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Essential Corporate News – Week ending April 7, 2017

Publication April 7, 2017


Introduction

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

House of Commons: BEIS Committee’s report on corporate governance

On April 5, 2017 the House of Commons Business, Energy and Industrial Strategy (BEIS) Committee published a report on its inquiry into corporate governance. This inquiry was announced in September 2016. The inquiry examined whether the UK corporate governance framework is still fit for purpose, whether it provides the right structures to assist businesses in making high quality decisions for the long term, taking fully into account the wider interests of society, and how good behaviour can be embedded in business through cultural change and persuasion.

The BEIS Committee believes that the system of corporate governance in the UK is still strong and remains an asset to the country’s reputation for doing business. It does not believe that there is a case for a radical overhaul of corporate governance in the UK, but that there is scope for significant improvements in order to address the changing nature of company ownership in a globalised economy, and its report contains a number of recommendations, including the following:

Promoting good corporate governance

  • More effective measures are required to ensure that directors demonstrably take seriously their duties to have regard to other stakeholders and the long-term consequences of decisions. As such, it recommends that the Financial Reporting Council (FRC) amends the UK Corporate Governance Code (the Code) to require informative narrative reporting on the fulfilment of directors’ duties under section 172 Companies Act 2006. Boards must be required to explain precisely how they have considered each of the different stakeholder interests, including employees, customers and suppliers, and how this has been reflected in financial decisions. They should also explain how they have pursued the objectives of the company and had regard to the consequences of their decisions for the long term, however they choose to define this. Where there have been failures to have due regard to any one of these interests, these should be addressed directly and explained.
  • The FRC should encourage companies to be more imaginative and agile in communicating digitally with stakeholders throughout the year and should actively push back on the use of boilerplate statements in annual reports. The FRC should work with business organisations to develop appropriate metrics to inform an annual rating exercise. This should publicise examples of good and bad practice in an easy to digest red, yellow and green assessment. Companies should be obliged to include reference to this rating in their annual reports.
  • The Government should bring forward legislation to give the FRC the additional powers it needs to engage and hold to account company directors in respect of the full range of their duties. If engagement is unsuccessful, the FRC should report publicly to shareholders on collective board or individual failings and the FRC should be able to initiate legal action for breach of section 172 duties. 
  • The Secretary of State should be more prepared than is presently the case to use existing powers where there is any suspicion of serious wrongdoing that may be in breach of the law.
  • The Investor Forum should seek to become a more pro-active facilitator of a dialogue between boards and investors by engaging in regular routine dialogue in order to pick up on any widespread concerns, for example those identified by the new FRC rating system.
  • Companies should consider establishing stakeholder advisory bodies and the BEIS Committee recommends that the Code should be revised to require a section in annual reports detailing how companies are conducting engagement with stakeholders.
  • The FRC should review the UK Stewardship Code with a view to providing more explicit guidelines on what high quality engagement would entail; a greater level of detail in terms of requirements; and an undertaking to call out poor performance on an annual basis.
  • The Government should consult on new requirements on listed and large private companies to provide full information on advisers engaged in transactions above a reasonable threshold, including on the amount and basis of payments and on their method of engagement.
  • Increased transparency and accountability are the best routes to promoting better stewardship, high quality engagement and public trust and as such, the BEIS Committee recommends that the FRC includes in its revised Stewardship Code stronger provisions to require the disclosure of voting records by asset managers and undertakes to name those that subsequently do not vote.
  • The FRC should include best practice guidance on professional support for non-executive directors when it updates the Code and that companies include training of board members as part of reporting on their people or human resources policy.
  • The FRC should update the Code to provide guidance on how companies should identify clearly and transparently the roles of non-executive directors where they have particular responsibilities and how they should be held to account for their performance. Further, non-executive directors should be required to demonstrate more convincingly that they are able to devote sufficient time to each company when they serve on multiple boards.

