Corporate weekly highlights—3 May 2018

This week’s edition of Corporate highlights includes news analysis on the government’s consultation on proposed reforms to the regulatory regime governing limited partnerships and the Lords’ approval of amendments to the EU (Withdrawal) Bill setting conditions for approval of Brexit deal. We have also published a new practice note on GDPR in our public company takeover topic area.

European Union (Withdrawal) Bill

Lords approve EU (Withdrawal) Bill amendments setting conditions for approval of Brexit deal

On the fourth day of the European Union (Withdrawal) Bill Lords Report Stage, Members of the House of Lords voted in favour of several amendments to clause 9 of the Bill, setting requirements for Parliament’s vote on the outcome of the Brexit negotiations and making the power to legislate in order to implement the withdrawal agreement subject to parliamentary approval of the negotiating mandate for the future UK-EU relationship. Members of the House of Lords voted against an amendment providing for the option of holding a further referendum on the final Brexit deal. While the government agreed that Parliamentary scrutiny is critical, it argued that Parliament should not be allowed to micromanage the Brexit negotiations.

For further information, see LNB News 01/05/2018 119.

Public company takeovers

UK public M&A Trend Report update—1 January 2018–31 March 2018

Lexis®PSL Corporate and Market Tracker have conducted research to examine the current trends in UK public M&A for the period 1 January 2018 to 31 March 2018. Data for this report has been sourced from the Market Tracker transaction data analysis tool which allows users to access, analyse and compare the specific features of numerous corporate transactions. This is an update to our latest Market Tracker Trend Report which reviewed trends in UK public M&A in 2017.

For the purposes of this update we analysed the period between 1 January 2018 to 31 March 2018. While comparisons have been made to the same period of 2017 definitive conclusions can only be made on the completion of the full year trend report of 2018. We reviewed a total of 25 transactions that were subject to the Takeover Code: 13 firm offers (7 for Main Market companies, 6 for AIM), 10 possible offers (8 for Main Market and 2 for AIM companies) and 2 formal sale processes (2 AIM companies).

For further information, see UK public M&A Trend Report update—1 January–31 March 2018.

Partnerships

BEIS: Consultation on reform of limited partnership law

The government has released a consultation seeking views on proposed reforms to the regulatory regime governing limited partnerships. The government hopes that the reforms proposed in the consultation will limit the risk of limited partnerships being used for criminal activities. It is also taking the opportunity to consider ways in which the law governing these vehicles could, or should, be brought more in line with the law governing limited companies, which has been regularly reviewed and amended over time.

This consultation follows the government's earlier call for evidence in relation to limited partnerships, which closed in March 2017. The aim of the call for evidence was to gain a better understanding of how limited partnerships are used—legitimately or otherwise—and if the legislative framework that underpins the limited partnership regime remains fit for purpose. It was launched in response to a significant increase in registrations of limited partnerships in Scotland and allegations that Scottish limited partnerships in particular were being used for illicit purposes.

The consultation will close on 23 July 2018.

For further information, see LNB News 30/04/2018 149.

Equity capital markets

London Stock Exchange consultation on changes to the AIM Rules for Nominated Advisers

Following on from issues raised in its AIM Rules Review Discussion Paper published in July 2017, the London Stock Exchange (LSE) has launched a consultation on proposed changes to the AIM Rules for Nominated Advisers (Nomad Rules). The Nomad Rules set out the eligibility requirements, ongoing obligations and certain disciplinary matters in relation to nominated advisers (Nomads).

AIM Notice 51 sets out the changes being proposed by the LSE. These changes cover the eligibility and continued eligibility of Nomad firms and the nature and extent of the LSE’s supervisory powers. The main changes include, among other things, an additional eligibility criteria for Nomads to provide evidence to the LSE about their resources and that they are able to comply with the standards of conduct the LSE expects from Nomad firms when performing their responsibilities (Rule 2) and a non-exhaustive list of matters that a Nomad firm must inform the LSE of, which may affect its operation, role or the performance of its Nomad services (new Rule 12).

Responses to the consultation are requested by 25 May 2018.

For further information, see LNB News 26/04/2018 76.

Private Equity

PERG and PwC publish the latest version of the Good Practice Guide for Portfolio Companies

The Private Equity Reporting Group (PERG) and PwC have published the latest version of the Good Practice Guide for Portfolio Companies (the Guide). Applicable to portfolio companies complying with the Guidelines for Disclosure and Transparency in Private Equity (Walker Guidelines), the Guide has been updated following PwC’s review of portfolio company disclosures in 2017. It reflects the increasingly high standards seen in corporate reporting by the FTSE 250, the benchmark against which compliance with the Walker Guidelines is judged. The Guide highlights examples of good practice in order to help portfolio companies with their narrative reporting.

For further information, see LNB News 01/05/2018 86.

Private M&A (share purchase)

Persimmon Homes Ltd v Hillier and others

In this case the claimant company succeeded in its claim for rectification of warranties and a related disclosure letter, with regard to the acquisition of a row parcels of land lying behind a number of houses. The evidence demonstrated that it had been intended for additional, neighbouring land to be included in the transaction. The Chancery Division held that the first and second defendants were in breach of warranties given in the rectified sale and purchase agreement, and were liable to pay damages to the claimant.

For further information, see Rectification of a share purchase agreement and a disclosure letter—Persimmon Homes Limited v Hillier and others.

Additional Corporate updates this week

Proposal for a directive amending Directive (EU) 2017/1132 as regards the use of digital tools and processes in company law

The European Commission has proposed a new directive to ensure that, in all Member States, there is a fully online registration procedure for companies.

There are currently only 17 Member States that provide for a fully online registration procedure for companies. In the other Member States, the only way to create a company is to physically go in person to the registration authority or to another body which then submits the application for registration. This creates significant inefficiencies, unnecessary costs and delay.

The proposed directive will enable companies in all Member States to register, set up new branches, file documents and update their data online. They may do so without any physical presence before a companies registry or intermediary being required, except where there is a genuine suspicion of fraud. Member States will also be able to rely on each other's information about disqualified directors.

For further information, see LNB News 27/04/2018 1.

Proposal for a directive amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions

The European Commission has proposed a new directive to make it easier for companies to merge, be divided or (using a cross-border conversion) transfer their registered seat within the Single Market. It will also ensure that when these operations are carried out, the rights of a company's employees, creditors and minority shareholders are well protected and tax abuse is prevented.

For further information, see LNB News 26/04/2018 128.

New and updated content

New Practice Note

We have published the following practice note in our Public Company takeovers topic area:

  1. The impact of the GDPR on M&A transactions

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.

Latest Q&As

New Q&As added this week:

  1. Can a private fund limited partnership (PFLP) be put into administration? If so, what is the process?
  2. Can a seller's warranty in a share purchase agreement be qualified by the buyer's actual imputed or constructive knowledge of a matter?
  3. Does a failure to file a shareholders’ resolution approving a share buyback at Companies House render the share buyback void?

Relevant Articles
Area of Interest