Corporate weekly highlights—8 March 2018

This week’s edition of Corporate highlights includes the Pre-Emption Group’s reaffirmation of the expectations for disapplication of pre-emption rights thresholds, a recent Supreme Court judgment on the application of limitation periods on trustees who are company directors, an updated Precedent in our Equity Capital Markets topic area and a new Practice Note on 2017/2018 Corporate governance reforms.

Share capital

Pre-Emption Group reaffirms expectations for disapplication thresholds

In response to a new exemption from the requirement to publish a prospectus where the company wishes to admit securities to trading on a regulated market and those securities represent less than 20% of a class of securities already admitted to trading set out in the early provisions of the Regulation (EU) 2017/1129 (Prospectus Regulation) the Pre-Emption Group announced there would be no change to the flexibility permitted by its 2015 Statement of Principles.

In setting out their expectations of companies and investors, the Pre-Emption Group state that ‘whilst decisions about specific placings are a matter for individual shareholders’, the Statement of Principles reflect a generally agreed position (supported by the Pensions and Lifetime Savings Association and the Investment Association) and affirm that ‘to assist in a constructive discussion between companies and shareholders, companies should be mindful of the expectations included within the Statement of Principles’.

For further information, see LNB News 05/03/2018 132.

Corporate governance

FRC podcast on proposed changes to UK Corporate Governance Code

The Financial Reporting Council (FRC) has published the first in a series of podcasts. In the podcast David Styles, Director of Corporate Governance at the FRC, discusses the proposed changes to the UK Corporate Governance Code and how it will help promote trust in business for long term sustainable growth in the UK economy post Brexit.

Issues considered in the podcast include the broader interpretation that the FRC has taken of what governance means, which focuses on the relations between the board, the company and a wider range of stakeholders, the new requirement for chairs to remain independent throughout their tenure and the new requirement for remuneration committees to take workforce policies and practices into account when setting the policy for director remuneration.

For further information, see LNB News 07/03/2018 120.

Additional Corporate updates this week

Supreme Court rules directors who breached trust are not exempt from claims through limitation period

The Supreme Court has unanimously dismissed an appeal by two former directors and controlling shareholders of Burnden Holdings (UK) Ltd (Burnden), a company which issued proceedings against them for the unlawful distribution in specie of the claimant’s shareholding in a trading subsidiary, Vital Energi Utilities Ltd (Vital). The Supreme Court ruled that contrary to the defendants’ submissions, section 21(1)(b) of the Limitation Act 1980 (LA 1980) does not become inapplicable merely because the misappropriated property has remained legally and beneficially owned by corporate vehicles, rather than having become vested in law or in equity in the defaulting directors.

The alleged unlawful distribution in specie of the claimant’s shareholding took place six years before Burnden issued proceedings against Mr and Mrs Fielding. This was outside of the six-year limitation period set out in LA 1980, s 21(3) in respect of an action by a beneficiary for breach of trust. The Fieldings applied to the High court on the basis that the claim was time barred.

While the High Court ruled in favour of the Fieldings, the Court of Appeal set this order aside, on the basis that the limitation period did not run against the claimant, because LA 1980, s 21(1)(b), provides that no limitation period applies to an action by a beneficiary under a trust to recover from the trustee trust property or the proceeds of trust property in the possession of the trustee, or previously received by the trustee and converted to his use.

The Fieldings applied to the Supreme Court on the proper construction of section 21(1)(b). The court dismissed this appeal, finding section 21(1)(b) applies to trustees who are company directors, who are to be treated as being in possession of the trust property from the outset.

For further news, see LNB News 28/02/2018 143.

Additional news—daily and weekly news alerts

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New and updated content

New and updated content

We have thoroughly reviewed and updated the following Precedent in our Equity Capital Markets (Main Market) topic area:

  1. Memorandum on the responsibilities and obligations of a director of a premium listed company

We have also published the following Practice Note in our Corporate Governance topic area:

  1. 2017/2018 Corporate governance reforms

Dates for your diary

Date Subjects covered
9 March 2018 ESMA consults on Prospectus Regulation RTS
The European Securities and Markets Authority (ESMA) has opened a consultation on draft regulatory technical standards (RTS) under the new Prospectus Regulation (Regulation (EU) 2017/1129). Feedback is sought by 9 March 2018.
For further information, see LNB News 15/12/2017 74.
March 2018 The government intends to lay before Parliament draft secondary legislation implementing some of its proposed corporate governance reforms before March 2018.
For further information, see Corporate governance reforms aim to enhance public trust in business, LNB News 29/08/2017 122, and Corporate governance reforms to force companies to reveal pay gap, LNB News 29/08/2017 118.
April 2018 LIBOR: The LIBOR benchmark in the UK will be replaced by a reformed version of SONIA. SONIA is anticipated to move to a new basis by April 2018.
The Sterling Overnight Index Average (SONIA) reflects bank and building societies’ overnight funding rates in the sterling unsecured market. The Bank of England announced its plans to reform the SONIA benchmark in July 2015 and is currently in the process of this reform. The Bank consulted on its high level proposals for SONIA reform, publishing its response to consultation feedback in November 2015. Further consultations were issued in October 2016 and February 2017, seeking views on the detailed proposals for the reform of SONIA.
In March 2017 the Bank provided a summary of feedback from the consultations as well as setting out the specification of reformed SONIA which will be implemented in March or April 2018.
At a roundtable on sterling risk-free reference rates in London on 6 July 2017, the need for a transition away from sterling LIBOR towards SONIA was outlined. The reasoning was to build a safer financial system and to better match the risks that firms are hedging.
Bank of England executive director discusses the transition to SONIA, LNB News 17/07/2017 134.
FMLC comments on SONIA as risk-free reference, LNB News 12/10/2017 60.
FSB progress report on interest rate benchmark reforms, LNB News 10/10/2017 79.

Latest Q&As

New Q&As added this week:

  1. What is the meaning of ‘clear days’?
  2. If a solvency statement and statement of compliance are made but are not filed at the same time as the shareholder resolution to approve a reduction of capital by solvency statement, will filing them a year or so later result in the reduction taking effect retrospectively?
  3. The Financial Services and Markets Act 2000 contains an exemption from the requirement to publish a prospectus for an offer to the public where the consideration is less than €5m. Do you have any guidance on interpreting this exemption?
  4. Can you remove a person as a director under section 168 of the Companies Act 2006 where the articles effectively require the consent of the director-shareholder to do so?
  5. What is meant by the phrase ‘negotiable on the capital market’ in the definition of ‘transferable securities’ for the purposes of determining whether a prospectus is needed for a public offer of securities?

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