Welcome to the weekly highlights from the Lexis®PSL Corporate team for the week ending 25 November 2016, which provide news updates and a comprehensive list of dates for your diary. This week’s edition features: corporate developments arising from the Autumn Statement 2016; the government’s proposals for corporate governance reforms; Institutional Shareholder Services Inc’s (ISS) 2017 benchmark proxy voting policy updates; the Investment Association’s (IA) newly published guidelines on viability statements; Companies House’s updated confirmation statement guidance; the Great Repeal Bill’s legislative challenges; the House of Commons Library briefing paper summarising the arguments over whether questions about triggering Article 50 under national constitutional arrangements are relevant to the Court of Justice of the EU (CJEU); the EU draft directive overhauling insolvency law; and case analysis of a High Court decision considering the operation of ‘leaver provisions’ in a company’s articles of association. Autumn statement Autumn Statement 2016—Corporate In the 2016 Autumn Statement released on 23 November 2016, the Chancellor announced that Corporation tax will be cut to 17% by 2020. The main rate of corporation tax has already been cut from 28% in 2010 to 20% and the Chancellor has committed to cutting it to 17% by 2020. This would make it the lowest in the G20 and the government believes it will benefit over one million businesses. The government also announced a £400m investment in growing innovative firms and rules that limit the tax deductions that large groups can claim for their UK interest expenses. These rules will limit deductions where a group has net interest expenses of more than £2m, net interest expenses exceed 30% of UK taxable earnings and the group’s net interest to earnings ratio in the UK exceeds that of the worldwide group. The government’s £400m investment will be invested through the British Business Bank to invest in innovative small businesses with potential for growth, to provide the finance that they need to expand. This aims to support up to £1bn of new investment. From April 2017, most salary sacrifice schemes will be subject to the same tax as cash income. In salary sacrifice schemes, employees exchange some of their salary for a non-cash benefit in kind (such as a mobile phone). The benefit is taxed less than a salary, or not taxed at all. The change will affect types of salary sacrifice schemes differently: pensions, pensions advice, childcare, Cycle to Work scheme and ultra-low emission cars will be exempt; and all arrangements in place before April 2017 will be protected for up to a year, and arrangements in place before April 2017 for cars, accommodation and school fees will be protected for up to four years. The Chancellor also announced that, a new penalty is being introduced for any person or business who helps someone else use a tax avoidance scheme. The penalty will ensure that those who help tax avoiders will face the same consequences when HMRC defeats their avoidance scheme. The government will also remove the defence of having relied on non-independent advice as taking ‘reasonable care’ when considering penalties for anyone that uses such arrangements. The government is also considering bringing non-resident companies into the corporation tax regime. A consultation will take place following the 2017 Budget. The Chancellor also announced that the National Living Wage for those aged 25 and over will increase from £7.20 per hour to £7.50 per hour from April 2017. It equates to an increase of more than £1,400 a year, for a full-time worker previously on the National minimum wage (NMW). The NMW will also increase: for 21 to 24 year olds—from £6.95 per hour to £7.05; for 18 to 20 year olds—from £5.55 per hour to £5.60; for 16 to 17 year olds—from £4.00 per hour to £4.05 and for apprentices—from £3.40 per hour to £3.50. The government has also announced plans to spend £4.3m on helping small businesses to understand the rules and on taking action against employers who are breaking the law by not paying the minimum wage. Corporate governance Government to introduce corporate governance reforms The government is to publish a green paper which sets out plans to reform corporate governance, including executive pay and accountability to shareholders, and proposals to ensure the voice of employees is heard in the boardroom, Prime Minister Theresa May announced in a speech at the CBI annual conference. The Prime Minister stated that the proposals in relation to worker representations on boards would not be mandatory. Additionally, there is no intention to replace the current single-board structure in the UK with a German-style binary board, which separates the running of the company from the inputs of shareholders, employees, customers or suppliers. The Green Paper is expected to be published later in 2016. ISS announces 2017 benchmark policy updates A 2017 update to its benchmark proxy voting policies for the Americas, EMEA, and Asia-Pacific regions has been published by the ISS. Among other things, the policies are being updated to ensure that audit and remuneration committees in the UK are fully independent regarding the assessment of smaller companies. Key policy changes for the UK and Ireland in 2017 proposed by the ISS include: the recommendation to vote against the chair of the remuneration committee where there are concerns over compensation; clarification of the acceptable number of directorships; where companies seek to implement pay structures which are not the typical UK model, confirmation that a greater level of certainty of reward should be matched by lower award levels; the introduction of a reference to a potential recommendation against the chair of the remuneration committee when serious issues are identified; for the remuneration report