Corporate Update Bulletin - 11 January 2024

9 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

FCA publishes feedback and consults on detailed proposals for listing regime reform

On 20 December 2023, the Financial Conduct Authority  (FCA) published CP23/31 providing feedback on its May 2023 consultation (CP23/10) and setting out further details of its proposed reform to the UK listing regime. As originally proposed in CP23/10, the premium and standard segments will be collapsed into a single segment for equity shares of commercial companies (“ESCC”) whose rules will be based mainly on the current premium segment rules but with some eligibility criteria and continuing obligations being dropped or simplified. In particular:

  • No shareholder approval will be required for significant (Class 1) or related party transactions.
  • No mandatory announcement will be required for a Class 2 transaction, although a company will still need to consider its general disclosure obligations.
  • The eligibility criteria for the ESCC will generally be based on the current premium segment criteria but companies will no longer need to demonstrate a three-year revenue-earning track record (making it easier for high growth or pre-revenue companies to join the ESCC), ensure its historical financial information covers at least 75% of its business, or give a clean working capital statement.

The consultation paper does not deal with indexation but it is expected that FTSE Russell will consult its members shortly on changes to the FTSE UK eligibility criteria in response to the FCA’s proposals.

Existing listed companies will be “mapped” to one of the new listing categories that will be created. For existing premium-listed companies, the changes will be mostly de-regulatory. However, the changes will be more significant for current standard segment companies which will need to assess whether they are able and willing to satisfy the eligibility criteria and comply with the more onerous continuing obligations of the ESCC.

The changes will result in a completely new UK Listing Rules (“UKLR”) sourcebook. CP 23/31 includes a first tranche of draft rules relating to the new ESCC category; a second tranche of draft rules relating to other listing categories and rules that will impact all issuers will be published in the first quarter of 2024. Consultation on the new UKLR, including on the second tranche of rules, will run until 22 March 2024. Final rules will be published at the start of the third quarter of 2024 and come into force two weeks later. For more details, see our client briefing.

FCA publishes Primary Market Bulletin 46

On 19 December 2023, the FCA published its Primary Market Bulletin 46. This edition:

  • addresses questions raised by certain stakeholders in relation to Article 10 UK Market Abuse Regulation and market conduct issues more generally in the context of shareholder co-operation regarding environmental, social and governance stewardship; and
  • outlines its initial observations on sponsors’ procedures to assess whether new applicants have procedures in place to enable them to comply with the Task Force on Climate-Related Financial Disclosures aligned disclosure requirements for premium listed commercial companies.

FCA publishes feedback on engagement papers relating to the new public offers and admissions to trading regime

On 12 December 2023, the FCA published a summary of the feedback received from market participants in response to a series of Engagement Papers published by the FCA in May and July 2023 on how it may use its rule-making powers under the new public offers and admissions to trading regime. The Engagement Papers covered a wide range of matters and the feedback is necessarily varied. Notable points from the feedback include the following:

  • In relation to initial public offerings and admission to trading on regulated markets, there was general support for retaining the bulk of prospectus requirements and aiming for targeted improvements to the existing framework.
  • There were mixed views on where the threshold which would trigger a prospectus requirement for further issuances of securities already admitted to trading should be set. Some favoured retaining the current 20% threshold while others raising it to 75% as recommended by the Secondary Capital Raising Review and still others somewhere in between. Below the threshold, there were also mixed views about whether some sort of “disclosure-lite” document or enhanced form of announcement should be required.
  • In relation to protected forward-looking statements (“PFLS”), many respondents wanted a definition that encompasses all types of information, including sustainability-related disclosures and supported requiring warnings about specific factors that could affect the accuracy of PFLS disclosures and for including assumptions and inputs where relevant.
  • Most respondents thought that the current UK prospectus regime works well in the context of the wholesale debt markets but expressed strong support for removing the dual disclosure regime for retail and wholesale debt securities.