Private companies

The FRC, Institute of Directors and Institute for Family Business should develop, with private equity and venture capital interests, an appropriate code with which the largest privately-held companies would be expected to comply. They should contribute to the establishment of a new body to oversee and report on compliance with that code. Further, the new code should include a complaint mechanism, under which the overseeing body could pursue with the company any complaints raised about compliance with the code. The scheme should be funded by a small levy on members. Should this voluntary regime fail to raise standards after a three year period, or reveal high rates of unacceptable non-compliance, then a mandatory regulatory regime should be introduced.

Pay

  • Companies should make it their policy to align bonuses with broader corporate responsibilities and company objectives and take steps to ensure that they are genuinely stretching. Policy in this respect would be considered by the FRC in their corporate governance rating system.
  • Long-term incentive plans (LTIPs) should be phased out as soon as possible. No new LTIPs should be agreed from the start of 2018 and existing agreements should not be renewed.
  • The FRC should consult with stakeholders with a view to amending the Code to establish deferred stock rather than LTIPs as best practice in terms of incentivising long-term decision-making. This consultation should develop guidelines for the structure of executive pay which should be simpler based on long-term equity, a limited use of short-term performance-related cash bonuses and clear criteria for bonuses. 
  • The FRC should revise the Code to include a requirement for a binding vote on executive pay awards the following year in the event of there being a vote of over 25 per cent of votes cast against the remuneration report in any year. This requirement should be included in legislation at the next opportunity.
  • Employee representation on remuneration committees would represent a powerful signal on company culture and commitment to fair pay. This option should be included in the Code and leading companies should adopt this approach.
  • Any chair of a remuneration committee should normally have served on the committee for at least one year previously. To further incentivise strong engagement, the chair of a remuneration committee should be expected to resign if the remuneration committee’s proposals do not receive the backing of 75 per cent of voting shareholders.
  • Companies should set out clearly their people policy, including the rationale for the employment model used, their overall approach to investing in and rewarding employees at all levels throughout the company, as well as reporting clearly on remuneration levels on a consistent basis. The FRC should consult with relevant bodies to work up guidance on implementing this recommendation for inclusion in the Code.
  • The FRC should work with other relevant stakeholders on the detail and amend the Code to require the publication of pay ratios between the CEO and both senior executives and all UK employees. Further, the Government should require that equivalent pay ratios be published by public sector and third sector bodies above a specified size.

Composition of boards and diversity 

  • The aims and targets of the Hampton-Alexander Review should go further and, in support of the Equality and Human Rights Commission’s objective, the Government should set a target that from May 2020 at least half of all new appointments to senior and executive management level positions in the FTSE 350 and all listed companies should be women. Companies should explain in their annual report the reasons why they have failed to meet this target, and what steps they are taking to rectify the gender inequality on their executive committees.
  • For companies seeking a competitive advantage, the directors and non-executives running them, and those setting the strategic context in which they operate, should be empathetic to the needs and requirements of all those involved, including employees, workers, suppliers and customers. The FRC should embed the promotion of the ethnic diversity of boards within its revised Code. At the very least, wherever there is a reference to gender, the FRC should include a reference to ethnicity, so that the issue of ethnic diversity on boards is made explicit in the revised Code, and is given as much prominence as gender diversity.
  • In accordance with the spirit of the McGregor Smith review, the Government should legislate to ensure that all FTSE 100 companies and businesses publish their workforce data, broken down by ethnicity and by pay band.
  • The more similar that individual directors think, act, and look, the more likely it is that they are not going to challenge each other, or innovate, or think imaginatively. Greater cognitive diversity promotes more effective challenge and more informed decision-making. The FRC should work with others to provide improved guidance on this aspect of diversity in the context of board membership.
  • The revised Code should have the issue of board diversity as a key priority and there should be a public explanation of the reasons why members are part of the board. The Code should require boards to cover in their annual reports information about diversity on their boards and in the workforce, covering diversity of gender, ethnicity, social mobility, and diversity of perspective. Annual reports should be required to include a narrative on the current position, and an emphasis on what steps the company has taken, and will continue to take to enhance the diversity of the executive pipeline, with agreed targets. This narrative should include how accurately the board mirrors the diversity of both the workforce and the customer base.
  • The detailed narrative of board diversity in annual reports should be a working document throughout the year, informing the board, the nomination committee, middle and senior managers, and the workforce and other stakeholders, about the seriousness with which companies are taking diversity and succession issues. The revised Code should make this requirement explicit.
  • Companies should be recruiting non-executive and executive directors from the widest possible net of suitable candidates, which should include recruiting internally. More companies should appoint workers on boards. 
  • The revised Code should state explicitly that the procedure for the appointment of new directors to the board should be by open advertising, and by an external search consultancy, and detailed explanations should be given if one or both of these requirements is not met.
  • The FRC should be given the extra role of overseeing the rigour of the director evaluation process to ensure that it is genuinely independent, thorough and consistent across companies. The FRC should highlight best and worst practice among nomination committees.

