Canada: Tenant insolvency issues for commercial landlords in Alberta
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Welcome to Essential Corporate News, our weekly news service covering the latest developments in the UK corporate world.
For corporates, the Autumn Statement published on November 23, 2016 provided relatively few surprises. We will need to wait until the Finance Bill is published on December 5, 2016 for the detail on the key reforms to interest deductibility, loss relief and the substantial shareholding exemption but there were some indications of what to expect. Other points to be aware of include the abolition of tax relief benefits in respect of employee shareholder status shares for arrangements entered into on or after December 1, 2016 and the changes to the Budget timetable, with a move to a Budget in the Autumn and abolition of the Autumn Statement.
Corporate interest deductibility and corporation loss relief
There was confirmation that the reforms to corporate interest deductibility and corporation loss relief would be effective from April 1, 2017. Draft guidance and a response to the consultation launched in May 2016 had been hoped for in the Autumn Statement but we will have to wait until publication of the Finance Bill on December 5, 2016.
Substantial Shareholding Exemption (SSE)
The Government consulted on reforms to SSE over the summer. The tenor of the consultation was how to make the UK more attractive as a holding company jurisdiction and a number of possible reforms were mooted. It was confirmed in the Autumn Statement that the changes will apply from April 1, 2017 and draft legislation is therefore expected on December 5, 2016. It was indicated in the Autumn Statement that the requirement relating to the investing company (i.e. that it is a trading company or member of a trading group) would be removed and that a more comprehensive exemption for companies owned by qualifying institutional investors would be introduced. There is no detail at present and reform may not be limited to these two areas.
Employee Shareholder Status (ESS)
Tax benefits for employees in respect of ESS shares will be abolished for arrangements entered into on or after December 1, 2016. ESS shares attract income tax and capital gains tax reliefs. Corporation tax reliefs for the employer company are not affected.
The Budget timetable will change from 2017 to focus on a single fiscal event, the Budget, with the aim of providing greater stability for business. The Budget will take place in the Autumn following which the Finance Bill will be introduced into Parliament with Royal Assent in the Spring ahead of the new tax year. In 2017 there will be both a Spring Budget and an Autumn Budget as we transition to this new regime. The new Spring Statement introduced from 2018 is intended to have the limited function of responding to the updated Office for Budget Responsibility forecast, albeit that the Government reserves the right to make changes to fiscal policy in the Spring Statement if economic circumstances require it.
On November 25, 2016 the Financial Reporting Council (FRC) published a thematic review of the reporting of alternative performance measures (APMs) following concerns about such measures expressed by a number of commentators and stakeholders. In October 2015 the European Securities and Markets Authority (ESMA) published its “Guidelines on alternative performance measures” (Guidelines). Listed companies are required to make every effort to comply with the Guidelines which apply to all regulated information, including interim statements and annual reports, published by listed companies on or after July 3, 2016. The Guidelines do not, however, apply to financial statements prepared in accordance with IFRS. The FRC’s report concludes that, although the use of APMs in narrative reporting has progressed, further improvements are required.
The thematic review was conducted by the FRC’s Corporate Reporting Review (CRR) team and looked at 20 sets of June 30, 2016 interim statements published after the Guidelines came into force. The main findings of the review are:
To achieve continuous improvement in reporting, the FRC expects many companies to make changes in response to the coming into force of the Guidelines. In its reviews of reports and accounts ending December 31, 2016 onwards, the FRC will consider whether APMs disclosed in strategic reports are consistent with the Guidelines and, where there are material inconsistencies, it will write to the companies concerned. The FRC will also take into account any such inconsistencies when deciding whether strategic reports are fair, balanced and comprehensive as required by the Companies Act 2006.
On November 21, 2016 Institutional Shareholder Services (ISS) published the updates to its 2017 benchmark policy recommendations which are to be included in its UK and Ireland Proxy Voting Guidelines. These updates will, for the most part, take effect for shareholder meetings held on or after February 1, 2017. ISS set out its proposed updates for consultation in October 2016.
The 2017 updates include the following:
Where directors have multiple board appointments, ISS may recommend a vote against the election/re-election of directors who appear to hold an excessive number of board roles at publicly-listed companies. ISS has amended the definition of overboarding to provide clarification on the precise number of board seats ISS believes can be held. A vote could be recommended against directors who hold more than five non-chair non-executive director positions, as well as against a non-executive chairman who also holds more than three other non-chair non-executive director positions, more than one other non-executive chair position and one non-chair non-executive director position or any executive position. In addition, a vote may be recommended against any executive director who holds more than two non-chair non-executive director positions, any other executive position or any non-executive chair position. The voting policy has also been amended to provide that an adverse vote recommendation in relation to a chairman will not generally be applied at the company where the individual is chairman unless that chairman exclusively holds other chair and/or executive positions or is being elected as chairman for the first time.
Approval of new or amended LTIP
Factors ISS will consider when considering a resolution to approve a new or amended long-term incentive plan (LTIP) will include whether it is over-complex, and ISS will want to ensure that any increase in the level of certainty of reward is matched by a material reduction in the size of award.
Committee composition of smaller companies
ISS has now made it clear that for companies listed on AIM, and for other companies which are not a member of the FTSE All Share or FTSE Fledgling Indices, the membership of their audit and remuneration committees should reflect the standard set out in the QCA Corporate Governance Code for Small and Mid-Size Quoted Companies. This requires that audit and remuneration committees should include independent non-executive directors only, with half the membership of the nomination committee being independent directors.
Timing of changes to Guidelines
As mentioned above, these updates will apply to shareholder meetings taking place on or after February 1, 2017. However, the policy with respect to committee composition of smaller companies will not apply until February 2018 since ISS recognises that this is a significant change and smaller companies will need time to comply with the new requirements if they wish to do so.
On November 23, 2016 the European Commission (Commission) published a communication setting out the results of its September 2015 call for evidence on the EU regulatory framework for financial services.
The Commission has taken the following follow-up actions as a result of the responses it received to the call for evidence:
The Commission will monitor progress in the implementation of the respective areas and will publish its findings and possible next steps before the end of 2017.
(European Commission, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Call for Evidence - EU regulatory framework for financial services, 23.11.16)
On November 24, 2016 the Office of Tax Simplification (OTS) published a press release announcing that it has agreed to carry out a review of stamp duty on paper transactions. The review will develop recommendations to simplify this area of the stamp duty system from both a technical and administrative stand point. This will include considering the possibility of transforming or replacing it so as to entirely remove the need for physical stamping, but will not cover Stamp Duty Reserve Tax or Stamp Duty Land Tax more widely.
The OTS is interested in hearing from businesses, advisers and others who deal with stamp duty about the technical and administrative issues that are most complex and time consuming in relation to documents requiring physical stamping. The OTS is also interested in any ideas to simplify this area of the stamp duty system.
Section 126 is the general interpretation section of the Building Act 1984 (the “Act”); in it “statutory undertakers” is defined as.
Since project bank accounts (PBA) were introduced on a ‘trial basis’ in 2018 under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act), they have largely applied to Queensland Government building projects between $1 million and $10 million. However, it is the Queensland Government’s intention that the roll out of PBAs will apply to other organisations (both public and private sector) and a broader ambit of building contracts pursuant to the Building Industry Fairness (Security of Payment) and Other Legislation Amendment Bill 2020 (Qld) (BIF Amendment Bill).