Corporate weekly highlights—28 September 2017

Corporate weekly highlights—28 September 2017
This week's edition of Corporate highlights includes six new practice notes on "Asset valuations on takeover transactions" and "Directors' decision-making as well as a consideration of the LSE's 2018 dividend procedure timetable and the new guidance launched to assist the boards of companies in their assessments of the interests of their stakeholders.

Share Capital

LSE publishes 2018 dividend procedure timetable

The London Stock Exchange (LSE) has issued its 2018 dividend procedure timetable. It sets out the requirements relating to the timing of announcements, record dates, ex-dividend dates and payments for dividends in 2018. Listed companies and alternative investment market (AIM) companies should comply with this timetable when declaring and paying dividends to shareholders.

A company with a premium listing on the main market of the LSE must have any dividend timetable set out in a circular approved in advance by the LSE, unless the timetable follows the guidelines set out in the dividend procedure timetable and an announcement which includes certain information is made under a correct headline.

An AIM company must inform the LSE in advance of any notification of a dividend timetable, unless the timetable follows the guidelines set out in the dividend procedure timetable and the AIM company's notification includes certain information.

For further information, see: LNB News 22/09/2017 83.

Corporate Governance

New Guidance launched to assist company boards weigh up stakeholders interests

ICSA: The Governance Institute (ICSA) and The Investment Association (IA) have jointly launched guidance to help company boards weigh up the interests of their stakeholders when making strategic decisions. It covers, among other matters, identifying key stakeholders, the composition of the board, and the development of directors.

The guidance follows on from the package of corporate governance reforms published by the government in August 2017 which, among other things, set out proposals to strengthen the employee, customer and wider stakeholder voice. One of the government's stated aims in this area was to encourage industry-led solutions by asking the ICSA and the IA to complete their joint guidance on practical ways in which companies can engage with their employees and other stakeholders at board level.

For further information, see: LNB News 26/09/2017 110.

Equity Capital Markets

European Commission publishes proposals for stronger and more integrated European financial supervision

The European Commission (Commission) has published proposals concerning the European Systemic Risk Board (ESRB) and the three European Supervisory Authorities (ESAs), namely the European Securities and Markets Authority (ESMA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Banking Authority (EBA). The proposals seek to upgrade and improve the supervisory convergence tools, governance and funding of the ESAs, and give new responsibilities to ESMA. The proposals also seek to ensure that supervision keeps up to pace with technological innovation, and introduce targeted amendments to the efficiency of the ESRB.

The Commission's proposed changes to the ESRB include making the ECB President the permanent chair of the ESRB and, where appropriate, ensuring that the ESRB's advisory committees consult interested parties such as market participants, consumer bodies, and experts to inform the opinions, recommendations and decisions.

In light of these proposals, the Commission has published a proposed Regulation amending Regulation (EU) No 1092/2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board.

For further information, see: LNB News 20/09/2017 116.

Government quizzes FCA about plans for new listing category for sovereign-controlled companies

The chairs of the Treasury and Business, Energy and Industrial Strategy committees have written a letter to the Financial Conduct Authority (FCA) questioning the rationale behind the FCA's proposals for a new category within the premium listing regime for commercial companies controlled by a shareholder that is a sovereign country. The proposals were first set out in the FCA consultation paper CP17/21 which was published in July 2017 and aims to make the UK market more accessible to companies controlled by a sovereign owner.

The new premium listing category would include all the investor protections that currently apply to commercial companies in the existing premium listing category of the UK listing regime with two important modifications. The two main differences are modified related party rules (the sovereign controlling shareholder would not be considered a related party for the purposes of the listing rules) and the controlling shareholder rules would not apply in respect of the sovereign controlling shareholder.

For further information, see: LNB News 25/09/2017 153.

Corporate Governance

Workplace 'cultural shift' must take place as gender pay gap widens

The Chartered Management Institute (CMI) has discovered a rise over the past year in the UK gender pay gap from 23.1% to 26.8%. The average pay gap between female and male managers standing at £11,606 per year. The research has been taken in light of the governments new reporting regulations launched in April 2017, which require large employers (250+ employees) to publicly disclose the size of their gender pay gap. Despite this, CMI found only 72 out of 7,850 eligible employers have fulfilled obligations of the new regulations.

