Welcome to the weekly highlights from the Lexis®PSL Corporate team for the week ending 16 March 2017, which provide news updates and a comprehensive list of dates for your diary. This week’s edition features: the revised shareholders’ rights directive, the FRC’s proposed revisions to International Standard on Auditing, the Law Society’s response to the government’s Green Paper on corporate governance reform, the ICMA’s response to European Commission’s consultation on the CMU mid-term review 2017, the QCA and RSM’s small and mid-cap investors survey 2017, the EESC opinion on venture capital and social entrepreneurship funds, analysis of the Takeover Appeal Board's decision on Rangers International Football Club plc, and the Chancery Division case Bhullar v Bhullar and others. This analysis is part of the Lexis®PSL Corporate team’s news offering. Some of the links require a LexisPSL subscription. If you are not a subscriber, you can take a free trial here. Headlines (News updates & analysis) Share capital EU Parliament passes shareholders' rights directive The revised shareholders’ rights directive has been approved by the European Parliament, meaning the final adoption step can now take place by the European Council of Ministers. The directive’s provisions include letting shareholders have a say on director pay and it will enter into force two years after its publication in the Official Journal. The European Commission has additionally published a question and answer page on the directive. For details see news, LNB News 14/03/2017 117. Audit FRC plans revisions to audit standard Proposed revisions to International Standard on Auditing (UK) (ISA (UK)) 250 and conforming amendments to other UK standards have been set out for consultation by the Financial Reporting Council (FRC). The limited amendments reflect recent revisions to the international standards on auditing issued by the International Auditing and Standards Board (IAASB). The revisions made by the IAASB resulted from a project designed to ensure alignment between ISA 250 and the revised Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants. The consultation is open until 26 May 2017. Responses should be sent to Kate Acott by email to: AAT@frc.org.uk. For details see news, LNB News 13/03/2017 106. Corporate governance Proposed corporate governance reforms risk being ‘too prescriptive’ The Law Society has published its response to the government's Green Paper on corporate governance reform. The Law Society has agreed with many of the objectives set out in the Green Paper. However, the Society has also warned that some of the proposed measures need to be evaluated against the risk of being unduly prescriptive, noting that a single approach to a highly diverse corporate environment is likely to be unworkable and counter-productive. The Law Society states in its response that the government should not pursue the following three options: making all or some elements of the executive pay package subject to a binding vote; requiring or encouraging quoted company pay policies to (a) set an upper threshold for total annual pay (from all elements of remuneration), and (b) ensure a binding vote at the AGM where actual executive pay in that year exceeds the threshold; and requiring the existing binding vote on the executive pay policy to be held more frequently than every three years, but no more than annually, or allowing shareholders to bring forward a binding vote on a new policy earlier than the mandatory three year deadline. The Law Society has encouraged the government, companies and shareholders (both large and small) to provide further support and encouragement for: the use of shareholder powers already in place; better engagement between companies and shareholders; improved understanding of the role performed by remuneration committees, the composition of such committees and the consultants engaged by such committees; and more effective remuneration committees, in which public trust may be placed. For details see news, LNB News 15/03/2017 67. Equity capital markets ICMA calls for globally competitive EU regulatory framework The International Capital Market Association (ICMA) has responded to the European Commission’s consultation on the Capital Markets Union (CMU) mid-term review 2017. ICMA warns that Brexit poses a significant risk to the potential benefits which CMU can bring to Europe as a whole, given London’s role as an international financial centre, and says that if negotiations between the UK and EU27 break down, there is a real risk that UK and EU27 regulation and supervisory convergence will start to diverge after Brexit. ICMA is critical of the CMU consultation’s inward focus, saying the global competitiveness of the EU financial services regulatory framework should be at the heart of the CMU project. This means regulation that is proportionate and which does not unnecessarily inhibit business flows into or out of the EU. It comments that competitiveness is crucial both for European exports and for attracting investment, particularly given the US’s likely turn towards de-regulation. For details see news, LNB News 13/03/2017 84. Survey reveals investors’ attitudes towards small and mid-cap market The Quoted Companies Alliance (QCA) and RSM has published its latest small and mid-cap investors survey 2017. The survey addresses, how companies should approach Brexit and the effectiveness of AIM. The survey provides insights into how investors view the wider market and the companies in which they invest. YouGov, on behalf of QCA and RSM, undertook research into the current attitudes of UK small and mid-cap institutional investors towards the companies in which they invest and the wider small and mid-cap market. The research