Corporate weekly highlights—13 January 2017

Welcome to the weekly highlights from the Lexis®PSL Corporate team for the week ending 13 January 2017, which provide news updates and a comprehensive list of dates for your diary. This week’s edition features: the Financial Reporting Council’s (FRC) annual report on developments on corporate governance and stewardship; the Takeover Panel’s statement in relation to the imposition of the cold shoulder sanction for a breach of the City Code on Takeovers and Mergers; a statement from the Financial Conduct Authority (FCA) reminding regulated firms of their obligations under the provisions of the FCA's Market Conduct sourcebook (MAR) to support the Takeover Panel's functions; European Securities and Markets Authority’s (ESMA) publication of extracts of enforcement decisions on financial statements; case analysis of a Court of Appeal decision considering whether a certain pensions arrangement amounted to a substantial property transaction; analysis pieces concerning corporate and corporate crime legal developments for 2017; and analysis pieces on the proposals in the draft Finance Bill 2017 concerning the Seed Enterprise Investment Scheme, Enterprise Investment Scheme and venture capital trust schemes, as well as corporation tax loss relief. We have also published a new Practice Note, three new Precedents and four new Q&As.

Headlines (News updates & analysis)

Corporate governance

FRC publishes annual report on developments in corporate governance and stewardship

The Financial Reporting Council (FRC) has published its annual report, Developments in Corporate Governance and Stewardship 2016.

The report states that while compliance with the principles of the UK Corporate Governance Code remains high, boards which choose not to follow its provisions give poor quality explanations for this, suggesting certain boards ‘need to do more than pay lip service to the needs of their shareholders and other stakeholders’. Consequently, the FRC is calling for greater oversight powers to encourage more focused reporting by boards on how they discharge their responsibilities.

Public company takeovers

Takeover Panel gives pair the cold shoulder

The Takeover Panel has issued a statement following a ruling by its Hearings Committee (the Committee) relating to a breach of the City Code on Takeovers and Mergers (the Code). The ruling found that Bob Morton and John Garner had committed serious breaches of section 9(a) of the Introduction to the Code, which sets out the rules according to which persons dealing with the Panel must provide information and assistance to the Panel.

The Committee found that Mr Morton and Mr Garner had provided false information to the Panel Executive in the course of its investigation into a potential breach by Mr Morton of an obligation to announce a mandatory offer under Rule 9 of the Code. This false information had been provided with the intention of deceiving the Executive into believing that a purchase of shares in Hubco Investments plc by Groundlinks Limited, a company owned by the trustees of a Morton family trust, had actually been made on behalf of Mr Garner as beneficiary.

As a result of their prolonged and serious attempted deception of the Panel during the course of its investigation, the Committee imposed the cold-shouldering sanction effective for six years in relation to Mr Morton, but effective for two years in relation to Mr Garner.

FCA reminds firms of obligation under MAR to support Takeover Panel's functions

The Financial Conduct Authority (FCA) has issued a statement reminding regulated firms of their obligations under the provisions of the FCA's Market Conduct sourcebook (MAR), in particular, MAR 4.3 to support the Takeover Panel’s functions and not to deal with the individuals given the cold shoulder sanction by the Takeover Panel on any transactions to which the Takeover Code applies.

Financial statements

ESMA published extract of enforcement decisions on financial statements

An extract of the confidential database of enforcement decisions on financial statements has been published by the European Securities and Markets Authority (ESMA). The extract includes a selection of 14 decisions which were taken by national enforcers in the period from March 2014 to June 2016.

ESMA is publishing the extracts in order to provide issuers and users of financial statements with relevant information on the appropriate application of the International Financial Reporting Standards (IFRS). It stated that publication of the enforcement decisions would inform market participants about which accounting treatments European national enforcers might consider as complying with IFRS. It would also contribute to a consistent application of IFRS in the European Economic Market.

