Corporate Update Bulletin - 30 May 2024

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

Calling of general election impacts pending legislation

Following the announcement of a General Election on 22 May 2024, a short “wash-up” period began, during which the government and official opposition privately agree on which Bills will make it on to the Statute Book and in what form ahead of the dissolution of Parliament.

A number of bills including the Data Protection and Digital Information Bill, which would have replaced the EU data protection regime inherited after Brexit, fell. Bills passed include the Digital Markets, Competition and Consumers Bill, which provides for a new digital markets regime regulated by the Competition and Markets Authority and proposes a range of reforms to UK competition and consumer law, and the Finance Bill, which implements the changes announced in the Spring budget.

Government launches consultation on reporting requirements for medium-sized companies

On 16 May 2024, the government launched a consultation into simpler corporate reporting for medium-sized companies. This consultation is part of the government’s wider review of non-financial reporting obligations on UK companies. The government already indicated in March 2024 that it will lay legislation later this year to increase the monetary elements of the company size thresholds by 50%, to take into account the effects of inflation. The aim of this consultation is to seek views on:

  • raising the employee threshold for medium-sized companies from 250 to 500 employees; and
  • exempting medium-sized companies from producing a strategic report (including companies that would be medium-sized except for the fact that they are a member of an ineligible group).

If adopted, it is estimated that the increased thresholds will result in a further 2,000 companies being reclassified form “large” to “medium” (in addition to the estimated 5,000 large companies that will be reclassified as medium-sized should the monetary thresholds be increased as proposed in March 2024). The consultation closes on 27 June 2024.

Government publishes policy paper on UK Sustainability Reporting Standards framework

On 16 May 2024, the Department of Business and Trade (DBT) published a policy paper entitled “Framework and Terms of Reference for the Development of UK Sustainability Reporting Standards”. On the same date, the government also published the Sustainability Disclosure Requirements: Implementation Update 2024, which provides an update on its wider project to develop a sustainability disclosure requirements regime within the UK.

Notably, timing for implementation of UK Sustainability Reporting Standards has been delayed with the government only aiming to make UK-endorsed ISSB standards available in Q1 2025 (originally scheduled for mid-2024) and any changes relating to disclosure requirements on companies against such standards would only be effective no earlier than accounting periods beginning on or after 1 January 2026.

The policy paper sets out the framework for the government’s assessment, endorsement and implementation of these standards in the UK. It also provides terms of reference for the Technical Advisory Committee and the Policy and Implementation Committee, which were established as part of the government’s Green Finance Strategy 2023, in which the government committed to establishing a framework to assess and decide whether to endorse the use of International Sustainability Standards Board’s sustainability disclosure standards in the UK. The first of ISSB’s standards (IFRS S1 - General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 – Climate-related Disclosures) were issued in June 2023.

Government publishes White Paper on improving UK’s regulatory environment

On 16 May 2024, DBT published a White Paper entitled “Smarter Regulation: Delivering a regulatory environment for innovation, investment and growth”. This paper sets out the government’s stated plan to improve the UK’s regulatory landscape, encouraging innovation, investment and economic growth. This paper responds to the “Smarter regulation and the regulatory landscape” Call for Evidence published in October 2023, which sought to understand what can be improved in how independent regulators operate. The reforms set out in the White Paper include:

  • a register of regulators that will be published, as part of the government’s plans for a “one stop shop” of regulatory information;
  • the establishment of a regulators’ council to improve dialogue between regulators and government;
  • the introduction of principles for smarter regulation that regulators and the government will sign up to; and
  • a new Growth Duty Performance Framework, which will encourage regulators to be transparent about how they are pursuing innovation, investment and contributing to economic growth.

Government consults on TUPE regulations

On 16 May 2024, the government launched a consultation paper entitled “Consultation on clarifications to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) and abolishing the legal framework for European Works Councils”, which forms part of the government’s plans to improve the UK’s regulatory landscape in order to drive economic growth as set out in its policy paper “Smarter regulation to grow the economy” (published May 2023 – see also above on DBT’s White Paper on Smarter Regulation).

