Essential Corporate News: Week ending September 25, 2020

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 – SI 2020/1031

On September 24, 2020 BEIS announced that certain temporary measures in the Corporate Insolvency and Governance Act 2020 (CIGA), aimed at relieving pressure on businesses dealing with the coronavirus, are being extended beyond September 30, 2020, and the extension is set out in the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020 (the CIGA Regulations). CIGA provides that the temporary provisions will automatically expire on September 30, 2020 unless regulations are made to prolong the period within which some or all of the temporary provisions have effect.

The CIGA Regulations come into force on September 29, 2020 and provide as follows:

• Companies and other qualifying bodies can continue to hold AGMs and other company meetings virtually until December 30, 2020 – so, for example, notwithstanding the provisions in the company’s articles, there is no requirement to hold the meeting at a particular place, votes can be cast electronically or by other means, shareholders only have the right to vote at the meeting and attendees at the meeting can be in more than one place.
• Statutory demands and winding-up petitions will continue to be restricted until December 31, 2020. The extension of these measures mean creditors cannot rely on statutory demands to bring winding-up petitions, and are prohibited from filing winding-up petitions where the company’s inability to pay is due to coronavirus.
• Small suppliers will remain exempt from the scope of the prohibition on termination clauses in supply contracts until March 30, 2021 so that they can protect their business if necessary. 
• The modifications to the new moratorium procedure, which relax the entry requirements to it, are being extended until March 30, 2021, and the temporary moratorium rules are also being extended to that date.

However, the temporary suspension of liability for wrongful trading is not being extended and will expire automatically on September 30, 2020.

(The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2020, SI 2020/1031)

(BEIS, Government gives businesses much needed breathing space with extension of insolvency measures, 24.09.2020)

ESMA: MAR Review Report

On September 24, 2020, the European Securities and Markets Authority (ESMA) published a report into its review of the Market Abuse Regulation (MAR), following a consultation exercise undertaken in 2019. This is the first in-depth review of MAR since its implementation in 2016 and its conclusion is that, overall, MAR has worked well in practice and is fit for purpose. However, the report does set out proposals for targeted amendments to MAR and some recommendations. 

Recommendations include the following:

• Market soundings – ESMA recommends that Article 11 of MAR should be amended to make it clear that its requirements represent an obligation for disclosing market participants and that, if they are complied with, they will protect such participants from the allegation of having unlawfully disclosed inside information.
• Management companies – ESM recommends that their responsibility in relation to the disclosure of inside information is clarified.
• Definition of inside information – ESMA recommends that the definition in Article 7 of MAR be unchanged save in respect of one aspect concerning “front running” conduct.
• Delaying disclosure of inside information – ESMA does not recommend changes to the conditions for delaying disclosure in Article 17(4) of MAR but proposes a review of the guidelines on delaying disclosure to further clarify the conditions that need to be met for delay and to provide more practical examples in which disclosure may be delayed.
• Insider lists – ESMA believes the insider lists regime should be maintained but recommends some amendments to that regime.
• PDMR notifications – ESMA believes the 5000 euro notification threshold for dealings by persons discharging managerial responsibilities (PDMRs) should be maintained but recommends that further exemptions to the prohibition on trading during a closed period be added, including the acceptance of inheritances, gifts or donations and the exercise of options, futures or derivatives when the main terms of the transaction were agreed outside the closed period.

ESMA has submitted the Final Report to the European Commission and it is expected to feed into the European Commission's review of MAR.

(ESMA, MAR Review Report, 24.09.2020)

FCA: Listings of cannabis-related businesses

On September 18, 2020 the Financial Conduct Authority (FCA) issued a statement setting out its approach to assessing listing applications from cannabis-related companies. A guidance consultation is to follow in due course.

