12 min read
Welcome to the latest edition of Corporate Update, our fortnightly bulletin offering a five-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 Autumn Statement
On 23 November 2023, the Chancellor, Jeremy Hunt, delivered his Autumn Statement to Parliament. Points for corporates and businesses include:
- Capital allowances: It was announced that full expensing would be made permanent. HM Treasury/HMRC have published a technical consultation on the wider legislative implications of full expensing which will focus on changes to capital allowances available for expenditure on the provision of plant and machinery. The government will seek to publish draft legislation for further changes in Summer 2024. Additionally, a working group has been set up to consider options for the treatment of plant and machinery for leasing in respect of the introduction of full expensing.
- R&D relief: The current R&D Expenditure Credit and SME schemes will be merged from April 2024 onwards, simplifying the system and providing greater support for UK companies to drive innovation. The rate at which loss-making companies are taxed within the merged scheme will be reduced from 25% to 19%.
- International tax reform: The Autumn Statement acknowledges the importance of the UK’s implementation of Pillar 2 in a similar timeline to other countries and states, and the government will continue to monitor international developments on implementation. The UK legislation currently has a start date of accounting periods beginning on or after 31 December 2023 for the multinational top-up tax (implementing the Income Inclusion Rule) and the domestic minimum tax (designed as a Qualifying Domestic Minimum Top-up Tax), but some jurisdictions have indicated they are implementing later in 2024 or 2025. The Chancellor announced that the Undertaxed Profits Rule would be implemented from the 31 December 2024 and that the Offshore Receipts in respect of Intangible Property (ORIP) rules would be repealed from the same date.
- Stamp Duty and SDRT: The government is extending the stamp duty and SDRT exemption for shares traded on a recognised growth market by allowing more markets to apply for recognition as a growth market and relaxing the qualification criteria by raising the maximum capitalisation threshold that must be met by a majority of companies on the market from £170 million to £450 million. Legislation has been included in the Autumn Finance Bill 2023 to ensure that no 1.5% charge to stamp duty or SDRT arises in relation to the issue of securities or stock into depository receipt systems and clearance services, nor on transfers of securities into depository receipt systems and clearance services in the course of capital-raising arrangements.
For further details on some of these measures, see Publications below.
Response to BEIS consultation on reporting on payment practices published
The government has published its response to the January 2023 BEIS consultation on amending the Reporting on Payment Practices and Performance Regulations 2017 and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017. These Regulations require the UK's large companies and LLPs to report on a half-yearly basis their payment practices, policies and performance. The government will extend the Regulations beyond their current expiry date of 6 April 2024 for up to seven years, and conduct a review after five years. The response also sets out other proposed amendments to the Regulations (although no timetable has been set for these proposals), including:
- Requiring reporting businesses to report on the value of invoices that have not been paid within agreed terms, alongside existing requirements to report on the total volume of payments due.
- Making the payment dates to be reported clearer when supply chain finance is used.
- Including a method for reporting the proportion of disputed invoices, while still including them as late payments in overall payment time data.
The government has also stated that it will await the outcome of the Smart Regulation non-financial reporting review before deciding on the requirement for reporting businesses to include their payment practices and performance information in their directors' report.
Companies House announces changes to filing system and closure of CH Direct
On 27 November 2023, Companies House announced that companies wishing to file paper documents with the registry will need to post these documents to its Cardiff Office from 4 March 2024. Companies House encourages companies to use its electronic filing system where possible instead of hard copy filing. Companies House’s Cardiff address can be found here.
Companies House has also announced the closure of Companies House Direct and Webcheck from 30 November 2023. Instead, company information can be found by using its Companies House Service. Additionally, the Follow service will show what document has been filed as soon as it has been accepted.
Financial Services Regulatory Initiatives Forum releases the latest Regulatory Initiatives Grid
On 30 November 2023, the Financial Services Regulatory Initiatives Forum (which comprises representatives from the Bank of England, FCA, Competition and Markets Authority, FRC and other regulators) released an update to its Regulatory Initiatives Grid. The Grid aims to help those in the financial services and wider corporate sector manage regulatory change by setting out proposed reforms to regulation in the coming two years. Notably, the Grid details the FCA’s plans to:
- start its consultation on the details of a new listing regime in the UK for equity shares in December 2023, with the aim of releasing the final rules in June 2024; and
- start consulting in the “summer of 2024” on a detailed set of rules required to implement the regulatory framework for the new public offers and admissions to trading regime.
It was noted that the government no longer intends to legislate to create new powers to block listings on national security grounds. However, the government has accepted all the recommendations of the Secondary Capital Raising Review (published July 2023) and, although no timeline was proposed, is considering how to take these forward.
Government updates its remit letter to the Financial Reporting Council
The Secretary of State for Business and Trade has published an updated remit letter to the Financial Reporting Council (FRC). While noting the FRC’s core purpose to enhance public trust and confidence in audit, corporate reporting and governance in the corporate sector, there was a notable emphasis on the FRC contributing towards the promotion of economic growth and international competitiveness in fulfilling this purpose and on the need for proportionality of any new requirements in its corporate governance code and the removal or streamlining of disproportionate rules and guidance.