(BEIS, Corporate governance: Third Report of Session 2016–17, 05.04.17)

BEIS: Call for evidence on register of beneficial owners of overseas companies and other legal entities that own UK property or participate in procurement

On April 5, 2017 the Department for Business, Energy and Industrial Strategy (BEIS) published a call for evidence seeking views on the proposals for a register of beneficial ownership information for overseas companies or other legal entities that own or buy UK property or participate in UK central government procurement.

The call for evidence follows BEIS’ March 2016 discussion paper on enhancing transparency of beneficial ownership information of foreign companies undertaking certain economic activities in the UK. The discussion paper particularly focussed on how an approach of requiring foreign companies to provide information on their beneficial ownership before they buy land/property or bid on a contract with the UK Government could be implemented. The Government wanted the obligations on foreign companies to be broadly similar to those on UK companies as required by the “persons with significant control” or PSC regime. The discussion paper suggested that Companies House could manage a new register with the requisite information or it could be operated by a private sector organisation or another independent public body.

Following the discussion paper, the Government announced in May 2016 that it intended to introduce a register of the beneficial owners of overseas companies owning UK property or engaging in UK government procurement. This call for evidence seeks views on the proposals and on the design of the policy and its impact.

Objectives and scope of the new register

BEIS objective is to create a new register that:

  • Contains useful information – the register must not give superficial information that takes the reader no further in understanding a company than information that is currently available.
  • Is publicly and easily accessible – the information will be of interest to a wide range of people and organisations both at an individual level and in the wider community. 
  • Protects the information of those at risk – it will be important to have a thorough protection regime to protect people who are at risk of harm as a result of information about them being publicly accessible. 
  • Avoids creating disproportionate burdens or putting off legitimate investors – in particular, BEIS is conscious that the new register will need to be readily applicable to, and understandable by, companies across the world. This carries important implications for how it is designed and communicated.

BEIS proposes including all legal entities that can hold properties or bid on central government procurement contracts in the scope of the new register’s requirements.

Registering information – property

BEIS intends to ensure that overseas entities cannot buy or sell property in the UK unless they have provided information about their beneficial owners for the new register. In respect of property already owned by an overseas entity, BEIS intends for this restriction to be reflected by a note on the title register for the property. Entities wishing to buy property will have to register their beneficial ownership information with Companies House. If their application is successful they will be allocated a registration number. This number will be required in order to register title to the property at the appropriate Land Registry. Entities that already own property will be given a transitional year in which they will be free to choose whether to disclose the information or dispose of their property.

Registration – procurement

The new register will operate in a similar way in relation to procurement as it does with property purchases. Once the register is in place, overseas entities that wish to take part in central government procurement contracts will need to supply beneficial ownership information before the contract can be finalised.

