Corporate weekly highlights—6 July 2017

This week’s edition of Corporate highlights includes the City of London Law Society and Law Society Company Law Committees updated Market Abuse Regulation Q&A and the news that the Prospectus Regulation has been published in the Official Journal.

Equity capital markets

City of London Law Society updates Market Abuse Regulation Q&As

The City of London Law Society and Law Society Company Law Committees have published an update to their Market Abuse Regulation Q&A. The updated version of the Q&A includes a new Part C which deals with the disclosure requirements where an issuer is negotiating contractual arrangements involving a subscription for shares.

The updated Q&A considers the following questions where parties are negotiating contractual arrangements in relation to a transaction involving a subscription for shares: whether the issuer is able to selectively disclose inside information to the counterparties in connection with such arrangements; if so, whether the issuer is able to delay disclosure of the inside information to the market, notwithstanding its disclosure to the counterparties; and if so, whether there is a requirement for the inside information to be announced before the relevant contractual arrangements can be entered into with the counterparties.

While the facts must be considered on a case-by-case basis, the Committees state that: selective disclosure of inside information to the counterparties should be permitted; a delay in disclosure to the market should be permitted provided that immediate disclosure is likely to prejudice the issuer’s legitimate interests, delay is not likely to mislead the public and confidentiality can be maintained; and disclosure to the market should not usually be required before the relevant contractual arrangements can be entered into with the counterparties.

For details see news, LNB News 30/06/2017 122.

Prospectus Regulation published in the Official Journal

Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, which repeals Directive 2003/71/EC (Prospectus Directive), has been published in the Official Journal.

The Regulation lays down requirements for the drawing up, approval and distribution of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market situated or operating within a Member State. The Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal (namely 20 July 2017).

The Regulation shall apply from 21 July 2019, except for: Article 1(3) and Article 3(2) which shall apply from 21 July 2018; points (a), (b) and (c) of the first subparagraph of Article 1(5) and the second subparagraph of Article 1(5) which shall apply from 20 July 2017; and Member States are required to take the necessary measures to comply with Article 11, Article 20(9), Article 31, Article 32 and Articles 38 to 43 by 21 July 2019.

For details see news, LNB News 30/06/2017 28.

ESMA reports that prospectus approvals continue to decrease

The European Securities and Markets Authority (ESMA) annual report on prospectus activity has found that the number of prospectus approvals across the European Economic Area (EEA) fell by around 8.5% from 2015 to 2016, continuing the overall decreasing trend seen since the start of the financial crisis.

From the prospectuses approved, 40% were in the form of base prospectuses and 91% were drawn up as single documents as opposed to tripartite prospectuses. Almost 75% of approved prospectuses related to non-equity securities, with the most frequent security type being debt securities with a denomination of at least €100,000.

The amount of prospectuses passported to one or more host countries declined by around 11% from 2015 to 2016, with Germany and Luxembourg accounting for the majority of prospectuses passported to other EEA countries in 2016.

For details see news, LNB News 03/07/2017 127.

FCA issues PS on prohibition of banks’ restrictive contractual clauses

The Financial Conduct Authority has published a policy statement, PS17/13: Investment and corporate banking: prohibition of restrictive contractual clauses, which sets out rules to ban clauses that restrict competition without being clearly beneficial to clients.

The FCA has found that some small primary market clients face pressure to reward their bank or corporate broker with future primary market services even where they might be better off with an alternative supplier. The FCA states that these types of clauses in contracts, mandates or engagement letters can restrict a client’s choice in future transactions and may hinder effective competition in the interest of those clients.

Changes are being made to the Conduct of Business sourcebook and to the Glossary of definitions in the FCA Handbook.

The new rules come into effect for agreements entered into on or after 3 January 2018.

For details see news, LNB News 27/06/2017 127.

FCA issues PS and consultation on MiFID II implementation

The Financial Conduct Authority (FCA) has released a policy statement on the implementation of the Markets in Financial Instruments Directive (MiFID) II, setting out its final rules on conduct issues, including research, inducements, client categorisation, best execution, the appropriateness test, taping, client assets and perimeter guidance. It covers the MiFID II rules of most relevance to consumers. The policy statement follows on from PS 17/5, published in March 2017, which covered mainly markets and organisational requirements.

The FCA has also issued a consultation on its sixth set of implementation proposals for MiFID II, seeking views on the proposed changes to the Handbook. Responses to the consultation are sought by 7 September 2017.

MiFID II applies from 3 January 2018. The FCA stress in PS 17/14 that firms must continue with their preparations for the application of MiFID II and, in particualar, if firms need to make applications for authorisation or variation of permission linked to the changes in MiFID II then they should do so now.

For details see news, LNB News 04/07/2017 97.

Members’ meetings and resolutions

Almost a third of companies believe AGMs are a ‘waste of time’

Only 36% of companies believe the current system of annual general meetings (AGMs) is still valuable to the business, according to a poll conducted by the Institute of Chartered Secretaries and Administrators (ICSA). Meanwhile, the survey found that 30% of respondents feel the meetings no longer hold any value, while 34% of respondents are undecided.

Suggestions for improving the AGMs include: virtual meetings; holding meetings when most shareholders can attend; and removing the option of voting on a show of hands and encouraging votes electronically.

For details see news, LNB News 29/06/2017 32.

Accounts and reports

Consultation respondents support a long-term aim of consistency within the FRC

The Financial Reporting Council (FRC) has published a summary of respondents’ comments to its consultation on updating financial reporting standards 102 (FRS 102) for changes in international financial reporting standards (IFRS).

Feedback shows support for a long term aim of broad consistency with IFRS. However it also questioned the proposed timetable and experience before incorporation into FRS 102.

The FRC agrees that more evidence-gathering is needed, and therefore will not be issuing a triennial review phase 2 exposure draft later this year.

For details see news, LNB News 30/06/2017 114.

Corporate governance

Department for Education publishes gender pay gap

The Department for Education has become the first government department to publish its gender pay gap and bonus pay gap. The department has reported a mean pay gap (the difference between average salaries for men and women) of 5.3% and a median pay gap of 5.9%. The UK’s national gender pay gap sits at 18.1%, the lowest since records began in 1997. Gender pay gap data is to be made public by all government departments and large private companies by April 2018.

For details see news, LNB News 29/06/2017 31.

Dates for your diary

Date Subjects covered
20 July 2017 The Prospectus Regulation enters into force. It will apply 24 months from this date. For further information see LNB News 30/06/2017 28.
24 July 2017 Eligible Scottish partnerships (Scottish limited partnerships and general Scottish qualifying partnerships) formed on or after this date will be required to register their PSC information with Companies House on formation. Subsequent changes to PSC information will need to be filed at Companies House within 14 days beginning with the later of 24th July 2017, and the day on which all the required particulars of the registrable person are first confirmed.
Further dates To look further ahead, see: Corporate horizon scanning—2017 and beyond.

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