Publication
UK Carbon Border Adjustment Mechanism: how will it work?
In February, we reported on the Department of Energy Security and Net Zero’s confirmation that a UK Carbon Border Adjustment Mechanism (CBAM) would be bought into force by 2027
Global | Publication | January 13, 2016
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On January 10, 2017 the Takeover Panel published a Panel Statement in which it announced that the Hearings Committee has decided to cold-shoulder Bob Morton and John Garner for breaching section 9(a) of the Introduction to The City Code on Takeovers and Mergers (the Code). Section 9(a) provides that the Takeover Panel expects any person dealing with it to do so in an open and co-operative way and it requires, among other things, persons dealing with the Takeover Panel to disclose to the Takeover Panel any information known to them and relevant to the matter the Takeover Panel is considering. Reasonable care should be taken to ensure that information disclosed is not incorrect, incomplete or misleading. The Hearings Committee concluded that Mr Morton and Mr Garner systematically provided false information to the Takeover Panel in the course of an investigation by the Panel Executive into a potential breach by Mr Morton of an obligation to make a Rule 9 offer for the remaining shares in Hubco Investments Limited not owned by him.
Cold-shouldering an offender is the most serious disciplinary power exercisable by the Takeover Panel and it involves declaring that the offender is a person who, in the opinion of the Takeover Panel, is not likely to comply with the Code. While the sanction remains effective, members of the Financial Conduct Authority (FCA) and other professional bodies are obliged in certain circumstances not to act for the person in question in a transaction subject to the Code. Cold-shouldering has only been used twice before by the Takeover Panel.
Despite pleas in mitigation from Mr Morton and Mr Garner, the Hearings Committee concluded that Mr Morton should be cold-shouldered for six years and that Mr Garner should be cold-shouldered for two years. Mr Morton had argued that the six year duration of the cold-shouldering was too long but, in the circumstances, the Hearings Committee felt that Mr Morton is someone who is not likely to comply with the Code and so a six year period was appropriate. However, the Hearings Committee did reduce the period for which Mr Garner should be cold-shouldered from the four years submitted by the Panel Executive to two years.
The cold-shouldering became effective from the date of the ruling, namely December 21, 2016.
Following publication of the Panel Statement, the FCA published a statement in which it draws the attention of regulated firms to MAR 4.3 in its Market Conduct sourcebook (Support of the Takeover Panel’s functions), which relates to ‘cold–shouldering’. The FCA reminds all regulated firms that they should not deal with the two individuals identified in the Panel Statement, or their principals, on any transactions to which the Takeover Code applies. The FCA also expects regulated firms to inform all approved persons at their firms that they should not deal with these individuals on such transactions.
On January 11, 2017 the Financial Reporting Council (FRC) published its annual report, “Developments in Corporate Governance and Stewardship 2016”, together with an accompanying press release. The purpose of the report is to give an assessment of corporate governance and stewardship in the UK; to report on the quality of compliance with, and reporting against, the UK Corporate Governance Code and the Stewardship Code; to provide findings on the quality of engagement between companies and shareholders; and to indicate to the market where the FRC would like to see changes in corporate governance behaviour or reporting.
UK Corporate Governance Code
In respect of the UK Corporate Governance Code (Code), the FRC highlights the following:
UK Stewardship Code
In respect of the Stewardship Code, the FRC highlights the following:
Future developments
The FRC notes that during 2016 there were two major consultations about corporate governance in the UK, specifically the Department for Business, Energy and Industrial Strategy (BEIS) Select Committee’s inquiry and the Government’s Corporate Governance Reform Green Paper. In response to the issues raised by the BEIS inquiry, the FRC suggested that additional powers may be necessary in order to demonstrate the alignment of business, investor and public interests, including:
The FRC also recommends a wider remit for the remuneration committee and shareholder consultation where there is a significant vote against an AGM resolution.
The FRC will consider how to encourage further improvements in reporting and possible revisions to the Stewardship Code in 2018. It also plans to consult on revisions to the Code, the FRC’s Guidance on Board Effectiveness and the FRC’s Guidance on the Strategic Report, taking account of the FRC’s work on culture and succession planning, the EU Non-Financial Reporting Directive and wider corporate governance changes in light of the Government’s Green Paper. In addition, it is considering guidance for nomination committees as part of wider consultation in light of responses to its October 2015 discussion paper on succession planning.
(FRC, Developments in Corporate Governance and Stewardship 2016, 11.01.17)
On January 3, 2017 Glass Lewis published an update to its UK corporate governance policy guidelines, which incorporate recommendations of the UK Corporate Governance Code, requirements of the Companies Act 2006 and the UK Listing Authority, as well as global corporate governance best practices.
Updates from the 2016 Guidelines include:
On January 13, 2017 the Institute of Chartered Secretaries & Administrators (ICSA) published a press release announcing the launch of a joint project with the Investment Association (the IA) intended to ensure that UK PLC boards understand the views of their employees and other stakeholders which should then be factored into their decision making.
ICSA and the IA will identify existing best practice and produce practical guidance to enhance understanding of the interests of employees and other stakeholders, in accordance with board duties under section 172 Companies Act 2006.
The guidance will identify different approaches to stakeholder engagement for companies to consider, summarising the issues to be addressed and the practical steps to be taken. These will include the different approaches identified in the Government’s November 2016 Green Paper on corporate governance reform. Specifically, the guidance will set out:
The guidance will be published in the second quarter of 2017.
In December 2016 the CFA Society of the UK (CFA) published a study carried out by Steven Young and Weijia Li of the Lancaster University Management School examining chief executive officer (CEO) pay structures and their alignment with corporate value creation for FTSE 350 companies between 2003 and 2014/15.
Specifically, the study analyses:
The major findings of the study include:
The two key themes emerging from the study are:
Publication
In February, we reported on the Department of Energy Security and Net Zero’s confirmation that a UK Carbon Border Adjustment Mechanism (CBAM) would be bought into force by 2027
Publication
International financial markets have started to show significant interest in nature and biodiversity. Whilst climate change and greenhouse gas emissions have made the headlines in recent years, there has been much less focus on their equally important counterparts, nature and biodiversity. However, that has started to change.
Publication
In April 2024, the UK Government published details of its sustainable aviation fuel mandate (the UK SAF Mandate) and launched a consultation on proposals for a revenue certainty mechanism to support UK sustainable aviation fuel (SAF) production.
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