Further extracts are expected to be published by the end of the first half of 2017.

Substantial property transactions—Case analysis

Substantial property transactions—Granada Group Limited v The Law Debenture Pension Trust Corporation Plc

In the case Granada Group Limited v The Law Debenture Pension Trust Corporation Plc [2016] EWCA Civ 1289, the Court of Appeal considered the legality of the pensions arrangement for former directors of a company, in particular, whether the directors’ membership of a secured unfunded unapproved retirement benefit scheme amounted to the acquisition of a non-cash asset for the purposes of section 320 Companies Act 1985 (CA 1985) (whose successor is now to be found in section 190 of the Companies Act 2006 (CA 2006)). The case raises some interesting issues regarding how definitions of 'non-cash asset', 'interest' and 'connected person' can be construed for the purposes of CA 1985, s 320.

The Court of Appeal dismissed Granada's appeal and upheld the High Court's decision that directors' membership of a secured unfunded unapproved retirement benefit pension scheme did not amount to the acquisition by them of a non-cash asset for the purposes of CA 1985, s 320 and, therefore, the arrangement could not be set aside on the grounds that shareholder approval had not been sought as required by CA 1985, s 320 as the directors themselves had not acquired a non-cash asset. The Court of Appeal also concluded that the defendant trustee was entitled to an indemnity against its costs.

Although many aspects of the judgement related to provisions under CA 1985, the principles are likely to be equally applicable to the equivalent provisions in CA 2006.

Corporate law developments

Corporate—looking ahead to 2017

As a new year begins, Nicholas McVeigh, professional support lawyer at Mishcon de Reya, and John King, partner at FDR Law, share their thoughts and predictions on corporate law developments for 2017.

Notable developments include, firstly the Supreme Court decision in R (on the application of Miller and Dos Santos) v Secretary of State for Exiting the European Union and associated references, secondly the implementation of the Fourth Money Laundering Directive 2015/849/EU which will consequently affect the PSC regime and trusts, and thirdly corporate governance reform.

For details see News Analysis, Corporate—looking ahead to 2017.

Relevant updates from other practice areas

Corporate Crime

Corporate Crime—looking ahead to 2017

In this analysis, Tim Woodcock, partner at Stephenson Harwood, Barry Vitou, partner at Pinsent Masons, Stephen Gentle, partner at Simmons & Simmons LLP, and David Egan, partner at DWF consider what lies ahead for corporate crime lawyers in 2017.

For details see News Analysis, Corporate Crime—looking ahead to 2017.

Tax

Streamlining the tax-advantaged venture capital schemes

In this analysis, Sue Crawford, partner, and Andrew Lindsay, associate at Wiggin LLP, examine the proposals in the draft Finance Bill 2017 and the consultation paper on advance assurance concerning the Seed Enterprise Investment Scheme, Enterprise Investment Scheme and venture capital trust schemes, assessing their potential impact and what they mean in practice.

For details see News Analysis, Streamlining the tax-advantaged venture capital schemes.

Draft Finance Bill—corporation tax loss relief

In this analysis, Pete Miller of The Miller Partnership takes a look at the provisions of the draft Finance Bill 2017 relating to corporation tax loss relief.

For details see News Analysis, Draft Finance Bill 2017—corporation tax loss relief.
Date Subjects covered
13 January 2017 Information to investors required by the Alternative Investment Fund Managers Directive 2011/61/EU (AIFMD), Art 13, should be included in the next annual or half-yearly report to be published after 13 January 2017. For further information, see LNB News 06/10/2016 73.
16 January 2017 The deadline for responses to the FCA's fourth and final consultation paper (CP16/43) on the implementation of the Markets in Financial Instruments Directive II (MiFID II) (Directive 2014/65/EU) and the Markets in Financial Instruments Regulation (Regulation (EU) 600/2014) on its proposal on fees. For further information, see LNB News 16/12/2016 157.

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Area of Interest