Required information

The requirements of the PSC register were developed through extensive consultation with stakeholders, including business and legal sectors, and have been well received. BEIS therefore believes that the PSC register requirements provide a good balance between providing transparency and the cost to business of compliance. Given this, and the similarities between the new overseas register and the PSC register, BEIS proposes to require the same information about beneficial owners as is required of people with significant control. The information will have to be updated at least every two years.

Compliance

BEIS wants to ensure that overseas entities that own property in the UK comply with the new register requirements. The system outlined in the call for evidence achieves this using controls over property. If an entity does not supply the right information to Companies House it will not get an overseas registration number. Without this number it will not be able to buy property, and it will not be able to sell, lease or place a charge against any property it already owns. Some entities might be content to own property that is restricted in this way; the powers over the property might not act as enough of an incentive to comply with the law. Because of this, the Government is considering whether it would be appropriate to create a criminal offence for entities that still own property at the end of the transitional period but have not complied with the new register requirements by that time.

Protection regime

The new overseas register will be publicly accessible to ensure transparency and increase ease of scrutiny by law enforcement bodies and transparency groups. There are, however, some situations where making information about an individual public would put that individual at risk of harm or would create a wider public safety risk. This builds on a principle in the PSC register. The PSC register has a protection regime which allows a company or individual to apply to have information about an individual with significant control suppressed if the individual is at risk of violence or intimidation as a result of that information being made public.

BEIS proposes to provide for a beneficial owner or managing officer to apply to have their information suppressed on the new register in similar circumstances. However, BEIS also considers that because the new overseas register will relate to individual properties, the risk of harm to an individual or others may be increased by the individual’s association with the property being known and BEIS wishes to consult on whether a more extensive regime may be appropriate for the new overseas register as it may include individuals’ residential addresses.

Third party protections

BEIS wants to ensure that where an entity does not comply with the register requirements and has defaulted on a loan secured on the property, the lender can still enforce its security by repossessing and disposing of the property but it asks how it can best ensure that only legitimate lenders can repossess and dispose of a property with a restriction against it.

(BEIS, A register of beneficial owners of overseas companies and other legal entities: Call for evidence on a register showing who owns and controls overseas legal entities that own UK property or participate in UK government procurement, 05.04.17)

House of Lords/Commons Joint Committee on Human Rights: Human Rights and Business 2017 – Promoting responsibility and ensuring accountability

On April 5, 2017 the House of Commons and House of Lords' Joint Committee on Human Rights published a report discussing human rights and business. The report follows the Joint Committee’s  June 2016 announcement of an inquiry into human rights and business, to consider progress made by the UK Government in implementing the United Nations Guiding Principles on Business and Human Rights, by means of the National Action Plan that was published in 2013 and revised in May 2016. The Joint Committee then published an open call for evidence focussing on four main issues: the National Action Plan, Government engagement with business and human rights, monitoring transparency and compliance, and access to remedy.

The report notes the following:

  • The Modern Slavery Act 2015 has multiple shortcomings, including there being no requirement for a central list of companies required to report, which makes it difficult to hold companies to account.
  • The passage of the Modern Slavery (Transparency in Supply Chains) Bill should be facilitated as it seeks to amend the Modern Slavery Act not only so as to require the Secretary of State to compile a list of companies that should be in compliance, but also to include public bodies in the transparency in supply chains requirements of the Act and to prevent public bodies from procuring services from companies that have not conducted due diligence.
  • The Bill is a private member's bill that has been passed by the House of Lords but has not yet received a second reading in the House of Commons and the report recommends that if the Bill fails to be enacted in the present parliamentary session, the Government bring forward its own legislation in the next session to achieve a similar objective.
  • The Joint Committee recommends that the Government bring forward legislative proposals to make reporting on due diligence for all other relevant human rights, not just the prohibition of modern slavery, compulsory for large businesses, with a monitoring mechanism and an enforcement procedure.
  • Companies that have been found to have been responsible for abuses, either by the courts or by the National Contact Point, or where a settlement indicates that there have been human rights abuses, should also be excluded from public sector contracts for a defined and meaningful period.
  • The Joint Committee recommends that the Government bring forward legislation to impose a duty on all companies to prevent human rights abuses, as well as an offence of failure to prevent human rights abuses for all companies, including parent companies, along the lines of the relevant provisions of the Bribery Act 2010. The legislation should enable remedies against the parent company and other companies when abuses do occur, so civil remedies (as well as criminal remedies) must be provided. It should include a defence for companies where they had conducted effective human rights due diligence, and the burden of proof should fall on companies to demonstrate that this has been done.

