Corporate weekly highlights—26 April 2018

This week’s edition of Corporate highlights includes News Analysis of the Scottish appeal court decision in Panel on Takeovers and Mergers v King, analysis of the QCA’s revised corporate governance code and the FCA’s Dear CEO letter on irredeemable preference shares.

Public company takeovers

Scottish appeal court upholds decision requiring King to make Rule 9 offer for Rangers

Corporate analysis: The Inner House, Court of Session, has upheld a decision of the Outer House requiring David King to make a mandatory offer for all the shares in Rangers Football Club not already owned by him and his concert parties.

The Takeover Appeal Board (TAB) directed that Mr King announce a mandatory offer by 12 April 2017. However, Mr King failed to comply and on 13 April 2017 the Takeover Panel (Panel) commenced proceedings in the Outer House of the Court of Session, Edinburgh under section 955 of the Companies Act 2006 (CA 2006) seeking an order requiring Mr King to comply with its rulings.

The Outer House found in favour of the Panel and issued an order requiring Mr King to make a mandatory offer at 20p per share for all the shares in Rangers not controlled by him or his concert parties.

The Inner House agreed with the Outer House’s finding that the court did have discretion in making an order under CA 2006, s 955. This discretion extended not merely to the form of the order, but whether to make any order at all. However, the circumstances in which the court would refuse an order would be rare and might include the offeror becoming insolvent or a competing offer arising after the decision of the Panel, Hearings Committee or TAB. Otherwise, the court’s function was to enforce the rulings of the Panel.

For further details, see News Analysis: Scottish appeal court upholds decision requiring King to make Rule 9 offer for Rangers.

Corporate governance

QCA publishes revised corporate governance code

Corporate analysis: The Quoted Companies Alliance has published a revised version of its Corporate Governance Code. The QCA Code sets out standards of good governance for quoted companies that do not have a premium listing of equity shares and private companies that wish to adopt good governance practices. This analysis, which includes market commentary from Martin Webster, partner at Pinsent Masons LLP, considers the new code and discusses some of the key changes.

A lot of the themes from the 2013 version of the QCA Code have been retained, but some differences include:

  1. there is less emphasis on the QCA Code being for small and mid-size quoted companies
  2. the new code may be suitable for privately-owned companies that wish to adopt good governance practices
  3. the number of Principles has been reduced from 12 to 10
  4. a new Principle has been added requiring companies to promote a corporate culture that is based on sound ethical values and behaviours

For further details, see News Analysis: QCA publishes revised corporate governance code.

Equity capital markets

FCA publishes Dear CEO letter on irredeemable preference shares

The FCA has published a Dear CEO letter on irredeemable preference shares and other similar capital instruments following Aviva plc's recent announcement that it is to cancel certain irredeemable shares.

The FCA is currently reviewing the prevailing market for certain fixed income shares, particularly those shares that are described as being perpetual, irredeemable or in some other way that suggests permanence. The FCA wants to ensure investors have access to the information that they require to properly assess the risks and rewards attaching to such shares.

The FCA informs listed companies that they must consider whether any intention to cancel or otherwise retire a class of irredeemable shares, or similar shares, at a price based on factors other than the prevailing market price, or their company's deliberation on any such intention, constitutes inside information under Article 7 of the Market Abuse Regulation.

The FCA suggests companies ensure that the following information is readily accessible to all holders and potential holders:

  1. terms and conditions of the instrument as included in the original prospectus or similar document issued at the time of the offer and or admission of the shares
  2. details of any changes to the above that have been made post the issue of the shares
  3. articles of association of the issuer of the securities
  4. Q&As so that the information is clear and comprehensible for investors—the FCA goes on to describe particular items that might usefully be clarified

For further information, see LNB News 19/04/2018 108.

Commission publishes roadmap for Prospectus Regulation level 2 measure

The European Commission has published a roadmap for the delegated act that it is required to develop under the Prospectus Regulation (EU) 2017/1129 to complement the ‘single prospectus rulebook’. The deadline for feedback is 22 May 2018.

The delegated act will cover (among other things): the reduced content and standardised format and sequence for the EU Growth prospectus, the format of the standard prospectus, the base prospectus and the final terms, and the schedules defining the specific information which must be included in a prospectus and the reduced information to be included in the schedules applicable under the simplified disclosure regime for secondary issuances.

For further information, see LNB News 24/04/2018 60.

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
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 enquiry to look at the gender pay gap and executive pay in the private sector. The enquiry 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 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 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
1 June 2018 The Financial Reporting Council (FRC) has updated its sanctions guidance for auditors, accountants and actuaries in order to implement the recommendations of an independent review of sanctions undertaken in 2017. The updated guidance will take effect on this date.
A panel chaired by former Court of Appeal Judge Sir Christopher Clarke conducted the independent review of sanctions, publishing its report in October 2017. The panel made several recommendations, including: an increase in fines to £10m or more for seriously poor audit work by a ‘Big 4’ firm, exclusion from the accounting profession for a minimum of ten years for dishonesty, greater use of non-financial penalties and sanctions that reflect the level of cooperation by respondents.
See LNB News 09/04/2018 6.

Relevant Articles
Area of Interest