Corporate weekly highlights—15 February 2018

This week’s edition of Corporate highlights includes concerns over the ‘hostile’ takeover bid for GKN, News Analysis pieces on gender pay gap reporting and the new Prospectus Regulation, and QCA survey results on companies’ optimism over the UK economy.

Public company takeovers

Takeover bid for GKN raises ‘serious concerns about protection for vital industries’

Chair of the Business, Energy and Industrial Strategy (BEIS) Committee, Rachel Reeves, has written to the Secretary of State for BEIS regarding the ‘hostile’ takeover bid for GKN by Melrose, highlighting that it raises ‘serious concerns’ about protection for vital industries and industrial strategy. Reeves has asked about potential government intervention in the proposed takeover of GKN, and for assurance that Britain’s strengths in the automotive and defence sectors will not be undermined by the takeover.

Reeves seeks clarifications on particular aspects of the takeover, including: whether the current consultation on national security and infrastructure review will be expanded to include proposals that will allow wider scope for government intervention; whether there are sufficient grounds for the Secretary of State to intervene in the public interest on the grounds of national security; and whether proposals relating to dual use in the national security and infrastructure investment consultation would permit government intervention. Reeves has asked for a response by 20 February.

For further information, see: LNB News 08/02/2018 75.

Corporate governance

Gender pay gap reporting deadline: Q&A on requirements and emerging market practice

Corporate analysis: With the deadline of 5 April 2018 approaching for companies to submit gender pay gap information, the analysis includes a summary of the market practice observed so far.

On 6 April 2017, the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, SI 2017/172 (the Regulations) came into force. The Regulations require employers with 250 or more employees to publish information on the gender pay gap in their organisation within one year, and on an ongoing basis for each subsequent year.

The objective of the Regulations is to narrow the gap between male and female pay. It will be interesting to observe whether the new requirements make any immediate impact, or whether it will take several years to start to see a narrowing pay gap. We will continue to monitor this, together with market practice on the type and depth of voluntary explanations being made, across the FTSE 350 in relation to gender pay gap reporting.

We will also review to what extent companies voluntarily include gender pay information in their annual report and will report back on this as part of our Market Tracker AGM season 2018 report, to be published in November 2018.

See News Analysis piece: Gender pay gap reporting deadline: Q&A on requirements and emerging market practice.

Equity capital markets

The new Prospectus Regulation–redefining prospectuses

The European Securities and Markets Authority (ESMA) recently published a further consultation paper containing draft regulatory technical standards (RTS) under the new Prospectus Regulation. Jamie Corner, European counsel at Davis Polk, explains the background to the consultation and considers the new proposals.

The new Prospectus Regulation, which was published in the Official Journal on 30 June 2017, will fully replace Directive 2003/71/EC (the existing Prospectus Directive) from 21 July 2019.

Under the new Prospectus Regulation, the European Commission mandated ESMA to prepare RTS on certain provisions by 21 July 2018. Prior to doing so, ESMA must conduct a public consultation of all draft RTS. The first set of draft RTS was published in July 2017 and covered the format and content of prospectuses, the scrutiny and approval process for prospectuses, and the content and format for EU growth prospectuses. The consultation paper on draft regulatory technical standards under the new Prospectus Regulation, published on 15 December 2017, addresses those areas not covered by the earlier ongoing consultation.

The consultation closes on 9 March 2018, with the final RTS expected to be published by 21 July 2018. Once the RTS are finalised, legal counsel will have until 21 July 2019 to prepare for the first prospectuses that will be required to meet the new requirements.

See News Analysis piece: The new Prospectus Regulation–redefining prospectuses.

Additional Corporate updates this week

Companies gloomy on prospects for UK economy, survey finds

The Quoted Companies Alliance (QCA) has found that, while publicly quoted growth companies are gloomier on prospects for the UK economy than at any time in five years, they are more upbeat on their own sector. The latest QCA/YouGov sentiment index finds that market-listed SMEs had an optimism rating of 45.8 in January 2018, in negative territory for the first time since April 2013 and in contrast to the 57.5 (mean optimistic) experienced in May 2017.

Tim Ward, chief executive of the QCA, said:

‘We are seeing continued but cautious short-term optimism of small and mid-size quoted companies towards their own business prospects. Intentions over raising capital have fallen significantly, perhaps indicating that their pessimism about the UK economy is having a real effect on their long-term planning.’

Oliver Rowe, director of YouGov plc, added:

‘These findings echo many of our other surveys. This sector is a very important part of the economy and we are seeing that small and mid-size quoted companies are looking forward relatively favourably to the next 12 months but seem to be more cautious thereafter. It is good to see that hiring intentions have held up reasonably well.’

For further information, see: LNB News 08/02/2018 108.

Additional news—daily and weekly news alerts

This document contains the highlights from the past week’s news. To receive all our news stories, whether on a daily or a weekly basis, amend your personal settings within your ‘News’ tab on the homepage by clicking on either ‘Email’ or ‘RSS’ (depending on how you prefer to receive them) on the right hand side of the blue banner.

New and updated content

Coming up

We intend to publish an updated version of the following Practice Note to expand the scope to cover public M&A transactions. It will be produced in partnership with Tessa Park at Kingston Smith LLP:

  1. Accounting issues on mergers and acquisitions private M&A—business combinations under IFRS and new UK GAAP (FRS 102)

We also intend to publish the following updated Precedent in our Equity Capital Markets topic area:

  1. Memorandum on the responsibilities, duties and liabilities of a director of a premium listed company

Dates for your diary

Date Subjects covered
28 February 2018 Deadline for responses to the FRC consultation of amendments to the UKCG Code.
For further information, see: FRC consultation on revised Corporate Governance Code.
9 March 2018 ESMA consults on Prospectus Regulation RTS
The European Securities and Markets Authority (ESMA) has opened a consultation on draft regulatory technical standards (RTS) under the new Prospectus Regulation (Regulation (EU) 2017/1129). Feedback is sought by 9 March 2018.
For further information, see LNB News 15/12/2017 74.
March 2018 The government intends to lay before Parliament draft secondary legislation implementing some of its proposed corporate governance reforms before March 2018.
For further information, see: Corporate governance reforms aim to enhance public trust in business, LNB News 29/08/2017 122, and Corporate governance reforms to force companies to reveal pay gap, LNB News 29/08/2017 118.

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