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Welcome to Essential Corporate News, our weekly news service covering the latest developments in the UK corporate world.
On May 11, 2016 the Department for Business, Innovation and Skills (BIS) published a summary of feedback and the Government’s response to its October 2015 consultation paper on the technical legislative implementation of the EU Audit Directive (2014/56/EU) (the Directive) and Regulation (537/2014) (the Regulation). The Directive amends the existing Directive 2006/43/EC on statutory audits and applies to all audits required by EU law. The Regulation only applies to the audits of Public Interest Entities (PIEs).
The Government’s response includes the following:
Additionally, BIS will apply the amended Directive framework to audits of Limited Liability Partnerships (LLPs) as this will continue the current approach of making LLPs subject to the same audit regulatory framework that applies to companies and other business entities. BIS notes that applying the updated framework to LLPs will not result in any significant additional costs, but will require amendments to LLP specific legislation. These changes will follow in due course since the Government’s priority is to implement the Directive on time and the deadline for that is June 17, 2016.
On May 12, 2016 the Department for Business, Innovation and Skills (BIS) published the final draft of the Statutory Auditors and Third Country Auditors Regulations 2016, which were initially published in October 2015 with the BIS consultation paper on the technical legislative implementation of the EU Audit Directive (2014/56/EU) (the Directive) and Regulation (537/2014) (the Regulation). BIS has also published an explanatory memorandum, transposition note and impact assessment.
The Regulations differ significantly from the October 2015 draft, and, among other things:
The Regulations will be periodically reviewed by the Secretary of State, who must publish a report within five years after they come into force and within every five years thereafter. They will apply from June 17, 2016, if made on or before June 16, 2016, otherwise they will apply from the day after they are made.
As part of the Anti-Corruption Summit held in London in May 2016, the Ministry of Justice has announced that it will consult on plans to extend the scope of the criminal offence of a corporate “failing to prevent” bribery on its behalf under the Bribery Act 2010 or failing to prevent the facilitation of tax evasion by its staff to other economic crimes.
The consultation will seek views and evidence to assess whether changes in the law could allow the courts to more effectively prosecute corporate economic crime. The consultation, to be published this summer, will explore whether the ‘failure to prevent’ model should be extended to complement existing legal and regulatory frameworks.
In May 2016, the Institute of Chartered Secretaries and Administrators (ICSA) published a joint report with Ernst & Young which considers the role of the nomination committee. The report notes that, while the nomination committee’s role may be less clearly defined than that of the audit committee, and its profile lower than that of the remuneration committee, it is arguably the most important of the three. It plays a pivotal role in appointing directors to the board and, if the board lacks the right balance, knowledge, skills and attributes, the likelihood of it and its committees operating effectively is greatly reduced.
ICSA and Ernst & Young sought to find out what happens in nomination committees and boardrooms through a series of roundtable discussions with board chairmen, nomination committee chairmen and members, and company secretaries from over 40 listed companies (predominantly from the FTSE 350) throughout February and March 2016. Many of the representatives said their companies were expanding the role of their nomination committee, as well as adopting a more professional approach to the recruitment and selection of candidates. The representatives were keen not only to share their experiences, but also to learn how others were addressing these issues and identify ideas that might be useful for their own committee.
The report considers the nomination committee’s role, its membership and its reporting in the annual report, and it sets out a number of points for boards and nomination committees to consider, including:
The report then considers executive succession and the talent pipeline, as well as executive development and suggests points for the board and nomination committee to consider include:
The report includes a section on the search for non-executive directors, looking at specific skill sets and personal attributes and then at preparation for future challenges, including linking longer-term strategy to succession plans and having open conversations.
The report concludes with a list of questions for boards and nomination committees to consider.
IMO 2020 is almost upon us. Readers are well aware of the impending switch to 0.5 percent fuel mandated by Annex VI of MARPOL which will cause an anticipated drop in HSFO demand, the potential hazards of new untested LSFO blends, the concerns around scrubber operations, the debate over open loop versus closed loop, and the myriad of other risks associated with the impending regulatory change.