The FCA has concerns that the proceeds from overseas medicinal cannabis business could constitute “proceeds of crime” under the Proceeds of Crime Act 2002 (PoCA) and points out that possessing and supplying cannabis for recreational use is a criminal offence in the UK. As a result its position is as follows:

• Recreational cannabis companies – The proceeds of these businesses, even if located in jurisdictions that have legalised it, are proceeds of crime under PoCA so the securities of these companies would not be admitted to the Official List.
• UK-based companies – UK-based medicinal cannabis companies can be admitted to the Official List if they have the required Home Office licences for their activities.
• Overseas companies – Overseas-licensed medicinal cannabis companies and cannabis oil companies can be admitted to the Official List if the FCA is satisfied PoCA does not apply and they otherwise satisfy the listing criteria. For those such companies with overseas activities, they will need to satisfy the FCA that their activities would be legal if carried out in the UK, and the FCA will need to understand the legal basis of their overseas activities (including local licensing and their licenses).

(FCA, Statement on listings of cannabis-related businesses, 18.09.2020)

BEIS: Corporate Transparency and Register Reform – Government response to consultation

On September 18, 2020 the Department for Business, Energy and Industrial Strategy (BEIS) published the Government’s response to its May 2019 “Corporate Transparency and Register reform” consultation which set out a range of options to enhance the role of Companies House and increase the transparency of companies and other legal entities. This response sets out the actions the Government intends to take (subject to funding), noting that some of the reforms will require further consultation. 

An overview of the proposals is as follows:

Knowing who is setting up, managing and controlling corporate entities

• Compulsory identity verification will be introduced for all directors and people with significant control (PSCs) of UK registered companies and for those who file information for companies at Companies House.
• Where agents incorporate companies and file information at Companies House, those agents will need to be properly supervised and provide evidence of verification checks they have undertaken.

Improving the accuracy and usability of data on the companies register

Among other things:

• The Registrar of Companies will be able to query information submitted to Companies House (rather than accept it is validly submitted) and be able to remove information from the register in certain circumstances to improve its accuracy.
• There will be tighter regulation on amendments to accounting reference periods. 
• Some aspects of accounts filings will be reviewed (including exemptions that allow micro or dormant accounts to be submitted).

Protecting personal information

The Government intends to remove restrictions so as to enable personal information to be removed from the companies register.

Ensuring compliance, sharing intelligence and other measures to deter abuse of corporate entities

Among other things:

• Bodies subject to the Anti-Money Laundering Regulations will be required to report discrepancies between the public register of companies and the information they hold on customers. 
• Companies House will be able to query, and possibly reject, company names before they are registered.
• There will be reform of how and under what circumstances Companies House issues certificates of good standing. 

Next steps

BEIS will develop these proposals with interested parties and then publish a comprehensive set of proposals that detail how BEIS thinks the proposals should be implemented. Subject to the views received, BEIS will then proceed to legislate when Parliamentary time allows. 

(BEIS, Corporate Transparency and Register Reform – Government response, 18.09.2020)

Home Office: Transparency in supply chains consultation – Government response

On September 22, 2020, the Home Office published the Government’s response to the consultation paper it published in July 2019 which sought views on proposed changes in transparency in supply chain reporting as required by Section 54 Modern Slavery Act 2015. The response document sets out the Government’s commitments in response to the consultation, many of which require changes to Section 54 so will be made when parliamentary time permits.

Measures to be implemented include the following:

Content of modern slavery statements

The areas to be covered by modern slavery statements will be mandated and these will be the six areas currently referred to in Section 54(5) as well as possible new areas. If no steps have been taken within an area, this must be made clear and an explanation provided if an organisation wishes. Updated transparency in supply chains guidance, including best practice approaches to reporting against the required areas,  will be published, though organisations will not have to report against new areas until the necessary legislative changes have been made. Organisations will need to publish their statements on the Government-run reporting service.

Transparency, compliance and enforcement

Organisations required to report will need to meet a single reporting deadline of September 30,  covering the previous 12 months from April to March. Modern slavery statements will need to state the date of board (or equivalent) approval and director(or equivalent) signoff, and name the entities covered.

Public sector supply chains

Public bodies with a budget threshold of £36 million or more will need to report. They will be able to publish group statements and guidance to assist public bodies in meeting their reporting requirements will be published.

Review of the £36 million turnover threshold

The Government has decided to retain this threshold and focus on improving compliance at this threshold.

(Home Office: Transparency in supply chains consultation – Government response, 22.09.2020)