Corporate weekly highlights—25 April 2019

This week’s edition of Corporate highlights includes the European Parliament resolutions on the Commission’s proposal for a directive amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions, for a directive amending Directive (EU) 2017/1132 regarding the use of digital tools and processes in company law and for a regulation to amend the Market Abuse Regulation and the new Prospectus Regulation as regards the promotion of the use of SME growth markets. It also covers the CMA’s final report into the UK statutory audit market and the FCA’s approach to supervision and enforcement.

In this issue:

Equity Capital Markets (AIM)

Commission welcomes progress as European Parliament approves CMU package including reform to covered bonds, SME growth markets, sustainability disclosures and EMIR

The European Commission has welcomed the European Parliament's final votes on legislation putting in place the building blocks of a capital markets union, including the adoption of the Commission's proposal for a regulation to amend the Market Abuse Regulation and the Prospectus Regulation on the promotion of the use of SME growth markets.

For further information, see: LNB News 18/04/2019 36.

Company incorporation

Directive requiring online company registration passes through parliament

Directive 2017/1132/EU—first proposed by the European Commission back in April 2018 (see: LNB News 27/04/2018 1)—has passed through the European Parliament on its first reading on 18 April 2019. The Directive requires all Member States to have a fully online process of registration for companies in an effort to lessen inefficiencies and unnecessary costs and delays. Member States will need to ensure that it is possible to upload every company document online and to identify company founders by the use of digital means such as e-ID, digital signatures or video-conference.

For further information, see: LNB News 24/04/2019 62.

Financial services regulation for corporate lawyers

FCA publishes its approach to enforcement

The Financial Conduct Authority (FCA) has published its ‘Approach to enforcement’ document, which sets out how the FCA identifies and attempts to drive out behaviour that fails to meet its standards, or is dishonest or unlawful. The document follows the FCA’s March 2018 ‘Our approach to enforcement’ consultation paper

For further information, see: LNB News 24/04/2019 43.

FCA publishes its approach to supervision

The FCA has published its ‘Approach to supervision’ document, which sets out the FCA’s role in ensuring fair and honest markets, why and how the FCA prioritises its supervision work and how, in practice, it supervises the firms and individuals it regulates.

For further information, see: LNB News 24/04/2019.

Additional Corporate updates this week

CMA market study: Final report recommends overhaul of UK audit market

On 18 April 2019, the Competition and Markets Authority (CMA) published its final report following its market study into the UK statutory audit market. The market study found serious competition concerns and recommends changes to legislation to improve the audit sector for the benefit of both savers and investors. The CMA launched its market study in October 2018 following the collapse of high-profile companies such as construction firm Carillion (audited by KPMG) and has identified several reasons why it believes audit quality is falling short, including companies choosing their own auditors based on the best ‘cultural fit’ or ‘chemistry’ rather than those who offer the toughest scrutiny, and inadequate choice and competition, with the Big Four audit firms conducting 97% of the audits of the biggest companies. To address its concerns, the CMA recommendations include separation of audit and advisory businesses, with separate management and accounts; a mandatory joint audit system, with Big Four and non-Big Four firms collaborating on an audit; and statutory regulatory powers to increase accountability of those appointing auditors. The CMA resisted calls for breakup of the Big Four, but this option could be revisited within five years if the profession does not improve. The government now has 90 days to respond to the recommendations.

For further information, see: LNB News 18/04/2019 13.

Final report of CMA audit market study recommends sweeping reforms

Corporate analysis: The CMA has published its final report into the workings and failings of the UK statutory audit services market, with recommendations to address serious competition problems in the UK audit industry.

For further information, see News Analysis: Final report of CMA audit market study recommends sweeping reforms.

European Parliament adopts merger and divisions Directive

Directive 2017/1132—proposed by the European Commission in April 2018—has been adopted by the European Parliament on its first reading on 18 April 2019. The Directive endeavours to make it easier for companies to merge, divide or transfer their registered seat within the Single Market. The Directive also ensures that these processes do not detrimentally impact the rights of company employees, creditors and minority shareholders.

For further information, see: LNB News 24/04/2019 73.

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 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.

Dates for your diary

DateDevelopment
30 April 2019Deadline for comments on DP19/1: Building a regulatory framework for effective stewardship.
On 30 January 2019, the FCA and the Financial Reporting Council (FRC) issued DP 19/1 concerning the importance of effective stewardship. The objective of DP 19/1 is to advance the debate about what effective stewardship should look like, what the minimum expectations should be for financial services firms that invest for clients and beneficiaries, what higher standards the UK should aspire to and how these might best be achieved. It also considers the potential public and private benefits of improved stewardship.
For further information, see: LNB News 30/01/2019 105.
30 April 2019Deadline for comments on the FRC’s consultation on business reporting of intangible assets.
The FRC has published a consultation paper, which invites comments on how business reporting of intangible assets could be improved. The FRC argues that intangible assets are increasingly important in a knowledge-based economy and notes concerns that financial statements often fail to recognise important intangibles, such as intellectual capital.
For further information, see: LNB News 06/02/2019 37.

Trackers

To track key legislative and regulatory developments, see our Trackers:

  1. Brexit legislation tracker

  2. Brexit timeline

  3. Markets in Financial Instruments Directive II (MiFID II) and Markets in Financial Instruments Regulation (MiFIR) timeline

  4. Market Abuse Regulation timeline

  5. Prospectus Regulation tracker

  6. Transparency Directive tracker

  7. Listing Rules tracker

  8. Disclosure Guidance and Transparency Rules Sourcebook tracker

  9. Prospectus Rules tracker

Useful information

To view analysis of the latest deals in the market and the underlying transaction documents, use our Market Tracker deal analysis tool.

To read about the latest corporate announcements, see our Market Tracker weekly round-up—18 April2019.

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