Corporate weekly highlights—19 April 2018

This week’s edition of Corporate highlights includes news analysis of the Takeover Panel’s ruling that Disney will need to make a mandatory offer following the acquisition of Twenty-First Century Fox, concerns over the failure of FTSE 350 companies to meed gender diversity targets and the case in which the Supreme Court defines the scope of Wrotham Park (negotiating) damages. We also have a Market Tracker dividends trend report in the pipeline.

Public company takeovers

Panel confirms that Disney will need to make mandatory offer following Fox acquisition

The Takeover Panel (Panel) has ruled that following the completion of the acquisition by Disney of Twenty-First Century Fox, Disney will be required to make a mandatory offer for Sky pursuant to Rule 9.1 of the Takeover Code (Code). The ruling is an example of the so-called ‘chain principle’ under the Code.

The ‘chain principle’ is dealt with under Note 8 on Rule 9.1 of the Code. Under this principle, an obligation to make a mandatory offer can arise where a person acquires 50% or more of the voting rights of a company (which need not be a company to which the Code applies) and, as a result, acquires or consolidates control of another company to which the Code does apply, by virtue of the first company's interest in that second company.

In its ruling the Panel said it considered that securing control of Sky might reasonably be considered to be a significant purpose of Disney’s acquiring control of Fox and that therefore Disney should be required to make a mandatory offer following completion of the acquisition. The Panel ruling also provides clarity on further ruled that the Offer must be at £10.75 in cash for each ordinary share in Sky.

For further information, see Panel confirms that Disney will need to make mandatory offer following Fox acquisition.

Corporate Governance

Change needed as FTSE 350 companies fail to meet gender diversity targets

The Investment Association (IA) and the Hampton-Alexander Review have called for change, as figures show one in ten FTSE 350 companies have fallen below gender diversity targets. The IA and the Hampton-Alexander Review have written to 35 of the FTSE 350 questioning their low female representation at leadership level.

They call on businesses to take ‘swift action’ to ‘urgently address gender diversity’ within their companies and argue that diverse companies ‘typically outperform their less diverse peers and make better long-term decisions’.

For further information, see LNB News 17/04/2018 111.

Accounts and reports

Government to conduct independent review of Financial Reporting Council

The government has launched an independent review to examine the role and powers of the Financial Reporting Council (FRC), the regulator for auditors, accountants and actuaries. The review—to be led by Sir John Kingham—will assess the FRC’s governance, impact and powers, to help ensure it is fit for the future. The review is scheduled for completion by the end of 2018.

Responding to the announcement, the chair of the FRC, Sir Win Bischoff, has welcomed the review, which he believes will ensure the FRC is best placed to support UK efforts to attract investment in business for the long term.

For further information, see LNB News 17/04/2018 46.

Additional Corporate updates this week

Supreme Court defines scope of Wrotham Park (negotiating) damages (Morris-Garner v One Step)

The Supreme Court has allowed the appeal of the defendants on the assessment of damages for breach of non-compete and non-solicitation covenants in the sale of a business providing ‘supported living’ services for children leaving care and vulnerable adults. The courts below had erred in assessing the award of damages on a so-called Wrotham Park basis and the case will now be remitted to the High Court for a hearing on quantum to measure the claimant’s actual financial loss. Christopher Hare, barrister at Guildhall Chambers explains that the decision is important as it clarifies the nature of Wrotham Park awards and the circumstances in which they may be appropriate.

For further information, see LNB News 18/04/2018 89

Of debts and dividends (LRH Services Ltd v Trew)

The case of LRH Services Ltd (in liquidation) v Trew underlines that a company and its directors must take great care when reviewing information leading to the making of a solvency statement under the Companies Act 2006. Failure to do so has the potential for criminal repercussions and possible personal liability in the future. Rebecca Zaman, of 3 Verulam Buildings, explains a case that offers clarity for insolvency practitioners.

For further information, see Of debts and dividends (LRH Services Ltd v Trew).

