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FCA: Sovereign controlled companies – Policy Statement PS18/11
On June 8, 2018 the Financial Conduct Authority (FCA) published Policy Statement PS18/11 (the Policy Statement) providing feedback on the FCA’s Consultation Paper CP17/21 (the Consultation) which it published in July 2017 proposing a new premium listing category for companies controlled by sovereign countries. The FCA is taking forward this new listing category but has amended some of its original proposals in light of feedback received. The relevant changes to the Listing Rules, primarily included in a new Chapter 21, are set out in an Appendix to the Policy Statement.
While companies in the new premium listing category will generally need to comply with the requirements of the current premium regime, these are subject to a number of modifications. The key amendments are as follows:
- Related party rules: The requirements set out in Chapter 11 of the Listing Rules for companies to seek prior independent shareholder approval and obtain a fair and reasonable opinion from the company’s sponsor in connection with certain related party transactions will not apply in respect of transactions with the sovereign controlling shareholder or one of its associates. Disclosure of such transactions will still, however, be required in order to ensure transparency.
- Controlling shareholder rules: In the Consultation, the FCA originally proposed that none of the controlling shareholder rules would apply in respect of the sovereign controlling shareholder. This position has changed slightly in the Policy Statement. The requirement for the company to have a controlling shareholder agreement in place will not apply in respect of the sovereign controlling shareholder. However, in light of feedback received, the rules requiring the appointment or re-appointment of independent directors to be approved by independent shareholders as well as by shareholders as a whole will apply to companies listed in the new category in the same way as for any other premium listed company with a controlling shareholder.
- Securities to be listed: Unlike the current premium listing categories which are only available for a listing of equity shares, companies seeking admission to the new category will be able to list depositary receipts. However, in light of feedback received, there will be an explicit eligibility condition and matching continuing obligation on the company to ensure that the rights attaching to the underlying equity shares pass through to the holders of the depositary receipts.
- Sovereign controlling shareholder: To qualify for the new listing category, 30 per cent or more of the company’s voting rights will need to be controlled by a sovereign shareholder (ie the sovereign or other head of State in their public capacity, the government of that State, a department of that State or an agency or special purpose vehicle of that State).
- Transfer of listing category: Independent shareholder approval will be required for a transfer from an existing premium listing into the new category, for transfers from the new category to a standard listing and for delisting.
Companies will be able to seek admission, or transfer, of securities to listing in the new category from July 1, 2018.
BEIS: Independent review of the Financial Reporting Council – Call for Evidence
On June 6, 2018 Sir John Kingman, having been appointed in April 2018 to carry out an independent review of the Financial Reporting Council (FRC), published a Call for Evidence in relation to that review.
The two objectives of Sir John Kingman’s review are (i) to ensure that the FRC’s structures, culture and processes, its oversight, accountability and powers, and its impact, resources and capacity are as good as they could be and are fit for the future, and (ii) to see the FRC standing as a beacon for the best in governance, transparency and independence. As a result, the review team is calling for evidence and information, including specific examples, on the effectiveness of the FRC.
Particular areas in respect of which evidence is requested are as follows:
- The FRC’s purpose and function: the Call for Evidence sets out the FRC’s mission statement and current role which includes the setting of accounting standards, the review of financial statements of public and large private companies for compliance with the Companies Act 2006, the monitoring and maintenance of the UK Corporate Governance Code and the UK Stewardship Code and responsibilities in relation to audit, accountants and actuaries. It asks whether the FRC’s objectives, name and structure remain appropriate.
- The FRC’s impact and effectiveness: the Call for Evidence asks questions about the FRC’s strengths and weaknesses, particularly in light of its roles in audit regulation, accounting and financial reporting and in relation to corporate governance and stewardship codes, and asks about the FRC’s influence and effectiveness in these areas.
- The FRC’s role in corporate failure: the Call for Evidence asks whether the FRC could or should do more to help reduce the risk of major corporate failure, whether it has responded quickly enough to warning signs arising from its work on accounts and financial reporting or on evidence of concerns over poor corporate governance and whether the viability statement could be made more effective.The Call for Evidence also asks questions about the FRC’s powers and sanctions, its legal status and its relationship with Government, as well as questions about governance and leadership, funding, resources and staffing.
Responses are requested by August 6, 2018.
Essential Corporate News
On June 5, 2019 the Task Force on Climate-related Financial Disclosures (TCFD) established by the Financial Stability Board (FSB) published its 2019 Status Report.