Corporate weekly highlights—31 May 2018

This week’s edition of Corporate highlights includes news of the European Commission’s proposed new rules to give SMEs better access to financing through public markets, the government’s proposal to hold directors of nuisance call companies more personally accountable and the implementation of the GDPR on 25 May 2018 by way of the Data Protection Act 2018.

Equity capital markets

Capital markets union: broadening access to market-based finance for SMEs

The European Commission has proposed new rules to give small and medium enterprises (SMEs) better access to financing through public markets as part of the EU’s capital markets union (CMU) agenda. The aim is to provide EU SMEs with easier access to cheaper funding to aid their expansion.

Despite the benefits of stock exchange listings, EU public markets for SMEs can struggle to attract new issuers and the number of SME initial public offerings today has halved compared to 2006-2007. This is why the Commission, as announced in the Mid-Term Review of the CMU Action Plan in June 2017, wants to adapt existing EU rules on access to public markets in the Market Abuse Regulation (MAR), the Prospectus Regulation and the recast Markets in Financial Instruments Directive (MiFID II). This complements a comprehensive series of measures already adopted by the Commission since the launch of the CMU to improve access to market-based finance for SMEs, for example requirements for SME growth markets which enable smaller companies to get equity capital and debt finance (bonds) which entered into force in January 2018.

The key changes to SME listings rules are as follows:

  1. adapting current obligations to keep registers of persons that have access to price-sensitive information so as to avoid excessive administrative burden for SMEs, while ensuring that competent authorities can still investigate cases of insider dealing
  2. allowing issuers with at least three years of listing on SME growth markets to produce a lighter prospectus when transferring to a regulated market
  3. making it easier for trading venues specialised in bond issuance to register as SME growth markets (by setting a new definition of debt-only issuers: companies that issue less than EUR 50m over a 12–month period)
  4. creating a common set of rules on liquidity contracts (agreements between issuers and financial intermediaries for buying and selling shares of and on behalf of the issuer) for SME growth markets in all member states, in parallel to national rules

The proposal for a regulation amending MAR and the Prospectus Regulation will now be discussed by the European Parliament and the Council. The amendments to the MiFID II delegated act on SME growth markets (Commission Delegated Regulation (EU) 2017/565 on SME Growth Markets) have been published for a four-week consultation ending on 21 June 2018, following which they will be scrutinised and sent to the European Parliament and the Council for their scrutiny.

For further information, see News: Capital markets union: broadening access to market-based finance for SMEs.

Directors; Partnerships

Directors of nuisance call companies could be fined up to £500,000

The government is seeking views on how it can make directors, and those in similar positions including members of partnerships, more personally accountable where their companies unlawfully make unsolicited marketing communications. Proposals under consideration include amending the Privacy and Electronic Communications Regulations 2003, SI 2003/2426 to allow the Information Commissioner’s Office (ICO) to fine directors up to £500,000 for nuisance calls and texts. Currently this type of enforcement is only available against companies rather than individual directors. The ICO’s concern is that this has enabled directors to put companies into liquidation to avoid penalties, only to restart the business under a new name.

Whilst this legislative change option would most commonly affect company directors’ liabilities, it is important to note that the consultation paper also refers to it affecting ‘those in similar positions’ to company directors in corporate bodies and unincorporated associations, as well as also extending to members of partnerships and Scottish partnerships. In relation to an unincorporated body other than a partnership, it would apply to any person who was concerned in the management or control of the body or purports to act in the capacity of a person so concerned.

For further information, see LNB News 30/05/2018 62.

Additional Corporate updates this week

Data Protection Act 2018

Provisions are made regulating the processing of information relating to individuals, making provisions in connection with the Information Commissioner’s functions under certain regulations relating to information, and making provision for a direct marketing code of practice, as well as for connected purposes.

Provisions are made repealing and replacing the UK’s existing data protection laws to keep them up to date as increasing amounts of personal data are being processed. New standards are set for protecting personal data, in accordance with recent EU data protection laws, giving people more control over use of their data and helping the UK prepare a future outside the EU. The Act came into force on 25 May 2018.

For further information, see News: Data Protection Act 2018.

Data Protection Act 2018 (Commencement No 1 and Transitional and Saving Provisions) Regulations 2018

SI 2018/625: Certain provisions of the Data Protection Act 2018 came into force on 25 May 2018 whilst others will come into force on 23 July 2018.

Broadly, section 2 and Parts 1, 2, 3, 4, 5, 6 and 7 come into force on 25 May. Sections 123, 125, 126, 127, 188, 189, 190, 191, 192, 193, 194 and 195 come into force on 23 July.

For further information, see News: Data Protection Act 2018 (Commencement No 1 and Transitional and Saving Provisions) Regulations 2018.

Additional news—daily and weekly news alerts

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Dates for your diary

Date Development
1 June 2018 Financial Reporting Council: updated sanctions guidance for auditors, accountants and actuaries takes effect.
The updated guidance has been produced in response to the October 2017 report of an independent panel, led by Sir Christopher Clarke, which reviewed the nature and appropriateness of sanctions for auditors, accountants and actuaries.
See LNB News 09/04/2018 6.
11 June 2018 Consultation on insolvency and corporate governance (closing date).
The Department for Business, Energy & Industrial Strategy (BEIS) launched a consultation on 20 March 2018 in relation to new proposals to improve the corporate governance of companies when they are in or approaching insolvency.
See LNB News 20/03/2018 121.
11 June 2018 Amendment of UK merger thresholds for certain transactions impacting national security
Two statutory instruments have been made which will amend the UK merger control regime’s notification thresholds for certain sectors impacting national security (namely military or dual-use goods which are subject to export control; quantum technology and computing processing units). For these sectors only, the share of supply threshold will be amended so that it can be met solely by the activities of the target and the turnover threshold will be reduced to £1m. The revised thresholds will enter into force on 11 June 2018.
See LNB News 15/05/2018 69.
21 June 2018 Capital markets union: broadening access to market-based finance for SMEs
Close of a four-week consultation on amendments to the Markets in Financial Instruments Directive (MiFID II) delegated act on SME growth markets (Commission Delegated Regulation (EU) 2017/565 on SME Growth Markets), following which such amendments will be scrutinised and sent to the European Parliament and the Council for their scrutiny.
These amendments are part of the European Commission’s plans to adapt existing EU rules on access to public markets (as announced in the Mid-Term Review of the CMU Action Plan in June 2017) which would also include amendments to the Market Abuse Regulation and the Prospectus Regulation.
See News: Capital markets union: broadening access to market-based finance for SMEs
29 June 2018 Late Payment of Commercial Debts (Scotland) Amendment Regulations 2018 come into force.
An amendment is made to legislation to clarify transposition of Article 7(5) of EU Recast Directive 2011/7/EU on combating late payment in commercial transactions in Scotland, by substituting a provision which allows representative bodies to challenge certain ‘grossly unfair’ contractual terms or practices on behalf of small and medium sized enterprises (SMEs). The new provision clarifies that certain representative bodies are able to decide whether to take action to bring proceedings to challenge the use of certain grossly unfair terms or practices, on behalf of any size business undertaking (not just SMEs) in or in relation to contracts to which the Late Payment of Commercial Debts (Interest) Act 1998(LPCD(I)A 1998) applies.
See LNB News 21/05/2018 75.

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