Corporate weekly highlights—4 May 2017

Corporate weekly highlights—4 May 2017
Welcome to the weekly highlights from the Lexis®PSL Corporate team for the week ending 4 May 2017, which provide news updates and a comprehensive list of dates for your diary. This week’s edition features: the Law Society and the CLLS’ joint response to the FCA’s consultation paper on the DTR sourcebook; the Law Society’s opposition to the creation of a new anti-money laundering supervisory regime; the FSB’s peer review of Corporate Governance; the FRC’s discussion paper on the role of auditors and preliminary announcements; analysis of Re Formenta Ltd; and Public Law analysis of the Great Repeal Bill.
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Headlines (News updates & analysis)

Equity capital markets

Law Society and CLLS call for clarity on LEI requirement

The Law Society and the City of London Law Society (CLLS) have published their joint response to the consultation paper published by the Financial Conduct Authority (FCA) in December 2016 proposing to update its Disclosure Guidance and Transparency Rules sourcebook (DTRs) to make it compliant with the regulatory technical standards (RTS) under the Transparency Directive.

The FCA’s consultation paper proposed adding new rules in DTR 6.2 to require issuers to supply a legal identifier (LEI) and classify regulated information when they file regulated information with the FCA. This proposal aimed to enable the FCA to fulfil its obligations under Articles 7 and 9 of the RTS.

While the Law Society and CLLS agree with the FCA's proposals, they point out that some issuers of securities (for example, those based overseas) may not always be able to obtain a legal entity identifier (LEI) in a quick or straightforward manner. They suggest that the FCA confirm that an issuer would not be prevented from complying with its obligation to disclose regulatory information if it had not been reasonably practicable for the issuer to obtain an LEI before doing so.

For details see: LNB News 28/04/2017 106.

Anti-money laundering

Law Society opposes creation of new AML supervisory body

The Law Society of England and Wales has responded to HM Treasury's consultation and call for further information on the anti-money laundering (AML) supervisory regime. Its response states that while it agrees that AML supervisors that are not performing to the appropriate standard must improve, the Law Society is not convinced that the evidence justifies the creation of a new overarching supervisory body and the consequent expense to be borne by professional bodies and their members.

In the Law Society's view, HM Treasury's existing powers in relation to the approval of AML supervisors are sufficient to address any perceived shortcomings in the UK's AML/CTF regime, provided they are adequately resourced.

It recommends that no new infrastructure should be put into place until after the Financial Action Task Force has carried out is review of the UK's AML regime in 2018.

For details see: LNB News 28/04/2017 104.

Corporate governance

FSB peer review makes recommendations on corporate governance for financial institutions

The Financial Stability Board (FSB) has published a peer review on corporate governance, which surveys how FSB member jurisdictions have implemented the G20/Organisation for Economic Co-operation and Development (OECD) Principles of Corporate Governance for publicly listed, regulated financial institutions. The peer review identifies effective practices and areas where good progress has been made while noting gaps and areas of possible weakness.

The peer review found that, while all FSB member jurisdictions have comprehensive corporate governance frameworks, their effectiveness can be impacted if the division of responsibility among financial sector authorities is unclear or if requirements overlap, leave unwarranted gaps or are otherwise not well aligned.

The peer review also found that although the corporate governance frameworks generally provide some degree of proportionality other factors, such as, ownership and control structure, geographical presence and stage of development could also be considered.

For details see: LNB News 28/04/2017 61.


FRC discussion paper on the role of auditors and preliminary announcements

The Financial Reporting Council (FRC) has issued a discussion paper in response to its findings that although preliminary announcements are an important part of UK corporate reporting, stakeholder feedback suggests that there is limited understanding of the current role of the auditor when agreeing to the publication of preliminaries.

The discussion paper considers the role of auditors and preliminary announcements of annual results, with a particular focus on the LSE Main Market.

Comments on the discussion paper are invited by 23 June 2017.

For details see: LNB News 27/04/2017 96.

Case analysis

Examining the case for reverse cross-border mergers—a sign of things to come? (Re Formenta Ltd)

This analysis examines whether the High Court’s approval of the absorption of UK parent company Formenta Ltd into its Italian subsidiary will pave the way for similar restructurings of pan-European group companies. Philipp Simon, barrister at Ely Place Chambers and who represented Formenta in the proceedings, explains the reasons behind the decision and why reverse cross-border mergers makes good business sense.

In this case, the High Court approved for the first time the reverse cross-border merger of a UK company, Formenta Ltd, into its Italian subsidiary. The merger was effected pursuant to the Companies (Cross Border Merger) Regulations 2007, SI 2007/2974, which provide a framework for mergers involving a UK public company (or an unlimited or unregistered company) merging with one or more companies in another EEA state.

The decision offers potential to deal with possible future pan-European group restructurings as a result of Brexit. The author states that it enables those who want to leave Europe to do so in a swift and efficient way, but it also enables those who look at Brexit as a chance to get their ducks in a row in time.

For details see News Analysis: Examining the case for reverse cross-border mergers—a sign of things to come? (Re Formenta Ltd).

Relevant updates from other practice areas

Public law

The Great Repeal Bill—examining the role of secondary legislation

This analysis considers the detail that is provided in the government White Paper with regards to legislating for Brexit. Continuing our analysis of the legislative plan for Brexit, professor Adam Cygan, of the University of Leicester, considers how the government aims to ensure that the UK has a functional statute book after withdrawal from the EU.

For details see News Analysis: The Great Repeal Bill—examining the role of secondary legislation.

Dates for your diary

Date Subjects covered
12 May 2017 Deadline for responses on the last two proposals in the FCA's fifth MiFID II consultation paper (CP17/8). For further information, see LNB News 31/03/2017 156.
14 May 2017 Deadline for responses to the FCA's discussion paper on the effectiveness of Primary Markets (DP17/2). This seeks feedback on how the UK primary capital markets can most effectively meet the needs of issuers and investors.
14 May 2017 Deadline for responses to the FCA's consultation paper on proposed technical enhancements to the Listing Rules (CP17/4). This considers improvements to FCA rules and guidance to ensure the Listing Rules continue to service the needs of issuers and investors.
15 May 2017 Deadline for responses to BEIS's call to evidence on proposals on the first public beneficial ownership register. BEIS has set out proposals for the world's first public beneficial ownership register to increase transparency of overseas investments in UK property. For further information, see: LNB News 06/04/2017 54.
Further dates To look further ahead, see: Corporate horizon scanning—2017 and beyond.

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