8 min read
Welcome to the latest edition of Corporate Update, our fortnightly bulletin offering a two-minute read of the latest developments which we consider relevant to corporate counsel. Please get in touch with your usual contact if you want to explore any of the topics covered in more detail. If you would like to subscribe to this bulletin as a regular email, please click here.
In this issue
News
Chancellor delivers “mini-budget”
On 23 September 2022, the Chancellor, Kwasi Kwarteng, delivered his fiscal statement (the so-called “mini budget”) to Parliament. The government also published its Growth Plan 2022. The focus is on growth: expanding the supply side of the economy through tax incentives and reform. Some headline points include:
- Cutting income taxes: The government will bring forward the 1 percentage point cut to the basic rate of income tax to April 2023, 12 months earlier than planned. The government also initially sought to remove the additional rate of income tax from April 2023 but this has since been reversed. Class 1 and Class 4 National Insurance contributions (NICs) will be reduced by 1.25 percentage points from November and the introduction of the Health and Social Care Levy as a separate tax from April 2023 will be cancelled.
- Cancelling the Corporation Tax rate increase: The previously announced planned increase in the UK Corporation Tax rate from 19% to 25% that was due to take effect in April 2023 will not go ahead.
- Helping businesses grow: The government will increase the generosity and availability of the Seed Enterprise Investment Scheme and Company Share Option Plan.
- Bankers’ bonus cap: The cap on bankers’ bonuses will be removed.
- New Investment Zones: The government will work with the devolved administrations and local partners to introduce 38 Investment Zones across the UK. Areas with Investment Zones will benefit from time-limited tax incentives over 10 years.
See Publications below for a briefing on implications of the mini-budget on employers and employees.
Economic Crime and Corporate Transparency Bill published
The government has published the Economic Crime and Corporate Transparency Bill on 22 September 2022. Following on from the Economic Crime (Transparency and Enforcement) Act 2022, the Bill forms the second part of a package of reforms to tackle economic crime and prevent abuse of limited partnerships and UK corporate structures. The government has also published various factsheets summarising the different measures contained in the Bill. Provisions of particular note to companies and businesses include provisions to:
- strengthen the powers of the Registrar to query, correct and remove information from registers at Companies House, including a power to refuse to accept or register a document that appears inconsistent with other information on the register;
- introduce identification verification requirements for all new and existing company directors and Persons with Significant Control (PSCs), with restrictions on ability of persons to act as directors if their identity has not been verified and notification been given to the Registrar; and
- reform the limited partnership regime to require, among other things, additional information of partners and such partnerships to maintain a UK registered address.
The reforms will require additional secondary legislation (including those relating to ID verification procedures) and guidance to implement, as well as new procedures and systems at Companies House. See also Legislation section below.
Government extends SME regulation exemptions
On 2 October 2022, the government announced that exemptions from reporting and regulation requirements for small and medium sized businesses (SMEs) will be extended to cover medium sized businesses with fewer than 500 employees. This goes beyond the EU definition of SME which grants regulatory exemptions to companies with below 250 employees.
While the government has stated that this is not a blanket exemption and can be overridden by future policy, the announcement indicates that the move is part of bigger shift to extend the threshold to 1,000 employees in future. The new threshold applies from 3 October 2022 to all new regulations under development as well as those under current and future review, including retained EU laws.
FRC publishes report on digital annual reports
On 23 September 2022, the Financial Reporting Council (FRC) Lab published a review of the first year of mandatory structured digital reporting for UK-listed companies as required by DTR 4.1.14 (under which issuers must publish their annual financial reports in a specified electronic format for financial years starting on or after 1 January 2021).
The report noted that data quality and usability of reports were below the levels expected of “companies in a leading capital market”. The report focuses on three key areas - tagging, process and usability and design – and sets out suggestions to optimise the reporting process to meet the needs of investors. The FRC have suggested that a webinar covering report findings and suggestions will be organised for autumn 2022.
BEIS publishes call for evidence on net zero target review
Following the Prime Minister’s announcement earlier in September, the Department of Business, Energy and Industrial Strategy (BEIS) has, on 26 September 2022, published a call for evidence on the independent review of the government’s Net Zero Strategy. The review will consider how the government’s approach to net zero can deliver maximum economic growth and investment, support UK energy security and affordability, and minimise costs to both businesses and consumers.
Businesses, local government and the public are invited to share their views by 27 October 2022. A report and recommendations will be submitted to BEIS by the end of December this year.
ESMA updates its Q&As on EU MAR
ESMA has published an updated version of its Q&As on the EU Market Abuse Regulation. The two additional Q&As (Q5.11 and Q5.12) relate to financial guidance and disclosure of inside information and whether market analysts' expectations can be considered when identifying whether event or items in financial guidance constitute inside information. The guidance provided is consistent with existing UK market practice.
Legislation
Economic Crime and Corporate Transparency Bill introduced to Parliament
On 22 September 2022, the Economic Crime and Corporate Transparency Bill was introduced to Parliament. The government has also separately published Explanatory Notes to the Bill. As noted above, it forms part of a legislative package of reforms being made to prevent the misuse and abuse of UK corporate entities and to tackle economic crime.
The Bill has three key objectives:
- Prevent companies and partnerships being used for economic crime, such as fraud, money laundering and terrorist financing by reforming the powers of the registrar of companies and the limited partnership regime.
- Strengthen the broader response to economic crime, by creating stronger enforcement powers such as a power for law enforcement to seize cryptoassets that form the proceeds of crime, and enabling more effective sharing of information among financial services businesses.
- Support enterprise by enabling Companies House to deliver a better service and improving the reliability of its data to inform business transactions and lending decisions.
The second reading of the Bill is scheduled for 13 October 2022.
Retained EU Law (Revocation and Reform) Bill given its first reading
On 22 September 2022, the Retained EU Law (Revocation and Reform) Bill, also known as the “Brexit Freedoms Bill”, was introduced to Parliament, together with accompanying Explanatory Notes.
If enacted in its current form, the Bill will introduce a sunset date of 31 December 2023 by which all remaining retained EU law will be revoked, restated or assimilated, with a mechanism to postpone the date to June 2026 for specified pieces of retained EU law. The principle of EU supremacy as it applies to the interpretation and application of pre-2021 legislation that implemented EU law will also be abolished.
The Bill also aims to change UK courts’ approach to retained EU law by requiring the Supreme Court and Court of Appeal to have regard, among other things, to any changes of circumstance relevant to the retained law and “the extent to which the retained EU case law restricts the proper development of domestic law”. The Court of Appeal would also be permitted to depart from pre-Brexit Supreme Court authority which modified or applied CJEU case law.
Publications
Sustainability is a leadership challenge: How can companies unlock their sustainability potential?
Slaughter and May has published an interactive briefing exploring how companies can redesign themselves to meet increasing stakeholder and regulatory pressures for sustainability to play a central role in decision making. The briefing considers how to integrate sustainability within a governance structure as well as the key figures that can support a sustainability agenda.
The (not-so) mini budget
Slaughter and May has published a briefing exploring the key proposals of the Chancellor’s “mini-Budget”, which would bring significant changes to the tax regime affecting UK employees and their employers, and the likely HR consequences for UK companies.
Note that the proposal to remove the additional rate of income tax has since been reversed.