Essential Corporate News – Week ending May 20, 2016

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

On May 13, 2016 the Equality and Human Rights Commission (EHRC) published a short guide to help board directors understand what they need to do to know and show that their company respects human rights in practice. At the time when many companies are contemplating the preparation of their slavery and human trafficking statement under the Modern Slavery Act, this guide sets out five steps boards should take to satisfy themselves that their companies understand the potential human rights impacts of their activities, take effective steps to mitigate or remedy them, and report on how they do this. In producing the guide the EHRC drew upon the experience of an expert advisory group, made up of business leaders and corporate governance experts. The guide also provides advice on how boards can implement the UN Guiding Principles on Business and Human Rights, the global standard, which outline the role of business and governments in respecting human rights.

The following are the five steps that it is recommended boards should follow to ensure that their company is fulfilling its responsibility to meet human rights in a robust and coherent manner that meets the expectations of the UN Guiding Principles and UK statutory reporting obligations:   

• the company should embed the responsibility to respect human rights into its culture, knowledge and practices;
• the company should identify and understands its salient, or most severe, risks to human rights;
• the company should systematically address its salient, or most severe, risks to human rights and provide for remedies when needed;
• the company should engage with stakeholders to inform its approach to addressing human rights risks; and
• the company should report on its salient, or most severe, human rights risks and meet regulatory reporting requirements.

With the guide, the EHRC has also published further information on identifying and preventing human rights risks for business. That information sets out in a table examples of business risk indicators, the associated human rights risks and examples of possible mitigating measures.

(EHRC, Business and human rights: A five-step guide for company boards, 13.05.16)

(EHRC, Identifying and preventing human rights risks for business, 13.05.16)

On May 18, 2016 the Council of the EU published a press release announcing that the Permanent Representatives Committee has approved, on behalf of the Council, an agreement with the European Parliament to extend the dates of transposition and application of the MiFID II Directive (2014/65/EU) and the Markets in Financial Instruments Regulation (Regulation 600/2014) (MiFIR) by one year.

Under this agreement, the deadline for member states to transpose the MiFID II Directive into national law will be set for July 3, 2017 and the date of application of both the MiFID II Directive and MiFIR will be January 3, 2018. Previously, member states were due to effect the transposition by July 3, 2016, with both the MiFID II Directive and MiFIR coming into effect on January 3, 2017. The one year delay results from technical implementing challenges faced by the European Securities and Markets Authority and by national competent authorities which mean essential data infrastructures will not be in place by January 3, 2017.

(Council of the EU, Markets in financial instruments: Council confirms agreement on one-year delay, 18.05.16)

On May 19, 2016 the European Commission published the final draft text of its delegated regulation regarding Regulatory Technical Standards on the European Electronic Access Point (EEAP) as required by the directive amending the Transparency Directive. This final draft is in substantially the same form as the draft published by the European Securities and Markets Authority (ESMA)  in September 2015. The EEAP is to be a web portal operated by ESMA and it will provide a single point of access at EU level to regulated information (including annual reports and major shareholding notifications) stored by officially appointed mechanisms in each member state.

ESMA consulted on the Regulatory Technical Standards in a consultation paper published in December 2014 and the final report notes that feedback to the consultation generally showed support for the functioning modalities of the EEAP, especially the search criteria and the technical infrastructure chosen by ESMA to ensure an easy access of end users to regulated information. ESMA considered the responses received in order to improve the design system and ensure its compliance with the objectives set in the Transparency Directive. It was decided that the EEAP will not replace existing officially appointed mechanisms in storing regulated information, but rather provide an additional way of access to the information that is already stored and enabled to end users by officially appointed mechanisms.

The regulation will enter into force on the twentieth day following its publication in the Official Journal, but Articles 7 (Unique identifier used by OAMs) and 9 (Common list and classification of regulated information) will apply from January 1, 2017.

(European Commission, Commission Delegated Regulation (EU) of 19.5.2016 supplementing Directive 2004/109/EC of the European Parliament and of the Council with regard to regulatory technical standards on access to regulated information at Union level, 19.05.16)

On May 13, 2016 the Department for Business, Innovation and Skills (BIS) published the final statutory guidance on the meaning of “significant influence or control” over companies in the context of the Register of People with Significant Control. Draft guidance was initially published for consultation in December 2015, with an amended draft being published in January 2016 and laid before Parliament for approval.