(House of Lords/House of Commons Joint Committee on Human Rights, Human Rights and Business 2017: Promoting responsibility and ensuring accountability - Sixth Report of Session 2016–17, 05.04.17)

FCA: Handbook Notice No. 42

On March 31, 2017 the Financial Conduct Authority (FCA) published its Handbook Notice No. 42 which sets out its response to feedback received on its December 2016 Quarterly Consultation Paper, CP 16/39.

The Quarterly Consultation paper set out proposals for new rules to be added to Chapter 6 of the Disclosure Guidance and Transparency Rules sourcebook (DTRs) to enable the FCA to comply with the requirements in articles 7 and 9 of the Regulatory Technical Standards (RTS) on the Transparency Directive (1004/019/EC) concerning the European Electronic Access Point (EEAP).

The FCA is proceeding with its proposals and the final instrument is in substantially the same form as the draft published with the Quarterly Consultation paper.

In light of feedback received to the consultation, namely that issuers and Primary Information Providers will require at least six months to prepare for the changes, the DTR changes will come into force on October 1, 2017. Issuers will not need a Legal Entity Identifier to file regulated information with the FCA before that date.

(FCA, Handbook Notice No. 42, 31.03.17)

FRC Conduct Committee: Revised corporate reporting review procedures

On April 3, 2017 the Financial Reporting Council (FRC) published revised operating procedures for reviewing company reporting together with a Feedback Statement and some revised Frequently Asked Questions (FAQs).

The revised operating procedures follow a consultation published by the FRC in October 2016, and no substantial changes have been made to the consultation draft. The changes implement new ways of working to address requests for more transparency about Corporate Reporting Reviews (CRRs) and their outcomes, and to enhance the efficiency of CRR procedures without compromising the quality of decision-making. Additional changes have resulted from requests for greater transparency in respect of the review process and clarity in the content of the operating procedures.

The FRC makes the following observations in the Feedback Statement:

  • Any interaction with CRR (including that the company’s accounts have been reviewed but no substantive issues have been raised) should be disclosed in the relevant company’s audit committee report, as it will enhance users’ understanding.
  • Respondents observed that the FRC’s Guidance to Audit Committees only applies to premium listed companies and there is no specific reference in the operating procedures to the reporting expected of other companies such as AIM companies. The FRC notes that guidance on this has been added to the FAQs, which clarifies that if any company, whether listed or not, has had its report and accounts reviewed, this is likely to be of general interest to any reader of the next year's accounts and so boards are encouraged to be transparent about the extent of any interaction with the FRC's CRR function in their subsequent reports and accounts.
  • The FRC’s Conduct Committee has committed to reviewing the effectiveness of the revised operating procedures once there is sufficient experience of their operation.
  • The FRC has concluded that it is for the company to explain its response to regulatory interventions to its shareholders and others, but that the FRC Board will monitor the quality of the disclosure provided by companies and the extent to which it is fair and balanced.
  • Paragraph 62 of the operating procedures has been amended to clarify that the list of companies whose reports have been previewed which is published by the FRC will indicate the type of approach made to the company and the specific report and accounts under issue.

The revised operating procedures took effect on April 1, 2017.