Legislation
Draft Public Offers and Admissions to Trading Regulations 2023 introduced to Parliament
On 27 November 2023, the draft Public Offers and Admissions to Trading Regulations 2023 and an accompanying draft Explanatory Memorandum were laid before Parliament. These Regulations will replace the current prospectus rules regime which was derived from EU law.
The Regulations will establish a new framework for regulating public offers of securities and admissions to trading in the UK. The Regulations, previously published in near final form for comment earlier in July, will make the activity of offering securities to the public and a prohibited activity, save for a limited number of exemptions, principally the admission of securities to a UK regulated market or a primary multilateral trading facility (which includes AIM). The FCA will become responsible for regulating admissions, giving it greater powers to specify the contents of a prospectus and determine when it is required.
The Regulations will also establish a new regulated activity of operating a “public offer platform” (via amendments to the Regulated Activities Order). This will facilitate public offers by private unlisted companies. Companies will be required to use a regulated public offer platform, such as a securities-based crowdfunding platform, where the value of their offer is £5 million or more, unless another exemption applies. The FCA will be responsible for authorising and supervising these public offer platforms.
The proposed changes are still some way from being implemented as the new regime will not come into force until the FCA has consulted and finalised the underlying regulatory framework.
Finance Bill 2023-24 published
On 29 November 2023, the Finance Bill 2023-24 was published putting on a statutory footing many fiscal measures announced during the Autumn Statement (see News above).
In addition to implementing many of the fiscal measures announced during the Autumn Statement, the Bill introduces provisions that relate to criminal offences for, and disqualification of, directors of corporate promoters. The Bill proposes to amend the Company Directors Disqualification Act 1986 to empower HMRC to begin disqualification proceedings against directors of corporate promoters that have been wound up under the Finance Act 2022. Additionally, HMRC would be empowered to bring similar proceedings against directors of corporate promoters whose conduct makes them unfit to be concerned in the management of a company.
Case Law
Frischmann v Vaxeal Holdings SA [2023] EWHC 2698
Court rules that a legal assignment cannot be executed by an attorney
The High Court was asked to consider the validity of the assignment of the rights provided for by two loan agreements and a guarantee. The Court was required to consider the requirements for a legal assignment set out in the Law of Property Act 1925 (the “LPA 1925”). It was argued that the assignment was invalid and void as the assigning instrument was entered into by an attorney, notwithstanding that the attorney was acting under a valid power of attorney. Section 136 of the LPA 1925 requires any assignment to be in writing under the hand of the assignor.
The Court was persuaded by this argument finding that there was not a valid legal assignment, with an assignment signed by the assignor's attorney not satisfying this section 136 requirement. Furthermore, it was not accepted that wording in the Powers of Attorney Act 1971 should be treated as rewriting the LPA 1925 without express reference to the earlier statute.
Notwithstanding the Court’s finding on the validity of the assignment, it did find that the assignment took effect as an equitable assignment.
Canada Square Operations Ltd v Potter [2023] UKSC 41
Supreme Court reformulates approach to section 32 of the Limitation Act
The Supreme Court, in considering an appeal of the Court of Appeal's decision in Canada Square Operations Ltd v Potter [2021] EWCA Civ 339, was asked to clarify the meaning of the phrases “deliberately concealed” in section 32(1)(b) of the Limitation Act 1980 and “deliberate commission of a breach of duty” in section 32(2), so as to determine whether Mrs Potter’s (the claimant) claim against the defendant (Canada Square Operations Ltd) was issued too late and is therefore time barred.
Broadly, section 32(1) of the Act provides that in actions based on fraud or in circumstances where a fact relevant to a claimant’s right of action has been deliberately concealed by the defendant, the limitation period does not begin to run until the claimant has discovered the fraud or deliberate concealment. Section 32(2) provides that, for the purposes of section 32(1), “deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.”
Despite reaching the same end-result as the Court of Appeal, the Supreme Court departed from the Court of Appeal’s approach. In relation to the meaning of “deliberate concealment” under section 32(1)(b), the Supreme Court held that the claimant does not need to establish that the defendant was under a legal, moral or social duty to disclose the fact, nor is there a need to show that the defendant knew the fact was relevant to the claimant’s right of action. All that is required is that the defendant deliberately ensures that the claimant does not know about the fact in question and so cannot bring proceedings within the ordinary time limit. The issue raised in relation to section 32(2) (on the basis that there had a been a breach duty) relates to whether the breach had been “deliberate”. The Supreme Court held that a claimant must show that the defendant knew it was committing a breach of duty or intended to commit a breach of duty, rejecting the Court of Appeal’s decision that “deliberate” in this context includes “reckless”. The case is now the most authoritative judgment on section 32, providing welcome clarification on the provision.
Publications
Autumn Statement – blog posts on various measures
Following the Autumn Statement, Slaughter and May has published various blog posts on the various measures that were announced. See posts relating to full expensing scheme, R&D relief, international tax reform and stamp duty and SDRT.