The final statutory guidance is in the same form as the draft laid before Parliament, apart from changing the date the guidance is effective (at paragraph 1.2) from April 6, 2016 to April 14, 2016.

(BIS, Statutory Guidance on the meaning of “significant influence or control” over companies in the context of the Register of People with Significant Control, 13.05.16)

On May 13, 2016 the Department for Business, Innovation and Skills (BIS) published draft amended statutory guidance on the meaning of “significant influence or control” over limited liability partnerships (LLPs) in the context of the Register of People with Significant Control (PSC). The new PSC regime came into effect on April 6, 2016 as a result of amendments to the Companies Act 2006 (CA 2006) made by the Small Business, Enterprise and Employment Act and as applied to LLPs by the Limited Liability Partnerships (Register of People with Significant Control) Regulations 2016 (2016 LLP Regulations). Paragraph 24 of Schedule 1A to the CA 2006 requires the Secretary of State to publish guidance on the meaning of “significant influence or control” and draft guidance was initially published for consultation in relation to LLPs in December 2015 with an amended draft being published in January 2016.

The text of the amended draft LLP statutory guidance, which is still before Parliament, is in largely the same form as the draft published in January but has been amended to state (at paragraph 1.2) that it is issued with effect from June 24, 2016. Provided there is no resolution not to approve the draft guidance, this will be the date from which the final version will be effective.

(BIS, Draft Statutory Guidance on the meaning of “significant influence or control” over Limited Liability Partnerships in the context of the Register of People with Significant Control, 13.05.16)

On May 12, 2016, at the Anti-Corruption Summit held in London, the Prime Minister announced in his closing statement a new register for foreign companies that own property in the UK, forcing them to make public who really owns them.

The main points from the speech are as follows:

• for the first time, foreign companies that already hold or want to buy property in the UK will be forced to reveal who really owns them;
• 40 jurisdictions, including a number of Overseas Territories and Crown Dependencies with major financial centres will automatically share beneficial ownership information; and
• the UK will host the first ever International Anti-Corruption Coordination Centre in London to strengthen cross-border investigations.

Additionally, France, the Netherlands, Nigeria and Afghanistan will follow the UK’s lead and commit to launch their own public registers of true company ownership, while Australia, New Zealand, Jordan, Indonesia, Ireland and Georgia are to take the initial steps towards making similar arrangements.

Furthermore, 40 jurisdictions, including a number of Overseas Territories and Crown Dependencies with major financial centres, have signed up to an international deal to automatically share their beneficial ownership registers with other countries.

(Prime Minister’s Office, Speech: Anti-Corruption Summit 2016: PM's closing remarks, 12.05.16)

On May 13, 2016 the Limited Liability Partnerships, Partnerships and Groups (Accounts and Audit) Regulations 2016 were published, together with an explanatory memorandum and final impact assessment. The final Regulations are in substantially the same form as the draft published in March 2016. The Regulations reflect the Government’s response  to its November 2015 consultation on the financial reporting requirements for limited liability partnerships (LLPs) and the creation of a new micro-entity regime for LLPs and for those general partnerships and limited partnerships that are Qualifying Partnerships as defined in the Partnerships (Accounts) Regulations 2008.

The main changes to the accounting and audit framework for LLPs include:

• increasing the thresholds to determine size for LLPs in order to save costs for some LLPs, which will be categorised in a lower size category;
• lessening the administrative burden on small LLPs by reducing the number of mandatory notes required;
• permitting small LLPs to prepare an abridged balance sheet and an abridged profit and loss account if this is agreed by all members of the LLP;
• allowing greater flexibility within layouts of profit and loss accounts and balance sheets, permitting the use of sector-specific layouts; and
• allowing participating interests to use the equity method in individual LLP statements.

The Regulations were made on May 10, 2016 and came into force on May 17, 2016.

(The Limited Liability Partnerships, Partnerships and Groups (Accounts and Audit) Regulations 2016, 05.16)