1st November 2023
Welcome to the current edition of Capital Markets Update, the monthly briefing from the Corporate Group at Walker Morris rounding up the previous month’s regulatory developments within the equity capital markets and looking ahead to future developments.
On 2 October 2023, the Department for Business and Trade (DBT) announced new measures to address the late payment of commercial invoices. The measures will include extending the Reporting on Payment Practices and Performance Regulations 2017 which require in-scope businesses to publish information about their payment practices. The regulations were due to expire on 6 April 2024.
On 5 October 2023, the Financial Reporting Council (FRC) published its annual review of corporate reporting for 2022/2023. It reports on its findings from its monitoring activities, including the issues most commonly raised with companies, together with its expectations for the coming reporting season.
On 9 October 2023, the Transition Plan Taskforce (TPT) published its Disclosure Framework, which sets out good practice recommendations to assist companies in making robust and credible disclosures about their climate-related transition plans.
On 11 October 2023, the Financial Conduct Authority (FCA) published the final notice issued to London Capital and Finance plc (LC&F) for its unfair and misleading minibond financial promotions, breaching COBS 4.2.1(1)R. As LC&F is insolvent and in administration, the FCA decided to censure the firm instead of imposing a fine. LC&F used financial promotions to market minibonds to retail investors, many of whom were vulnerable. The FCA found that, between June 2016 and December 2018, these promotions presented a misleading picture of the minibonds and made them appear a far more attractive investment than they were.
On 11 October 2023, the Takeover Panel launched a digital version of the Takeover Code on a new Takeover Code website. In the Panel’s statement confirming the launch of the digital Takeover Code, the Panel highlighted some of its new functionality including navigation between provisions of the Code, pop-up boxes for defined terms, and tabs linking Rules with related Practice Statements.
On 12 October 2023, the Taskforce on Climate-related Financial Disclosures (TCFD) published its 2023 Status Report. The TCFD’s annual status report describes firms’ progress in making climate-related financial disclosures. The 2023 report concludes that the percentage of public companies disclosing TCFD-aligned information continues to grow, but more progress is needed.
On 16 October 2023, the DBT announced that Government has withdrawn the draft Companies (Strategic Report and Directors’ Report) (Amendment) Regulations 2023, in response to concerns raised by companies about the imposition of additional reporting requirements. The draft regulations proposed amending the Companies Act 2006 to introduce additional reporting requirements for companies with 750 or more employees and an annual turnover of at least £750 million, including an annual resilience statement, distributable profits figure, material fraud statement and triennial audit and assurance policy statement.
On 19 October 2023, the Department for Energy Security and Net Zero (DESNZ) published a call for evidence seeking views on Scope 3 greenhouse gas emissions reporting and the current Streamlined Energy and Carbon Reporting (SECR) framework. Under the SECR rules, listed and large private UK companies and LLPs are required to disclose Scope 1 and Scope 2 GHG emissions in their annual reports, while disclosures of Scope 3 emissions are mostly voluntary. The call for evidence closes on 14 December 2023.
On 26 October 2023, the Economic Crime and Corporate Transparency Act 2023 entered the statute books. The Act introduces a broad package of measures to tackle economic crime more effectively, including fundamental reforms that will expand the role and powers of the registrar of companies and modernise Companies House operations. An identity verification regime for new and existing directors, LLP members and people with significant control, together with other changes to improve corporate transparency, will affect how every UK corporate entity is formed and administered.
On 27 October 2023, the Takeover Panel issued Panel Statement 2023/11 setting out amendments to Rule 21 of the Takeover Code. Rule 21 restricts a target board from taking certain actions without shareholder approval on the basis that those actions might result in an offer or possible offer being frustrated. The amendments take effect on 11 December 2023, when a new edition of the Takeover Code will be published.
On 27 October 2023, the Takeover Panel issued Panel Statement 2023/12 announcing that the Panel Executive has published a revised practice statement in relation to Rule 13.5 of the Takeover Code on invoking conditions and pre-conditions to an offer, together with an Explanatory Note.
On 27 October 2023, the FCA published Handbook Notice 113 which sets out changes to the FCA Handbook in two areas. First, to strengthen the effectiveness of the remuneration regime by increasing the proportion of compensation that can be subject to the incentive setting tools within the framework and second, to implement the regulatory gateway for all authorised persons that want to approve financial promotions for unauthorised persons.
On 27 October 2023, the CGI published a press release warning boards that they should prepare now to ensure arrangements are in place to take advantage of the developing technology around artificial intelligence (AI).
On 30 October 2023, the FRC Lab published a report on materiality in connection with information in a company’s annual report and accounts. It considers that the value of reporting is strengthened by the thorough review, ranking and removal of any irrelevant information. The report contains a toolkit to help companies report clearly on the issues that the board and management consider to be of most importance to stakeholders.
6 November – application window opens for firms to apply for FCA permission to approve the financial promotions of unauthorised persons.
6 November – certain provisions of the Financial Services and Markets Act 2023 come into force for the purpose of the FCA receiving, but not determining, applications for permission to approve financial promotions made during the application periods.
30 November – Companies House to close Companies House Direct and WebCHeck Services.
Corporate and Head of Food & Drink
Corporate and Head of International