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Essential Corporate News – Week ending March 30, 2018

Publication March 30, 2018


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

The new UK national security regime: quick guide to the key changes

On March 15, 2018 the Department for Business, Energy and Industrial Strategy (BEIS) announced that it was introducing reforms to the existing UK merger control regime to strengthen the Government’s power to scrutinise mergers on the grounds of national security. This is the first significant amendment to the UK merger control regime since the Enterprise Act 2002 (EA02) came into force.

For a briefing from the Anti-trust and Competition team click here.

ESMA: Updated Q&As on prospectuses

On March 28, 2018 the European Securities and Markets Authority (ESMA) published an updated version of its questions and answers on prospectuses. The updated version includes a new Q&A designed to assist in the identification of profit forecasts.

New Question 102 explains the definition of “profit forecast” included in Article 2(10) of the Prospectus Regulation (Regulation 809/2004) and provides examples of what may or may not constitute a profit forecast. The Q&A clarifies the following:

  • A forecast does not need to refer to a precise figure for the likely level of profits or losses. Instead of a precise figure, a profit forecast can also refer to a range of figures particularly when a minimum or maximum figure is mentioned or implied.
  • The phrase the "likely level of profits or losses" does not only refer to the profit or loss for the year, it may also refer to other measures of profitability where these refer to an expectation of future performance.
  • ESMA adopts a “substance over form” approach concerning what financial measures may be viewed as profit forecasts for the purpose of the Prospectus Regulation.
  • The scope of the profit forecast definition encompasses forms of words from which profits or losses can be derived even if no particular figure is mentioned and the word ‘profit’ is not used.
  • Information does not need to relate to the entirety of an issuer's results to amount to a profit forecast. Where one or more segments of the issuer’s business generates the vast majority of the issuer’s profit or loss, and predictions are made about the level of the segment’s profit or loss, this can also constitute a profit forecast for the issuer as a whole.
  • A general discussion about future prospects of the issuer under trend information will not normally constitute a profit forecast.
  • Forecasts are distinct from trend information required by item 12 of Annex 1 of the Prospectus Regulation. Profit forecasts should be clearly identified. It is important for the investor to be able to easily differentiate between a “profit/loss forecast” and other information, such as “objectives” or “trend information”.

(ESMA, Updated Prospectuses Q&As, 28.03.18)

BEIS: Committee inquiry launched on executive pay and the gender pay gap in the private sector

On March 23, 2018, the House of Commons Business, Energy & Industrial Strategy Committee (BEIS Committee) announced the launch of an inquiry into executive pay and the gender pay gap in the private sector.  The BEIS Committee is looking at these issues in light of concerns about the overall level of executive pay and bonuses and the fact that the deadline for gender pay gap reporting is April 4, 2018.

Gender pay gap

The BEIS Committee has asked for written evidence on the following questions:

  • Is the annual information related to pay required under the Equality Act 2010 sufficient? Should any further information be required?
  • What is the extent of compliance? Is the information accurate?
  • How effective are the sanctions for non-compliance with reporting requirements?
  • What requirements, if any, should there be on companies to address gender pay gaps?

Executive pay

The BEIS Committee has asked for written evidence on the following questions:

  • What progress has been made on implementing the recommendations on executive pay by the previous BEIS Committee in its 2017 report on corporate governance?
  • What improvements have been made to reporting on executive pay in the last 12 months?
  • What steps have been taken by remuneration committees and institutional investors to combat excessive executive pay in the last 12 months? What further measures should be considered?

Next steps

Evidence on gender pay gap reporting is requested by April 10, 2018 and evidence on executive pay is requested by May 8, 2018.

(BEIS Committee, Corporate governance: delivering on fair pay inquiry, 23.03.18)

Companies House: First successful prosecution for false company information

On March 23, 2018 Companies House announced that a company director had been successfully prosecuted for falsifying company information in breach of section 1112 Companies Act 2006, in what is thought to be the first-ever conviction of its kind.

Section 1112 Companies Act 2006 makes it an offence for a person knowingly or recklessly to deliver or cause to be delivered to the registrar of companies, for the purposes of the Companies Acts, a document, or make, for any such purpose, a statement that is misleading, false or deceptive in a material particular.

In this case, an individual had incorporated a company in 2013, making Vince Cable MP a director and shareholder without his knowledge. That company was dissolved and taken off the company register after Companies House took action.  He then formed another company in 2016 making other MPs and an imaginary Israeli national all directors and shareholders without their knowledge.  Once again, Companies House dissolved the company and took it off the companies register.

On conviction, the individual was ordered to pay over £12,000.

(Companies House, Press release, 23.03.18)

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