resolution, the introduction of a reference to the use of ISS' Pay-for-Performance methodology (EP4P), including a definition of EP4P and confirmation that in termination scenarios, appropriate pro-rating on outstanding share awards should be applied; for smaller companies, specifying that on and from 1 February 2018 audit and remuneration committees should be fully independent; for companies in continental Europe, on and from 1 February 2017 the calculation of director independence levels under ISS policy will exclude employee shareholder representatives; and the general recommendation against all performance-based compensation for non-executive directors. The updated policies will generally be applied for shareholder meetings on or after 1 February 2017. Investment Association publishes guidelines on viability statements The IA has published viability statement guidelines for UK asset management industry and institutional investors in listed companies. The guidelines set out the expectations of institutional investors on companies’ current position and principle risks, and the viability of companies' continued operation. The IA said that the guidelines have been developed with the benefit of one year’s experience and will be reviewed in the light of best practice as it evolves. Company administration Companies House updated confirmation statement guidance Guidance explaining the confirmation statement has been updated by Companies House to reflect the need for the full statement of capital to be included with first confirmation statement. The confirmation statement replaced the annual return. This update amends the share capital section to reflect the need for the full statement of capital to be included with first confirmation statement. Brexit related developments Great Repeal Bill—legislative challenges of Brexit explored The House of Commons Library has released a briefing paper considering important issues likely to be raised by the ‘Great Repeal Bill’ (GRB), such as the challenges for converting EU law into UK domestic law, proposed use of delegated powers, devolution, and UK Courts post-Brexit. The government first announced plans for a GRB in October 2016. The GRB has been announced as a means for the UK to legislate for Brexit in advance, with the necessary legal changes to take effect on the official day of exiting the EU. Designed to repeal the European Communities Act 1972 and incorporate EU law into domestic law, commentators say this could be the largest legislative project ever undertaken in the UK. EU Treaty provisions—Brexit and the EU Court Following the High Court judgment in Miller v Secretary of State for Exiting the European Union  EWHC 2768 (Admin),  All ER (D) 19 (Nov) on 3 November 2016 on whether the government could trigger the start of the EU exit process under Article 50 of the Treaty on European Union (TEU) using Royal Prerogative powers, the House of Commons Library has produced a briefing paper summarising the arguments over whether questions about the decision to trigger Article 50 under national constitutional arrangements are relevant to the CJEU. The interpretation of Article 50 TEU, the briefing paper says, would be a matter of EU, not UK law. Under Article 267 of the Treaty on the Functioning of the European Union, there could be a role for the CJEU in determining whether an Article 50(2) notice can be withdrawn if a Member State which has served notice of an intention to withdraw changes its mind. Specifically, the paper explores the doctrine of acte clair, the Miller case at the High Court and whether a notice of withdrawal can be revoked. EU insolvency law EU insolvency law overhaul to afford faltering companies breathing space An EU draft directive has been issued by the European Commission as part of a cross-border reform of insolvency laws that proposes to give companies more time to sort out debts instead of being forced to cease trading. Similar to US-style Chapter 11 proceedings, companies would be shielded from creditors taking action against a company during a four month window with an extension of a year available in exceptional cases. Articles of association—case analysis Restaurant business serves up wrong set of articles (Gunewardena v Conran Holdings Ltd) In the case Gunewardena v Conran Holdings Ltd  EWHC 2983 (Ch), the High Court considered the operation of ‘leaver provisions’ in a company’s articles of association. The case raises some interesting issues regarding how definitions of 'subsidiary', 'holding company' and 'group' can be construed in a company's articles. The case also considers which articles of association are binding on the company and its shareholders where an incorrect version of the articles is filed with the Registrar of Companies. Dates for your diary Date Subjects covered 6 December 2016 Member states are required to transpose the Reporting Directive into national law by 6 December 2016. The Reporting Directive amended the EU Accounting Directive 2013/34/EC as regards disclosure of non-financial and diversity information by certain large undertakings and groups. In the UK, this introduces disclosure requirements in relation to anti-corruption and bribery issues in the strategic report, which must be transposed into UK law by 6 December 2016. For further information, see LNB News 25/10/2016 170. 16 December 2016 The Department for Business, Energy and Industrial Strategy (BEIS) is seeking views on its discussion paper outlining possible approaches to the transposition of Article 30 of the Fourth Money Laundering Directive. This Article relates to the requirement for EU member states to maintain a central register of beneficial ownership information of corporate and other legal entities in their territory. The deadline for responses is 16 December 2016. For further information, see LNB News 03/11/2016 146.