The manager salary analysis, conducted by the CMI and XpertHR, is the first time that pay gap data, compiled by XpertHR, has been published taking into account the new rules. It includes salary data of 118,385 managers from 423 organisations over the past year. The findings include evidence that women are far more likely to fill junior management positions than men and men are much more likely to occupy senior positions.

For further information, see: LNB News 25/09/2017 151.

Share Capital

Remuneration by way of dividend (Global Corporate Ltd v Hale)

What ability do liquidators have to recover dividends paid to owner-managers when the company is insolvent? Steven Fennell, barrister at Exchange Chambers, examines the answer in Global Corporate Ltd v Hale and says while the case might be one limited to its facts if it is followed in future cases involving more normal accounting methods, it may create real obstacles to liquidators seeking to recover monies from directors.

The issues for the court were whether dividends had been paid in breach of section 830 of the Companies Act 2006 (CA 2006) and whether the director knew this so as to make him liable to return the money under CA 2006, s 847, and if the payments were not in fact dividends, whether the director had a right to be paid for the work he did for the company. The judge decided that the payments were not dividends, and so the director could not be liable to repay them under CA 2006, s 847.

If the decision on directors' duties and transactions at undervalue is correct, it is potentially very far-reaching. It means that a director can play 'heads I win, tails you lose' with HMRC and their own company about how they are paid. If the company manages to make enough profit to allow dividends to be paid, the director will pay less tax than they would have had they been paid through PAYE. If the company doesn't make enough profit, the director can say that they only agreed to work for the company on condition that they would be paid in excess of the amount declared to HMRC and so they can keep whatever they have taken.

For further information, see News Analysis: Remuneration by way of dividend (Global Corporate Ltd v Hale)

Accounts and Reports

FRC proposes accounting amendments for gift aid payments

The Financial Reporting Council (FRC) is proposing amendments to FRS 102, which would allow the tax effects of gift aid payments made by subsidiaries to their charitable parents to be taken into account at the reporting date, where it is probable that the payment will be made in the nine months following the reporting date. Comments are invited on the exposure draft, FRED 68, by 20 October 2017.

FRED 68 responds to the significant differences in accounting treatment arising in practice, in relation to the accounting for gift aid payments made by a subsidiary to its charitable parent. Such payments are made during the nine months following the relevant reporting date, and are a distribution to owners but a donation for tax purposes. These draft amendments to FRS 102 propose that the tax effects of such a gift aid payment, when it is probable that it will be made in the nine months following the reporting date, shall be taken into account at the reporting date. This will improve the consistency of reporting between entities and the relevance of the information provided to users.

For further information, see: LNB News 22/09/2017 26.

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New and updated content

New Practice Notes

We have published the following new Practice Notes on Directors' decision-making and Asset valuations on takeover transactions:

  1. Directors' decision-making-power, authority and duties
  2. Directors' decision-making-convening board meetings
  3. Directors' decision-making-conduct at board meetings
  4. Directors' decision-making-post board meeting formalities
  5. Directors' decision-making-written resolutions and decisions by sole directors
  6. Asset valuations on takeover transactions

Dates for your diary

Date Subjects covered
28 September 2017 Deadline for comments on three ESMA consultations relating to the Prospectus Regulation: Consultation paper on the format and content of the prospectus (ESMA 31-62-532); Consultation paper on the EU Growth prospectus (ESMA 31-62-649); and Consultation paper on scrutiny and approval (ESMA 31-62-650). For details see LNB News 06/07/2017 144.
September 2017 MiFID II: Transparency data and double volume cap data must be reported to ESMA from September 2017. For details see news, LNB News 13/01/2017 145.
2 October 2017 Deadline for proposed amendments to the FCA Handbook on this date, further to the FCA's prior publication of its quarterly consultation paper on changes to the FCA Handbook. For details see news, LNB News 01/09/2017 65.
11 October 2017 Deadline for feedback and comments on the FCA's three new technical notes that outline its expectations of sponsors and their obligations under LR 8.3.4R, LR 8.4.2R(3) and LR 8.4.12R(2). For details see: FCA Primary Market Bulletin,  FCA's Technical Note: Sponsors' duty regarding directors of listed companies, FCA's Technical Note: Sponsors' obligations on established procedures, FCA's Technical Note: Sponsors' obligations on no adverse impact.
13 October Deadline for responses on the FCA's consultation and proposals to create a new category within its premium listing regime to cater for companies controlled by a shareholder that is a sovereign country.
For details see: LNB News 13/07/2017 135.

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