ISS announces updates to proxy voting guidelines for 2024

On 19 December 2023, the Institutional Shareholder Services (ISS) published its international Benchmark Policy Updates for 2024. Appendix B contains a summary of changes that apply to UK and Ireland, which relate primarily to board diversity, share issuance authorities and the definition of significant shareholder. The updated policies will generally be applied for shareholder meetings taking place on or after 1 February 2024.

FRC Lab publishes 2023 insights report on structured digital reporting

On 7 December 2023, the FRC Lab published Report: Structured digital reporting – 2023 insights which sets out some areas of focus and suggestions to optimise reporting for UK listed companies required to produce their annual financial reports in a structured digital (iXBRL) format. The significance of adopting good practice in relation to the production of such reports was highlighted as the report noted that over a third of investors surveyed are now using XBRL-tagged reports as a source of company financial data alongside other more traditional data sources, with many retrieving the data from company websites. 

Legislation

Regulations relating to revocation of retained EU law enter into force

On 15 December 2023, the Retained EU Law (Revocation and Reform) Act 2023 (Commencement No. 1) Regulations 2023 were published. The Regulations brought into force provisions of  Retained EU Law (Revocation and Reform) Act 2023 that repeal EU-derived legislation specified in Schedule 1 of that Act immediately before the end of 2023. On 1 January 2024, by virtue of the same Regulations, provisions that alter the framework for retained EU Law, including the abolition of the principle of supremacy and general principles of EU law, also entered into force.

Additionally on 1 January 2024, the Retained EU Law (Revocation and Reform) Act 2023 (Consequential Amendment) Regulations 2023 entered into force. These Regulations amend primary legislation to reflect changes made by ss. 2, 4 and 5 Retained EU Law (Revocation and Reform) Act 2023 at the end of 2023, including replacing references to EU retained law with “assimilated law” and removing references to general principles of EU law throughout primary legislation.

Economic Crime and Corporate Transparency Act 2023 draft regulations published and codified identification doctrine enters into force

The following Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023)-related draft Regulations have been published:

On 26 December 2023, aspects of the ECCTA 2023 which extend the existing common law identification doctrine entered into force, allowing for the attribution of criminal liability to corporates for economic crimes committed by the actions of, not just those at or close to board level, but also their “senior managers” (defined widely). There is also a proposal in the Criminal Justice Bill, currently progressing through Parliament which would, if enacted, further expand the identification doctrine to allow criminal liability to be attributed for organisations whose “senior managers” commit any criminal offences.

Case Law

Ntzegkoutanis v Kimionis [2023] EWCA Civ 1480

Court of Appeal holds that English law is more accommodating of unfair prejudice petition claims brought on behalf of a company than Hong Kong in Re Chime Corp

The Court of Appeal has handed down its decision in Ntzegkoutanis v Kimionis, allowing an appeal against a High Court order which, on grounds of abuse of process, struck out parts of an unfair prejudice petition that sought relief on behalf of a company.

The High Court had applied the Hong Kong Court of Final Appeal case of Re Chime Corp [2004] 7 HKCFAR 546 as authority for the principle that the Court would only exceptionally allow a case to proceed by way of an unfair prejudice petition when it would otherwise be brought by way of derivative claim. However, the Court of Appeal held that the judge had erred in applying Re Chime Corp – English law is more accommodating of claims for relief in favour of the company in unfair prejudice petitions, at least where the relief sought corresponds to that to which the company would be entitled in direct or derivative proceedings. The Court of Appeal also rejected an argument that the provision made by the Companies Act 2006 for derivative claims precluded the seeking of corporate relief within a petition.

Publications

COP28: Impacts for business

On 18 December 2023, Slaughter and May published a briefing considering the impacts for business following the conclusion of 28th Conference of the Parties to the UN's Framework Convention on Climate Change (“COP28”). The briefing summarises the international commitments made in the negotiated headline text (the Global Stocktake Text) and consider four significant developments for businesses coming out of COP28: the energy transition, climate finance, the just transition, and the role of nature.