Essential corporate news - week ending 20 July 2012

Welcome to Essential Corporate News, our weekly news service covering the latest developments in the UK corporate world.

On 16 July 2012, the Financial Services Authority (FSA) published the second edition of its Primary Market Bulletin (Bulletin). The main purpose of the Bulletin is to provide information about the UKLA Knowledge Base which the FSA intends to launch shortly and which will be a single repository of the technical guidance available from the UK Listing Authority (UKLA) on the Listing Rules, the Disclosure and Transparency Rules and the Prospectus Rules. The UKLA Technical and Procedural Notes (Notes) will form a key element of the UKLA Knowledge Base and so the FSA has undertaken a comprehensive review of all the existing Notes which were introduced in 2010 in place of the FSA’s List! publication. Previously published information in the Notes that continues to be valid, current and relevant has been reproduced in a new format and information that is outdated or superseded has been updated or withdrawn.

The Notes are now being arranged on a topical basis, with each Note being assigned a unique reference number. The total number of Notes (taking account of the new Notes that the FSA is now proposing to introduce) will be 82.

So far as the new Notes are concerned, the FSA proposes issuing three new Procedural Notes as follows:

• Block listings: this is to provide issuers and advisers with a greater understanding of the appropriate use of block listing facilities.
• The UKLA decision making review process: this is to provide market participants with a greater understanding of how the UKLA makes and escalates decisions internally, as well as details on how to request a review of UKLA decisions.
• Sponsor firms - ongoing requirements during re-organisations: this is to clarify the UKLA’s expectations when sponsor firms are the subject of corporate re-organisations.

The FSA also proposes introducing eight new Technical Notes as follows:

• Approval of circulars: this is to clarify what constitutes "unusual features" in a circular which will then require UKLA approval under LR 13.2.2R(3).
• Equality of treatment - Listing Principle 5: the UKLA is concerned that the application of Listing Principle 5 to the treatment of small shareholders in certain share capital reorganisations is poorly understood so it is adding a Technical Note on this topic.
• Long-term incentive schemes: a Technical Note on LR 9.4.2(2) is proposed to explain the application of this rule.
• Related party transactions - modified requirements for smaller related party transactions: this Technical Note will clarify how the UKLA would expect LR 11.1.10R to be addressed.
• Related party transactions - Issuer’s undertaking: a new Technical Note will set out some basic guidelines to ensure that disclosure standards in annual accounts in light of LR 11.1.10R(2)(c) improve.
• Prospectus disclosures on credit rating agencies: this Technical Note will provide specific details on the disclosures required within a prospectus depending on whether the credit rating agency is established in the EU or elsewhere.
• Sponsor’s obligations on financial position and prospects procedures: this new Technical Note will outline the UKLA’s expectations of sponsors for a key aspect of the sponsor declaration required by LR 8.4R, namely the assurance given regarding the financial position and prospects procedures established by the directors of the relevant issuer.
• Sponsor transactions - Adequacy of resourcing: this Technical Note will clarify the UKLA’s expectations in relation to staffing arrangements so that sponsors can perform sponsor services with due care and skill.

Comments on the Bulletin and on the Notes to be published in the UKLA Knowledge Base are requested by 14 August 2012. Once comments have been considered, the Notes will be published on the UKLA Knowledge Base.

(FSA, Primary Market Bulletin - Issue No.2, 16.07.12)

(UKLA Technical and Procedural Notes, 16.07.12)

On 16 July 2012, the European Commission published a report addressed to the European Parliament and others on the application of Directive 2004/25/EC on takeover bids (the Takeover Directive). The report draws on an external study on the application of the Takeover Directive undertaken by Marccus Partners.

The report describes the impact of the Takeover Directive and how it has been complied with, the main issues emerging from its application and it draws a number of conclusions. It argues that the framework created by the Takeover Directive is working satisfactorily, with no structural compliance issues emerging in relation to its application. So far as the transposition of the optional provisions of the Takeover Directive is concerned, research shows that 19 Member States have transposed the board neutrality rule, while only three Member States have transposed the breakthrough rule. Improvements brought about by the Takeover Directive include the introduction of coordination rules for supervisors with regard to cross border offers, the general principles of the Takeover Directive, the disclosure rules, the mandatory bid rule and squeeze-out and sell-out rights.

The report sets out a number of proposals for improving the current regime, including the following:

• clarification of the concept of "acting in concert" at EU level in order to provide more legal certainty to international investors as to the extent to which they can cooperate with each other without being regarded as "acting in concert";
• investigation of how minority shareholders are protected when a national derogation to the mandatory bid rule applies (in situations of change of control and, when relevant, what alternative mechanisms exist in national law to protect minority shareholders in situations of change of control). Infringement procedures are among the measures proposed should, following an investigation, the protection of minority shareholders proves to be inadequate;
• bilateral discussions with concerned Member States or Recommendations issued by the European Commission to discourage the practice of getting round the mandatory bid rule by acquiring a stake close to the mandatory bid threshold and then launching a voluntary bid for a low price across the EU. The European Commission suggests additional mandatory bid thresholds or minimum acceptance conditions to prevent this occurring; and
• dialogue with employee representatives, with a view to exploring possible future improvements. The European Commission will also investigate further the experience gained in practice with the provisions of the Takeover Directive which require disclosure of the offeror's intentions as regards the future business of the target company and its employment conditions and the view of the offeree company's board on this, as well as disclosure of information concerning the financing of the bid and the identity of the offeror.

Interested parties are invited to submit views on the report.

(European Commission, Report on the application of the Directive on takeover bids, 16.07.12)