Welcome to the weekly highlights from the Lexis®PSL Corporate team for the week ending 9 February 2017, which provide news updates and a comprehensive list of dates for your diary. This week’s edition features analysis of the proposed impact of the Legislative Reform (Private Fund Limited Partnerships) Order 2017, news on the publication of the Reporting on Payment Practices and Performance Regulations 2017 and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 and information on the publication of ESMA’s guide to national rules across the EEA, the FRC’s revised best practice guidance on audit tenders, the IA’s guidelines on audit tenders and the government’s Brexit negotiating principles. Headlines (News updates & analysis) Limited partnerships Proposed changes to the UK limited partnership framework: Legislative Reform (Private Fund Limited Partnerships) Order 2017 The Legislative Reform (Private Fund Limited Partnerships) Order 2017 (LRO) comes into force on 6 April 2017. Under the LRO, a limited partnership that is a collective investment schemes and are constituted by a written agreement may now be registered as a private fund limited partnership (PFLP). The LRO also amends the existing legislation relating to limited partnerships in five key ways: (1) it introduces a non-exhaustive 'white list' of activities that limited partners can undertake without automatically being considered as taking part in the ‘management’ of the limited partnership’s business and risking losing their limited liability status; (2) it abolishes the requirement for capital contributions to be made by limited partners in a PFLP set up after 6 April 2017; (3) it provides that if there is no general partner, then a PFLP may be wound up by a third party appointed by the limited partners (subject to any express or implied agreement between the limited partners as to the winding up); (4) it disapplies a number of the requirements of the Partnerships Act 1890 in relation to limited partners in a PFLP; and (5) it states that certain filings need not be made at Companies House by a PFLP. Sharon Ayres, Partner, and Alastair Dolman, Associate, both at Gowling WLG have examined the current status and proposed impact of the LRO. The authors explain that the changes the LRO could initiate when it comes into force are, overall, to be welcomed. However, they point out that they may ultimately be short-lived, considering the recent call for evidence is relation to a more fundamental review of the UK's limited partnership framework by the Department for Business, Energy & Industrial Strategy. Payment practices Reporting on Payment Practices and Performance Regulations 2017 The draft Reporting on Payment Practices and Performance Regulations 2017 were published on 2 February 2017. They impose a requirement on large companies to publish certain information twice per financial year about their practices, policies and performance in relation to paying suppliers. The Regulations set out: a duty on a qualifying company to publish, for each reporting period, information on its payment practices and policies in relation to qualifying contracts and its performance in relation to those practices and policies; a requirement that the information must be approved by a director of the qualifying company; which companies are qualifying companies; and the reporting periods for which a qualifying company must publish information. The Regulations come into force on 6 April 2017 and will cease to have effect on 6 April 2024. Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 The draft Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 were published on 2 February 2017. They impose a reporting requirement on large limited liability partnerships in relation to their payment practices and policies and their performance by reference to those practices and policies. The substantive provisions of the reporting requirements are set out in the draft Reporting on Payment Practices and Performance Regulations 2017 (see above). The Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 apply equivalent provisions to certain limited liability partnerships, with modifications to some of the wording so that the provisions reflect the nature of limited liability partnerships and their structure. The Regulations come into force on 6 April 2017 and will cease to have effect on 6 April 2024. Equity capital markets New ESMA guide on EEA major holdings notifications The European Securities and Markets Authority (ESMA) has published a practical guide to national rules across the European Economic Area (EEA) on major holdings notifications under the Transparency Directive, to help market participants identify their notification obligations under each country's national law and navigate the different requirements. As a minimum harmonisation directive, the Transparency Directive allows EEA countries some discretion as to how they transpose its requirements into their national law. ESMA, with the help of national regulators, has prepared the practical guide, which contains a fact sheet for each EEA country (with the exception of Lichtenstein) setting out the relevant national requirements along with links to websites. It then presents information on the national rules and practices in a series of tables, enabling market participants to compare across the different jurisdictions. Audit tenders FRC publishes revised best practice guidance on audit tenders The Financial Reporting Council (FRC) has published updated guidance, Audit Tenders–Notes on Best Practice. The guidance, which has been updated from the July 2013 version, underlines how audit committees can approach the process of tendering and rotation of auditors ‘to get the best outcome’. It includes, among other things, greater emphasis on involving the whole audit committee in the tender process and highlights that a long lead time is required for an effective and smooth running tender process. Other key issues it examines relate to the timing of a tender, which firms to invite to tender, balancing professional services (including whether to prioritise audit), engagement with investors in terms of communications on the tender process, getting the right audit team in terms of skills and experience and the approach taken to making the decision on the audit tender. Investment Association publishes guidelines on audit tenders Guidance setting out the expectations of UK institutional investors when companies tender their audits has been published by the Investment Association (IA). The guidance covers, among other things, planning the tender, tender candidates, the tender process and the tender decision. The IA is issuing the guidance because the mandatory auditor rotation requirement in the EU Audit Regulation, Regulation (EU) No 537/2014, became effective on 16 June 2016. This requires Public Interest Entities (PIEs) to change their auditor after a maximum of ten years, which can be extended to 20 or 24 years if an audit tender has taken place. Whilst the EU Audit Regulation applies to PIEs, the IA guidelines are aimed at all companies whose shares are admitted to the premium or standard segment of the Official List of the UK Listing Authority, to trading on AIM or to the High Growth segment of the London Stock Exchange's Main Market. Brexit-related developments Government publishes Brexit negotiating principles The 12 principles on which forthcoming negotiations over the UK’s withdrawal from the EU will be based have been set out in a White Paper published by the Department for Exiting the European Union. The principles include: providing certainty and clarity ahead of the negotiations, taking control of the UK’s laws, securing a deal that works for the entire UK, protecting ties with Ireland, controlling the number of EU nationals coming to the UK, securing rights for EU nationals in the UK and for UK nationals in the EU, protecting and enhancing existing workers’ rights, ensuring free trade with European markets, securing new trade agreements with other countries, ensuring the UK remains the best place for science and innovation, co-operating in the fight against crime and terrorism and delivering a 'smooth and orderly' exit from the EU with a phased process of implementation. Dates for your diary Date Subject 17 February 2017 Deadline for responses to the government's Green Paper on corporate governance reform, which seeks views on three areas where the government is considering updating the UK’s corporate governance framework. For further information, see LNB News 29/11/2016 81. 17 February 2017 Deadline for comments on the FRC's consultation on its draft plan and budget for 2017/18. A key focus of the FRC’s work will be its monitoring and enforcement activities to ensure the UK’s reputation for high standards of corporate governance and reporting and its standing as a global centre of excellence for accountancy, audit and actuarial work. For further information, see LNB News 15/12/2016 195. 17 February 2017 Deadline for responses to The Financial Conduct Authority's fourth and final consultation paper (CP16/43) on the implementation of Markets in Financial Instruments Directive 2014/65/EU (MiFID II) and the Markets in Financial Instruments Regulation 600/2014/EU (MiFIR).For further information, see LNB News 16/12/2016 157. 27 February 2017 Deadline for comments on the second consultation paper (CP43/16) published by Prudential Regulation Authority (PRA) on the implementation of MiFID II. The consultation paper proposes changes to the PRA Rulebook and supervisory statements relating to new management body and organisational requirements. There are also proposed changes to granting authorisations in respect of operating an organised trading facility, emission allowances and structured deposits. For further information, see LNB News 25/11/2016 121.