) by promoting alternative sources of financing and removing barriers to cross-border investments. The European Commission has adopted a Communication to clarify which country's law applies when determining who owns a security in a cross-border transaction. The proposals are part of the European Commission’s Action Plan for a CMU.
At present, there is no legal certainty as to which national law applies when determining who owns a the underlying asset in a cross-border securities transaction. Three Directives determine in specific cases which national law applies in the case of cross-border securities transactions: the Financial Collateral Directive, the Settlement Finality Directive and the Winding-up Directive. The Communication clarifies that:
The European Commission states that national authorities and administrations should take into consideration the clarifications provided in the Communication when applying the conflict of laws provisions of the Settlement Finality Directive, the Winding-up Directive and the Financial Collateral Directive. It will continue to monitor developments in this area and, in consultation with stakeholders, assess how national interpretations and market practices evolve in light of international and technological developments.
(European Commission, Factsheet on Delivering on the Capital Markets Union, 12.03.18)
On March 21, 2018 the European Commission published a consultation paper seeking views on whether the EU framework for public reporting by companies is fit for purpose. This follows on from the publication on February 8, 2018 by the European Commission of an evaluation and fitness check Roadmap on public reporting by companies.
The first objective of the consultation is to assess whether the EU public reporting framework is overall still relevant for meeting its objectives, whether it adds value at the European level, and is effective, internally consistent, coherent with other EU policies, efficient and not unnecessarily burdensome.
The second objective of the consultation is to review specific aspects of the existing legislation as required by EU law, and thirdly it will assess whether the EU public reporting framework is fit for new challenges (such as sustainability and digitalisation).
The consultation will assess other ongoing developments in EU policies that may also have an impact on the public reporting framework (for instance, the Capital Markets Union, Common Corporate Tax Base and the digitalisation of companies’ lifecycle).
The fitness check is part of the actions announced in the Action Plan on sustainable finance published on March 8, 2018. Responses to the consultation should be submitted through an online questionnaire by July 21, 2018. The responses will feed into a Staff Working Document on the fitness of the EU framework for public reporting by companies which is to be published in 2019.
(European Commission, Fitness check on the EU framework for public reporting by companies, 21.03.18)
Publication
A recent decision by a Full Court of the Federal Court of Australia (Court) examined the concept of "genuine redundancy" in the context of redeploying workers to contractor roles.
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