Sandhu and another v Nagra and others

In this case the High Court ruled that a company’s affairs had been conducted in a manner unfairly prejudicial to the interests of the petitioners as members. The court rejected the respondents' contention that there had been unanimous consent of the company's shareholders, such as to authorise or ratify any steps taken to transfer the company's business and assets to the respondents under the ‘Duomatic principle’. It was clear that, in order to rely on informal consent by shareholders as authorising, waiving or ratifying any such acts, the shareholders had to have given their consent with full knowledge of the relevant facts.

For further news, see Sandhu and another v Nagra and others.

Additional news—daily and weekly news alerts

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New and updated content

Coming up

We have in the pipeline the Market Tracker Trend Report: Dividends. This Lexis®Nexis Market Tracker Trend Report looks at market practice across the FTSE 350 for payment of final, interim and special dividends. We have looked at:

  1. what mix of final, interim and special dividend payments are made across the FTSE 350?
  2. how frequently do FTSE 350 companies pay dividends?
  3. how quickly are dividend payments made following the first announcement, the AGM, and the record date?
  4. are companies adhering to the recommended timeframe for payment of dividends set out in the London Stock Exchange (LSE) Dividend Timetable?

Dates for your diary

Date Subjects covered
April 2018 LIBOR: The LIBOR benchmark in the UK will be replaced by a reformed version of the Sterling Overnight Index Average (SONIA). SONIA is anticipated to move to a new basis by April 2018.
SONIA reflects bank and building societies’ overnight funding rates in the sterling unsecured market. The Bank of England announced its plans to reform the SONIA benchmark in July 2015 and is currently in the process of this reform.
The Bank consulted on its high level proposals for SONIA reform, publishing its response to consultation feedback in November 2015. Further consultations were issued in October 2016 and February 2017, seeking views on the detailed proposals for the reform of SONIA.
In March 2017 the Bank provided a summary of feedback from the consultations as well as setting out the specification of reformed SONIA.
At a roundtable on sterling risk-free reference rates in London on 6 July 2017, the need for a transition away from sterling LIBOR towards SONIA was outlined. The reasoning was to build a safer financial system and to better match the risks that firms are hedging.
Bank of England executive director discusses the transition to SONIA, LNB News 17/07/2017 134.
FMLC comments on SONIA as risk-free reference, LNB News 12/10/2017 60.
FSB progress report on interest rate benchmark reforms, LNB News 10/10/2017 79.
8 May 2018 Corporate Governance: Submissions of evidence to the House of Commons BEIS Committee on executive pay close on this date.
The House of Commons BEIS Committee has launched an inquiry to look at the gender pay gap and executive pay in the private sector. The inquiry comes amid concerns about the overall level of executive pay and bonuses and as the deadline for gender-pay gap reporting passed on 4 April 2018.
The Committee is seeking written evidence on executive pay—for example, what progress has been made on implementing the recommendations on executive pay by the previous Committee in its 2017 report on corporate governance.
The evidence can be uploaded via the online portal and should be submitted by 8 May 2018.
See news, LNB News 23/03/2018 82.
25 May 2018 Data protection: the General Data Protection Regulation shall be directly applicable and fully enforceable in all Member States.
On 15 December 2015, the EU institutions reached agreement on the General Data Protection Regulation (EU) 2016/679 (GDPR), which will replace the Data Protection Directive 95/46/EC upon which the UK's Data Protection Act 1998 (DPA 1998) is based. The GDPR was published in the Official Journal of the European Union on 4 May 2016. It came into force on 24 May 2016.
The GDPR will be directly applicable in all Member States from 25 May 2018 and the government has confirmed that the UK will be implementing the GDPR as it will remain a member of the EU on this date.
The General Data Protection Regulation (GDPR)
The GDPR—preparing for implementation

Latest Q&As

New Q&As added this week:

  1. Can a private company be acquired under a scheme of arrangement?
  2. When would the acquisition of a private company be structured as a takeover offer?
  3. Can the board of a parent company make decisions for its wholly owned subsidiary?
  4. When is deemed delivery of a general notice to a shareholder by post for an address that is not in the UK?
  5. What duties do former directors owe to companies of which they were directors?

Relevant Articles
Area of Interest