Corporate weekly highlights—18 May 2017

Welcome to the weekly highlights from the Lexis®PSL Corporate team for the week ending 18 May 2017, which provide news updates and a comprehensive list of dates for your diary. This week’s edition features: the Council of the European Union formally adopting the draft Prospectus Regulation; the FRC Pre-Emption Group’s monitoring report examining the Statement of Principles; the European Commission’s consultation on improving corporate mobility; the FRC’s proposals to update guidance for auditors of charities; the Court of Appeal decision in Cosmetic Warriors Ltd v Gerrie and another; analysis of the Financial Stability Board peer review on corporate governance in financial institutions; and analysis of key changes to the Proceeds of Crime Act 2002. 

This update is part of the Lexis®PSL Corporate team’s news offering. Some of the links require a LexisPSL subscription. If you are not a subscriber, you can take a free trial here.

Headlines (News updates & analysis)

Equity capital markets

Council of the EU adopts Prospectus Regulation

The Council of the European Union has formally adopted and approved the draft Prospectus Regulation, which was approved at first reading on 5 April 2017 and amended by the European Parliament on 11 April 2017. The approved Prospectus Regulation has been published on the website of the Council of the European Union.

This is the final legislative hurdle and the Prospectus Regulation will enter into force on the 20th day following its publication in the Official Journal of the EU. Except for some specific provisions that will apply earlier, the Prospectus Regulation will apply 24 months from this date.

For details see LNB News 16/05/2017 55.

Pre-emption rights

FRC finds Statement of Principles have ‘generally been adhered to’

The Financial Reporting Council's (FRC) Pre-Emption Group (PEG) has published a monitoring reportexamining the implementation of the Statement of Principles and the template resolutions.

The Statement of Principles aims to provide clarity on the factors to be taken into account when considering the case for disapplying pre-emption rights and making use of an agreed authority for a non-pre-emptive share issue and the circumstances in which flexibility might be appropriate. The Statement of Principles is recommended as a basis for discussion of the business case by companies and investors as they consider pre-emption issues.

The report concluded that the Statement of Principles and template resolutions have generally been adhered to, although the PEG has received information about examples of possible poor consultation and disclosure in the monitoring period.

For details see LNB News 15/05/2017 46.

EU company law

European Commission consults on improving corporate mobility

The European Commission has published a consultation which seeks views on a proposed company law initiative aimed at facilitating the use of digital technologies throughout a company's lifecycle and improving mobility for cross-border mergers and divisions.

Input is now sought on aspects of this proposal. Responses will inform potential future legislative measures and other complementary actions. The consultation is divided into the following sections: reasons to act; use of digital processes or tools throughout the companies' lifecycle; cross-border mobility of companies; and conflict-of-law rules for a company.

The consultation is open until 6 August 2017.

For details see LNB News 11/05/2017 85.

Audit—Charities

FRC proposals to update guidance for auditors of charities

The FRC has published a consultation on Practice Note 11 on the audit of charities in the UK. In the consultation, the FRC has proposed changes to Practice Note 11 to reflect the updated regulatory landscape, the implementation of FRS 102 and a new Charities Statement of Recommended Practice (SORP), and the implementation of revised ISAs (UK) in 2016.

The proposed changes are aimed at ensuring the Practice Note will continue to support the delivery of high quality audit for charities. The proposed areas of change are: legislative and regulatory framework; reporting matters of material significance to Charity Regulators; special features of charities; materiality; going concern and other information.

The FRC welcomes comments on all aspects of the revised Practice Note by 25 August 2017.

Subject to stakeholder comments, the FRC will issue a final version of the revised Practice Note later in 2017.

For details see LNB News 12/05/2017 34.

Case analysis

Cosmetic Warriors Ltd v Gerrie and another

In this case, the Court of Appeal, Civil Division, in affirming the judgment of the High Court, gave a decision on the true construction of shareholders' rights of pre-emption contained in the articles of association of the two claimant companies, following a decision of the defendant minority shareholders to leave. The defendants had served a single combined transfer notice in respect of their shareholdings in both companies which had triggered the pre-emption provisions in art 5 of the articles of association.

The judgment is available at: [2017] EWCA Civ 324.

Relevant updates from other practice areas

Financial Services

FSB peer review on corporate governance in financial institutions

On 28 April 2017, the Financial Stability Board (FSB) published its thematic peer review on corporate governance. The peer review identifies effective practices and areas where good progress has been made within publicly listed, regulated financial institutions and also notes gaps and areas of possible weakness.

This analysis considers the review's background, key findings, future recommendations, and significance for law firms. It states that firms should consider whether the review affects any of the corporate governance arrangements under which they operate and whether they need to revise their arrangements in light of the FSB recommendations.

For details see News Analysis: FSB peer review on corporate governance in financial institutions.

Corporate Crime

The Criminal Finances Act 2017—examining the impact on POCA 2002

A number of changes were recently made to the Proceeds of Crime Act 2002 (POCA 2002) by the Criminal Finances Act 2017 (CFA 2017). CFA 2017 contains legislation for the new corporate offences of failure to prevent facilitation of tax evasion.

Experienced criminal litigator, Ross Dixon, partner at Hickman & Rose, considers the key changes to POCA 2002 that lawyers should be aware of in Corporate Crime News Analysis: The Criminal Finances Act 2017—examining the impact on POCA 2002.

Dates for your diary

Date Subjects covered
26 May 2017 Deadline for responses to theFRC's consultation on guidance on obtaining bank reports for audit purposes. The FRC proposes to update guidance on obtaining bank reports for audit purposes. This will involve the withdrawal of Practice Note 16, and its replacement with additional application material in ISA (UK) 330—The Auditor’s Responses to Assessed Risks and ISA (UK) 505—External Confirmations. For further information, see LNB News 26/04/2017 99.
31 May 2017 Application date of new procedure for registering companies under SBEEA 2015. SBEEA 2015 requires the Secretary of State to establish a procedure to help streamline the process for registering a company so that information only has to be submitted once, rather than to multiple departments or agencies (eg Companies House and HM Revenue and Customs). For further information, see Practice Note: The Small Business, Enterprise and Employment Act—company law reforms.
31 May 2017 Deadline for responding the Office for Tax Simplification's (OTS) call for evidence on stamp duty reform. Following the initial phase of work, the OTS has now published a progress report along with a list of questions and a call for evidence. The latest progress report clarifies that the reforms will not cover stamp duty reserve tax or stamp duty land tax more widely. They have requested for input from businesses, advisers and anyone dealing with stamp duty and would like to hear of experiences of particular issues raised in the report, such as administrative costs. The OTS would also welcome ideas for reforming the current system. For background, see News Analysis: Autumn Statement 2016—Corporate highlights.
Further dates To look further ahead, see: Corporate horizon scanning—2017 and beyond.

Relevant Articles
Area of Interest