took place during October and November 2016. Key findings include the following: investors recommend that companies prepare for Brexit uncertainty as much as they can and do not wait for outcomes; there is little pressure for companies to move from AIM to the main market; and investors see the market as better now than it has ever been. For details see news, LNB News 10/03/2017 90. Private equity EESC opinion on venture capital and social entrepreneurship funds Regulations published in the Official Journal An opinion of the European Economic and Social Committee (EESC) of 14 December 2016 on the proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 345/2013 on European venture capital funds and Regulation (EU) No 346/2013 on European social entrepreneurship funds has been published in the Official Journal. For details see news, LNB News 10/03/2017 82. Public company takeovers Takeover Appeal Board issues decision on Rangers International Football Club plc and Mr King This news analysis considers the recent decision of the Takeover Appeal Board to dismiss the appeal by Mr David Cunningham King in relation to the finding by the Hearings Committee that Mr King and others acting in concert with him had acquired interests in shares carrying more than 30% of the voting rights of Rangers International Football Club plc (Rangers) and were therefore required to make a mandatory offer for Rangers in accordance with Rule 9 of the Takeover Code. The decision highlights the potential pitfalls of shareholder activism and the need to pay careful attention to ensure compliance with the Code. The Panel has also published the ruling of the Hearing Committee dated 5 December 2016 which was the subject of the Takeover Appeal Board Statement 2017/1. For details see News Analysis, Takeover Appeal Board decision on Rangers International Football Club PLC and Mr King and news, LNB News 13/03/2017 138. Cases Bhullar v Bhullar and others  EWHC 407 (Ch) Abstract: The Chancery Division ruled, in respect of a derivative claim, that a director had acted in breach of his fiduciary duty to the companies in question in respect of certain payments made from the companies to another company, and that the Duomatic principle had not been engaged so as to excuse it. Applying settled law, the court held that the claim for equitable compensation for breach of fiduciary duty was not statute-barred and that the most appropriate remedy, in circumstances where some of the money paid out had been repaid, would be for the repayment of the money that remained outstanding, along with interest to be determined with remaining matters at a later date. Dates for your diary Date Subjects covered 17 March 2017 Deadline for the government's call for evidence seeking views on possible reasons for the increase in limited partnerships and whether changes are needed to the wider framework. Following a recent increase in the number of limited partnerships registered in Scotland in comparison to those registered in England, Wales and Northern Ireland, the government has expressed concerns that some of them are being used for criminal activity. A call for evidence has been launched seeking views on possible reasons for the increase and whether changes are needed to the wider framework. For further information, see LNB News 16/01/2017 188. 17 March 2017 Deadline for the European Commission's public consultation into the CMU. The CMU is the EU-wide plan to strengthen capital markets and investment in the long term. Evidence-based feedback and specific operational suggestions are sought. For further information, see LNB News 20/01/2017 196. 24 March 2017 Deadline for the government's open call for evidence on the extent to which the identification doctrine is deficient as a tool for enforcement against larger companies. For further information, see LNB News 13/01/2017 90. 30 March 2017 Deadline for comments on FRC consultation on views on which corporate reporting issues it should research in the immediate future. Questions include whether the FRC should continue with its research activities at the current level, or increase or decrease the extent of its work in this area. For further information, see LNB News 09/12/2016 73. 31 March 2017 Deadline for comments on FRC consultation on proposed amendments to FRS 101—Reduced Disclosure Framework. In the consultation paper, Financial Reporting Exposure Draft (FRED) 66, the FRC proposes limited amendments to FRS 101 in relation to IFRS 16 Leases. FRED 66 asks respondents whether they agree that qualifying entities should be required to continue to provide detailed analyses of leases. For further information, see LNB News 13/12/2016 97. 31 March 2017 The European Union (Notification of Withdrawal) Bill is expected to receive Royal Assent by this date. For further information, see LNB News 26/01/2017 155. 1 April 2017 Rules that limit the tax deductions that large groups can claim for their UK interest expenses will come into force. These rules, contained in the Finance Bill 2017, will limit deductions where a group has net interest expenses of more than £2m, net interest expenses exceed 30% of UK taxable earnings and the group’s net interest to earnings ratio in the UK exceeds that of the worldwide group. For further information, see LNB News 23/11/2016 100 and Draft Finance Bill 2017—corporation tax loss relief. 3 April 2017 Deadline for comments on the Financial Conduct Authority's (FCA) proposed changes to PR 1.2.3R in anticipation of the Prospectus Regulation coming into force. These changes were proposed in the FCA's Quarterly Consultation Paper No. 16 (CP17/6). For further information, see LNB News 03/03/2017 145. Further dates To look further ahead, see: Corporate horizon scanning—2017 and beyond.