(FRC – The Conduct Committee, Operating procedures for reviewing corporate reporting, 01.04.17)

Council of the EU: Formal adoption of shareholders' rights in EU companies

On April 3, 2017 the Council of the EU announced that it has adopted a Directive aimed at strengthening shareholders' engagement in big European companies by amending the Shareholder Rights Directive (2007/36/EC).

Only minor amendments have been made to the text adopted by the European Parliament on March 14, 2017. The new Directive establishes specific requirements to encourage shareholder long-term engagement and increase transparency. The new requirements will apply to:

  • remuneration of directors;
  • identification of shareholders;
  • facilitation of exercise of shareholders’ rights;
  • transmission of information;
  • transparency for institutional investors, asset managers and proxy advisors; and
  • related party transactions.

The Directive will enter into force on the twentieth day following its publication in the Official Journal of the EU and member states will then have up to two years to incorporate the new provisions into domestic law.

(Council of the EU, Shareholders' rights in EU companies: Council formal adoption, 03.04.17)

European Parliament: Provisional texts adopted – Prospectus Regulation

On April 5, 2017 the European Parliament resolved to adopt an amended version of the European Commission's proposal for a regulation for a new Prospectus Regulation to repeal and replace the existing Prospectus Directive (2003/71/EC) and the existing Prospectus Regulation (809/2004).

Previously, the Parliament had resolved in September 2016 to adopt the proposal with amendments. In December 2016, the European Commission announced that an informal trialogue agreement had been reached on the proposal and the agreed text was sent to the European Parliament and the Council for a final vote.

Amendments made to the European Commission’s first proposal include:

  • Increasing the upper limit for the total consideration for offers to which member states may elect to exempt offers in Article 3(2) to EUR 8 million.
  • Reducing the number of persons to whom an offer that is outside the scope of the Regulation can be addressed in Article 1(4)(b) to 150 natural or legal persons per member state, other than qualified investors (from 350).
  • Restricting the combination of exemptions for securities representing less than 20 per cent of the number of securities of the same class already admitted to trading on the same regulated market and for shares resulting from the conversion or exchange of other securities or from the exercise of the rights conferred by other securities representing, subject to certain exceptions, less than 20 per cent of the number of shares of the same class already admitted to trading on the same regulated market if this would lead to the admission to trading of more than 20 per cent of the number of shares of the same class already admitted to trading over a 12 month period.
  • Increasing the length of the prospectus summary to a maximum of seven sides of A4.
  • Removing the flexibility to increase the length of the prospectus summary in exceptional cases (Article 7).
  • Tightening the list of entities which may draw up an EU growth prospectus for public offers of securities in Article 15.
  • Requiring an explanation of how each risk factor affects the issuer or the securities, the presentation of risk factors in a limited number of categories and the ranking by materiality within each category (Article 16(1)).

The Regulation must now be adopted by the European Council. The Regulation will then enter into force on the twentieth day after its publication in the Official Journal and will largely apply from 24 months after the date of its entry into force. Article 1(3) and 3(2) will apply from 12 months from its entry into force and points (a), (b) and (c) of Article 1(5) will apply from the date of its entry into force.

(European Parliament, European Parliament legislative resolution of 5 April 2017 on the proposal for a regulation of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading (COM(2015)0583 – C8-0375/2015 – 2015/0268(COD)), 05.04.17)

ESMA: Report on shareholder identification and communication systems

On April 5, 2017 the European Securities and Markets Authority (ESMA) published a report on shareholder identification and communication systems. The report presents a general assessment of the level of harmonisation of national regulatory frameworks for shareholder identification and communication systems across the European Economic Area (EEA) and aims to provide input to the European Commission in relation to the preparation of the implementing acts to specify minimum requirements on the process, format and timeline for shareholder identification and transmission of information as required by the Shareholder Rights Directive II (SRD II).

