Publication
Legal strategies to tackle fraud in early-stage investments in Asia
In the wake of the recent eFishery scandal early-stage investors are recalibrating their approach to due diligence and risk tolerance.
Global | Publication | November 2023
On 13 November 2023, the Cabinet Office published a Call for Evidence in relation to the National Security and Investment Act 2021 (NSI Act). With the Call for Evidence there is a survey link that can be used to submit responses.
Respondents to the Call for Evidence are asked to share their views on how the NSI Act system can be even more business friendly while maintaining and refining the essential protections needed to protect national security. In particular, views are sought on:
This Call for Evidence will be used to:
Depending on responses, there may be more detailed consultation on specific measures or legislative changes, but the Cabinet Office is not currently considering changes that would require primary legislation.
Responses are requested by 15 January 2024.
(Cabinet Office, Call for Evidence – National Security and Investment Act 2021, 13.11.2023)
On 16 December 2023, the Financial Reporting Council (FRC) published their latest annual review of the reporting of 100 premium listed companies who are required under the Listing Rules to follow the UK Corporate Governance Code (Code). The aim of the review is to give an overview of the reporting that the FRC has assessed, highlight good practice, trends over time, and explain where practices and reporting fall short, and need improvement.
The review looks at particular disclosures in some detail, providing examples of good reporting practice. In general terms, key findings include the following:
Application of the Code’s Principles within compliance statements
The FRC notes that whilst there have been improvements in how companies report on their application of the Code Principles, companies need to move away from a formulaic Principle by Principle approach which adds to the length of the annual report and contains little company-specific information, and instead companies should report clearly and concisely on how application of the Principles has made a difference to actions taken by their board.
Compliance with the Code’s Provisions
In an improvement from previous years, the FRC found that a majority of companies either clearly stated full compliance or set out what Provision(s) they depart from. However, it points out that some companies are still not offering clear reporting on compliance, with vague statements still being employed, such as ‘the company has complied with all the Provisions of the Code except as specifically identified in this report’. The FRC points out that a company’s compliance statement should clearly set out which Provisions they have not complied with and when companies do depart from a Provision, they should still demonstrate through clear explanations that they are applying the Principles.
In addition, simply stating the timeline for achieving compliance with a Provision is not enough. Companies must also say why their alternative arrangements delivered benefits to the company and its shareholders.
Reporting on the assessment of risk and the quality of internal controls
The FRC comments that despite this being an area of focus and debate, the review finds that there has been little year-on-year improvement in the quality of reporting in this area, with some companies reporting very well but the majority not doing so, and failing to demonstrate that sufficiently robust systems, governance and oversight are operating effectively. When explaining the processes for reviewing the effectiveness of the systems, the FRC points out that companies do not need to provide extensive reporting but should be specific and concise about the board’s actions.
Workforce and stakeholder engagement
The FRC comments that focus on workforce engagement is commendable, with the best reporters showing the beneficial impacts arising when companies broaden their engagement to include culture, purpose and values. Stakeholder engagement reporting also continues to improve, and the FRC would like to see companies build on this by reflecting on the feedback received and its impact on board decisions. The report does state that reporting on stakeholder engagement is often formulaic and missing specific examples that help companies to demonstrate how they have considered the interests of stakeholders as set out in section 172 Companies Act 2006.
Reporting on culture
The FRC notes that reporting on culture is evolving and that good reporting focuses on setting out both the practice and policy along with objectives and progress towards milestones. This includes reporting on what activities helped to achieve the outcome. Too often culture-related disclosures in the governance report repeat what can be found in the strategic report or wording from the Code.
Climate reporting
The report states that reporting in this area is improving. The FRC reminds companies that a good statement of consistency with the Task Force on Climate-related Financial Disclosures (TCFD) framework clearly explains a company’s level of consistency with the TCFD recommendations and recommended disclosures, states any areas where they are not yet compliant, and avoids vague statements. Many companies provided a table including a key to show the areas in which they are compliant or partially compliant with the TCFD recommendations.
Diversity reporting
The report notes that, overall, companies have improved in disclosing certain aspects of diversity reporting within their annual reports. However, the FRC believes more can be done by companies to ensure that there is a link between company and diversity strategy. Companies should define their business strategy clearly and link this to their diversity objectives.
Remuneration reporting
While the report notes that the quality of reporting in this area is improving, the FRC comments that companies should look to provide specific explanations and directly refer to their corporate purpose and values when discussing their executive remuneration arrangements. Most statements of remuneration arrangements fail to explain how the framework is designed to align with purpose and values, and what the benefits are.
Cyber and information technology
While the FRC notes that the Code does not require this specifically to be reported on, it was encouraged that most companies in the sample outlined the risks, opportunities and medium to long-term importance of cyber security to their business and market. Among other comments, the FRC states that boards should be comfortable understanding cyber risks within the organisation and how they are managed. In addition, boards should have a clear view of the responsible development and use of Artificial Intelligence (AI) within the company and the governance around it. Boards should consider the potential of AI as well as risks – including risks to people and wider society. This requires boards to increase their knowledge on AI, whether it be through training or tapping into management and external expertise.
(FRC, Review of Corporate Governance Reporting, 16.11.2023)
(FRC, Strides made in corporate governance reporting but more work needed to meet stakeholder expectations, 16.11.2023)
The Quoted Companies Alliance (QCA) published an updated version of its Corporate Governance Code (QCA Code 2023) on 13 November 2023. The previous version was published in 2018. The QCA Code 2023 applies to financial years beginning on or after 1 April 2024, so the first disclosures under it will appear in 2025. There will be a 12-month transitional period so that companies applying the QCA Code 2023 have time to focus on their explanations as to their application of the principles in it while they become accustomed to the new reporting requirements.
The QCA Code 2023 continues to be constructed around ten principles and related disclosures and while recommended locations for each disclosure have been specified, it is noted that a company should decide for itself the best location for its disclosures, with both its shareholders and accessibility in mind.
Changes in the QCA Code 2023 include the following:
The QCA Code 2023 also includes further guidance on the independence of directors, requires all directors to be re-elected annually and sets out new requirements for board committees. For example, it states that both the audit and remuneration committees should comprise at least a majority of independent non-executive directors and aim for full independence.
The QCA Code 2023 can be purchased from the QCA by members and non-members.
On 13 November 2023, the Transition Plan Taskforce (TPT) launched a consultation on its sector-specific guidance for preparers and users of climate transition plans. This follows publication of its Disclosure Framework for transition plans in October 2023. For more information on that see here.
The new draft guidance published for consultation covers seven sectors, namely asset managers, asset owners, banks, electric utilities and power generators, food and beverage, metals and mining, and oil and gas. These ‘Sector Deep Dives’ are intended to help preparers interpret the final TPT Disclosure Framework in more detail for their sector.
The consultation on the draft guidance will be open until 29 December 2023.
Publication
In the wake of the recent eFishery scandal early-stage investors are recalibrating their approach to due diligence and risk tolerance.
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Following the launch of the new Electricity Law on 30 November 2024, which took effect on 1 February 2025 (Electricity Law 2024), Decision No. 768/QD-TTg (Decision 768) issued on 15 April 2025 by the Prime Minister of Vietnam approved the revised National Power Development Plan VIII (PDP 8) for the period 2021–2030, with a vision to 2050. This decision replaces the previous Decision No. 500/QD-TTg, dated 15 May 2023.
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