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Tier 3: Thinking strategically
Whilst the bottom two layers of the Pyramid focus on improving how you currently operate across the key aspects of a legal function, the third tier is about thinking aspirationally.
Global | Publication | June 2022
On May 26, 2022 the Takeover Panel (Panel) published public consultation paper PCP 2022/2 (the PCP) setting out proposed amendments to the definition of “acting in concert” and related matters.
We will be publishing a more detailed briefing on the PCP in due course, but the key proposed changes relate to the presumptions contained in the definition of acting in concert and, in particular, current presumption (1). This presumption refers to a company, its parent, subsidiaries and fellow subsidiaries, and their associated companies, and companies of which such companies are associated companies being presumed to be acting in concert with each other and sets the threshold for associated company status at 20%. The PCP proposes this presumption is deleted and replaced with two new presumptions as follows:
New presumptions (1) and (2) would be applied to funds in the same way as to companies, thereby (in effect) treating an investment in a fund as equivalent to an investment in a company’s equity share capital.
The PCP also explains how the new 30% threshold would apply differently to interests in voting share capital and (voting or non-voting) equity share capital when held through a chain of ownership. In summary, in the case of new presumption (1) interests would not dilute through a chain of ownership whereas in the case of new presumption (2) they would.
Various changes are also proposed to other presumptions to the definition of acting in concert as well as to other related provisions of the Code.
The PCP includes commentary and diagrams explaining the application of the proposed new rules in practice. The Panel has also indicated that it intends to hold a webinar on the proposed changes in late June or early July 2022.
The period for responding to the PCP closes on September 23, 2022. The Panel expects to publish a response statement setting out the final amendments to the Code in late 2022 and anticipates that the amendments would come into effect approximately two months thereafter.
On May 26, 2022 the Financial Conduct Authority (FCA) published DP22/2 (the DP) setting out for discussion a potential new single segment approach to UK listings of equity shares in commercial companies. This is the latest step in the ongoing listing review process initiated by the publication of the Hill Review in spring 2021 and builds on elements of the FCA’s previous paper on this topic (CP21/21) published in summer 2021.
In this briefing, we discuss the key features of the single segment regime outlined in the DP and some of the drivers behind discussions in this area.
On May 27, 2022 the Financial Conduct Authority (FCA) published Primary Market Bulletin 40 (PMB 40) in which it provides feedback on proposed changes to the Knowledge Base consulted on in PMB 34 (published in June 2021) and explains the final changes it is making to its knowledge base.
The proposals made by the FCA in PMB 34 included:
As a result of feedback received, the FCA has made certain further changes to the procedural note and four of the technical notes as identified in the table set out in PMB 40. The other notes have been adopted in the form proposed in PMB 34.
On the same day, the FCA published Handbook Notice No 99, setting out, among other things, its response to feedback received to its proposals, as set out in Chapter 6 of FCA Quarterly Consultation No 33, to make various amendments to the Prospectus Regulation Rules and Listing Rules as a consequence of the changes to the Knowledge Base proposed in PMB 34, together with the instrument to implement the changes. The FCA is proceeding with its proposed changes to the Handbook, and the instrument is in substantially the same form as the draft instrument in the Quarterly Consultation.
On May 31, 2022 the Department for Business, Energy and Industrial Strategy (BEIS) published a document summarising responses to and its plans for action following its consultation on the White Paper it published in March 2021 setting out wide-ranging reforms to the UK’s audit and corporate governance framework.
In broad terms, the Government intends to put in place a new UK approach to regulating in the areas of audit, corporate reporting and corporate governance. Since this will involve a broad range of actors, not just the Government, the response document does not set out a precise timetable, but outlines the actions to be taken, including what the Government intends to ask of the new regulator and other stakeholders.
We will be publishing a more detailed briefing on this response in due course but key points to note include the following:
On May 24, 2022 the 30% Club Investor Group, UK (30% Club Investor Group) published a guidance toolkit for companies prepared by investors to (i) establish a shared understanding of what constitutes useful reporting on diversity to assist with investors’ decision-making processes and engagements; and (ii) help companies better understand what investors value most in disclosure on diversity and provide insights on how company reporting can be made more effective and comprehensive. The guidance is primarily aimed at FTSE 350 companies, but unlisted companies are invited to use it for guidance too.
Investors want to see more integrated reporting that shows how diversity is being treated as a core strategic consideration. As a result, the document is meant to be used as a high-level reporting framework so that companies can use the various elements to enhance their existing reporting over time and fill in any gaps where needed.
The 30% Club Investor Group identifies the following key principles of good diversity reporting:
The guidance also provides examples of useful reporting to illustrate approaches companies use in different areas of reporting on governance and oversight in relation to diversity issues.
Publication
Whilst the bottom two layers of the Pyramid focus on improving how you currently operate across the key aspects of a legal function, the third tier is about thinking aspirationally.
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