ESMA’s recommendations include:

  • Requiring issuers and intermediaries to follow harmonised processes on key aspects for the identification of shareholders. Harmonisation may be achieved by leveraging on existing regulatory frameworks, as shareholder identification processes already exist in half of the jurisdictions. Such harmonisation should ensure interoperability and focus on: i) the minimum information to be transmitted (the name and contact details of the shareholders and, where the shareholders are legal persons, their unique identifier, if any), ii) the format of the identification request and of the answers provided (on the basis of formats already used in practice by issuers and intermediaries), iii) the compatible use of IT systems (which are increasingly used across countries) and iv) the deadlines to comply with (here, SRD II provides for a transmission of the identification request between intermediaries without undue delay).
  • Harmonising key aspects of the transmission of information and shareholder communication. The report shows that issuers mainly convey information to shareholders by publishing it on their website. However, to the extent that this tool does not fulfil the requirements under company law regarding notification to shareholders, such as emails or traditional post and advertisements in some designated media. Here, SRD II implementing measures could be particularly helpful if they facilitate a wider use of electronic means and thereby streamline and reduce the burden of communication duties for issuers and shareholders.
  • Most countries have established rules concerning the record date as required by EU legislation. However, the range of dates and the way they are calculated vary significantly. Moreover, it seems that the definition and of the ex-date in connection to the record date for voting rights purposes are not always commonly understood and communicated in the same way. ESMA suggests that this might be improved through more explicit and common disclosure of this information by issuers and trading venues.
  • Regarding communication from the shareholder to the issuer, there seems to be a relatively high level of harmonisation in relation to the procedures followed by shareholders in order to convene a general meeting, to include new items on the agenda and to ask questions. However, ESMA believes there could also be common standards for communications relating to vote delegation and notification of attendance to facilitate the flow of such information through the chain of intermediaries to the issuer.
  • Regarding the enforcement of the transmission of information process, specifically in respect to foreign/third country intermediaries, ESMA believes the cross-border application of sanctions already in place in most countries could be facilitated by the partially harmonised regime against breach of provisions envisaged by SRD II.

(ESMA, Report on shareholder identification and communication systems (ESMA31-54-435), 05.04.17)

The Statutory Auditors and Third Country Auditors Regulations 2017

On April 5, 2017 the Statutory Auditors and Third Country Auditors Regulations 2017 were published. The Regulations make some amendments to the Statutory Auditors and Third Country Auditors Regulations 2016, which fully transposed amendments to the Statutory Audit Directive (2006/43/EC) and the Audit Regulation (Regulation 537/014).

The amendments include:

  • Adding sections 485C and 489C Companies Act 2006 – these set out the restrictions on the appointment of an auditor of a private or a public company which is a public interest entity (PIE).
  • Adding section 494ZA Companies Act 2006 – this sets out the maximum engagement period referred to in new sections 485C and 489C.
  • Amending section 1253D Companies Act 2006 (restriction on transfer of audit working papers to third countries) to extend the list of approved third country competent authorities in order to transpose Commission Implementing Decision 2016/1010 issued under Article 47 of the Statutory Audit Directive on the adequacy of the competent authorities of certain third countries and territories.

The Regulations come into force on May 1, 2017, apart from Regulation 13(4)(b) which comes into force on October 1, 2018.

(The Statutory Auditors and Third Country Auditors Regulations 2017 (SI 2017/516), 05.04.17)

The Legislative Reform (Private Fund Limited Partnerships) Order 2017

On March 31, 2017 the Legislative Reform (Private Fund Limited Partnerships) Order 2017 was published in its final form. The purpose of the Order is to amend the Limited Partnerships Act 1907 to introduce a Private Fund Limited Partnership (PFLP) structure. This structure will be available to private investment funds which are structured as limited partnerships, for example, private equity and venture capital funds. It is designed to reduce the administrative and financial burdens that impact these funds under the current limited partnership structure.

The final order was made on March 29, 2017 and is in substantially the same form as the draft Order, published in January 2017. The Order came into force on April 6, 2017.

(The Legislative Reform (Private Fund Limited Partnerships) Order 2017 (SI 2017/514), 31.03.17)


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