The Companies (Shareholders’ Rights to Voting Confirmations) Regulations 2020
On July 9, 2020 the Companies (Shareholders’ Rights to Voting Confirmations) Regulations 2020 were laid before Parliament and they come into force on September 3, 2020. The Regulations implement certain provisions of Article 3c of the Shareholder Rights Directive (2007/36/EC), as amended by the Shareholder Rights Directive II (2017/828), and include new sections 360AA and 360BA in the Companies Act 2006 (CA 2006).
The Regulations apply to “traded companies” (as defined in Section 360C CA 2006) and provide as follows:
- Where a vote is cast on a poll electronically on or after September 3, 2020, the traded company must confirm receipt of the vote as soon as reasonably practicable after the vote has been received. That confirmation of receipt of the vote must be given to the shareholder, proxy or corporate representative who cast the vote (see Section 360AA).
- Shareholders have the right to request confirmation that their vote on a resolution where a poll has been taken was validly recorded and counted. That request must be made within 30 days of the relevant general meeting and the company must provide that confirmation within 15 days of the result of the poll declaration or receipt of the shareholder’s request, whichever is later (see Section 360BA).
Section 360AA CA 2006 applies to votes cast on or after September 3, 2020 and Section 360BA CA 2006 applies to votes cast at a general meeting which takes place on or after that date.
(The Companies (Shareholders’ Rights to Voting Confirmations) Regulations 2020, 09.07.2020)
FRC: Call for participants in project relating to reporting on stakeholders and Section 172
On July 9, 2020, the Financial Reporting Council (FRC) invited investors and companies to participate in a new project on corporate disclosures about stakeholders, including statements under Section 172 Companies Act 2006. The project will seek to identify how information about stakeholders can be reported most effectively by examining existing best practice and understanding the needs of investors.
The FRC expects to publish a range of outputs in Q4 2020 and H1 2021.
(FRC: Call for participants in project relating to reporting on stakeholders and Section 172, 09.07.2020)
Companies House: Companies House to restart the voluntary strike off process
On July 10, 2020, Companies House announced the end of its temporary suspension of voluntary strike off action which was introduced in March 2020 in light of COVID-19.
From September 10, 2020, Companies House will restart the process to dissolve companies that have applied for voluntary strike off. The guidance outlines how the process will work including:
- When voluntary strike off action restarts from September 10, 2020, if there have been no objections to dissolution and the two-month period from the publication of the Gazette notice has expired, the company will be struck off shortly afterwards.
- Where a person with an interest in a company has already registered an objection, but the time period for that objection is due to expire, that person must register the objection again if it is still required.
- Applications for voluntary strike off from July 10, 2020 onwards are not affected by the temporary policy because the easements for voluntary dissolution apply to strike-off applications registered before that date.
The compulsory strike-off process remains paused but Companies House is keeping this under review.
(Companies House, Companies House to restart the voluntary strike off process, 10.07.2020)
BEIS: Government’s response to the BEIS Committee on inquiry into Thomas Cook
In October 2019, the Business, Energy and Industrial Strategy (BEIS) Committee held a series of evidence sessions on the collapse of Thomas Cook which concluded with recommendations to the Department for Business, Energy and Industrial Strategy on corporate governance, executive pay and bonuses, and audit reforms. On June 15, 2020, the Government sent its response to the BEIS Committee and that response was published on July 14, 2020.
The Government includes the following in its response:
- It will respond to the Competition and Markets Authority study of the statutory audit market and Sir Donald Brydon’s review into the quality and effectiveness of audits with proposals for reform of company audit and legislation as soon as Parliamentary time allows. This will include legislation to put the new Audit, Reporting and Governance Authority (ARGA) on a statutory footing.
- The Government is actively considering what more can be done to ensure that executive pay is aligned with performance. It also expects to see significant further progress by companies this year in aligning pension contribution rates for their existing directors with the wider workforce.
- In relation to bonus arrangements, the Government agrees that metrics need to be reliable and credible to satisfy shareholders and it will consider whether measures of future financial performance should be subject to audit to provide more certainty that appropriate controls are in place and to deter “gaming” to hit bonus targets.
- The Government believes that directors’ contracts should include malus and clawback provisions and that companies should act on provisions enabling them to recover and/or withhold sums or share awards when appropriate. It also expects shareholders to use their voting on remuneration policies to ensure companies have robust malus and clawback arrangements in place.
- The Government is committed to promoting business leadership diversity and inclusion and believes companies should embrace diversity throughout the organisation. It notes that further action is needed to create more gender-balanced leadership in the UK, as indicated by the Hampton-Alexander Review, and it supports the Parker Review on ethnic diversity of UK boards.
- In relation to audits and audit firms, the Government makes a number of comments in light of the BEIS Committee’s recommendations. It agrees that the use of goodwill and its impairment should be reviewed and will consider whether the audit report should include graduated audit findings. It notes that it will make comprehensive proposals for reform of company audit via legislation when Parliamentary time allows.
(BEIS, BEIS Committee Inquiry into Thomas Cook – Government response, 15.06.2020)
(Thomas Cook inquiry – Government dragging its feet on corporate reforms, 14.07.2020)
ESMA: Final Guidelines on disclosure requirements under the Prospectus Regulation
On July 15, 2020, the European Securities and Markets Authority (ESMA) published its final Guidelines on the requirements relating to the disclosure of financial and non-financial information in a prospectus under the Prospectus Regulation (2017/1129) (Guidelines). The Guidelines aim to provide a uniform understanding of the relevant disclosures in annexes in Commission Delegated Resolution (EU) 2019/980 and to promote consistency across the EU in how those annexes are applied.
The Guidelines cover a variety of financial and non-financial topics including:
- pro forma information
- working capital statements
- capitalisation and indebtedness
- profit forecasts and estimates
- historical financial information
- operating and financial review
- options agreements
- collective investment undertakings.
The Guidelines follow a consultation launched in July 2019. They replace the previous CESR recommendations which have been updated to be consistent with the Prospectus Regulation and made into Guidelines so that the comply-or-explain mechanism can apply. In a limited number of cases, ESMA has included new Guidelines as well as added some new content in the explanatory text. In particular, ESMA draws attention to the changes introduced in Guidelines 11 and 13 relating to profit forecasts, Guideline 18 relating to pro forma financial information, Guidelines 33, 36 and 37 relating to working capital statements and Guidelines 38 and 39 relating to capitalisation and indebtedness statements.
(ESMA, Final Report - ESMA Guidelines on disclosure requirements under the Prospectus Regulation, 15.07.2020)