The consultation paper sets out proposals for further clarifications to TUPE, to help businesses be more confident of their obligations, which it says will help foster better outcomes for both businesses and employees. The paper also sets out proposals to abolish the legal framework for European Works Councils, which it describes as a legacy of UK membership of the EU.

Government consultation on the Commercial Agents (Council Directive) Regulations 1993

On 16 May 2024, DBT launched a consultation on the operation of the Commercial Agents (Council Directive) Regulations 1993 (“CARs”), seeking views on proposals to deregulate the CARs, which set out the terms of engagement between a business and ‘commercial agents’ who act on their behalf, for instance, negotiating or concluding the sale or purchase of goods in the principal’s name.

The government is proposing to bring forward legislation to prevent new agreements being entered into in future under the CARs. This would mean that contracts would need to be negotiated individually within the context of agency, as with service contracts which are out of scope of the CARs. The consultation closes on 11 July 2024.

Updated materials on the national security and investment regime

On 21 May 2024, the Cabinet Office published an updated Section 3 Statement and amended market guidance relating to the National Security and Investment Act 2021 (NSI Act). This follows the government’s Call for Evidence Response, in which the government committed to publish an updated Section 3 Statement and market guidance in May. 

The Section 3 Statement sets out how the Secretary of State expects to exercise the power to give a call-in notice. Respondents to the Call for Evidence had requested greater clarity on the areas of the economy the government considers most sensitive and how the government assesses the national security risks of a transaction. The Section 3 Statement aims to help stakeholders better understand what the Secretary of State is seeking to protect by using the call-in power and factors that will be taken into account when deciding whether to exercise it.

The updates to the market guidance include new or amended guidance on how long assessments under the NSI Act will take; how the Act can apply to cases of outward direct investment; and completing and registering a notification form.

FCA publishes Primary Market Bulletin 49

On 21 May 2024, the Financial Conduct Authority (FCA) published Primary Market Bulletin 49, its newsletter for primary market participants. This edition covers:

  • Listing Rules in relation to Long Term Incentive Plans: the FCA’s findings in a review they conducted into 25 premium listed companies over a three year period, to assess these companies’ compliance with their disclosure obligations under the Listing Rules in relation to LTIPs and the nature of the metrics and performance conditions tied to the LTIPs.
  • Global Depositary Receipts (GDRs) report: the FCA’s findings in relation to a thematic review that sought to assess whether issuers of the shares underlying GDRs listed on the standard section of the FCA’s Official List were meeting certain continuing obligations.
  • Annual Financial Reporting: the disclosure and filing requirements for Annual Financial Reports including structured annual financial reporting obligations.

Legislation

Draft Reporting on Payment Practices and Performance (Amendment) (No. 2) Regulations 2024 published

On 20 May 2024, the draft Reporting on Payment Practices and Performance (Amendment) (No. 2) Regulations 2024 and a draft Explanatory Memorandum were published and laid before Parliament. The draft Regulations will amend the Reporting on Payment Practices and Performance Regulations 2017 (Principal Regulations) and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 (LLP Regulations) (the “2017 Regulations”).

The 2017 Regulations require companies and LLPs that fall within their scope to publish information twice a year on their payment practices, policies and performance concerning the payment of suppliers.

The draft Regulations introduce requirements for in-scope companies and LLPs to publish information about their payment practices and policies concerning retention clauses in qualifying construction contracts with suppliers. These requirements reflect proposals from an earlier consultation that had not been enacted.

The draft Regulations are expected to come into force on 1 October 2024, and to require additional information to be reported by qualifying companies for financial years beginning on or after 1 January 2025.

Draft regulations for new identity verification regime laid before Parliament

On 23 May 2024, the draft Registrar (Identity Verification and Authorised Corporate Service Providers) Regulations 2024, and a draft Explanatory Memorandum were published. These were successfully laid before Parliament on 22 May 2024. These regulations form part of the reforms introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023) for a new identity verification scheme aimed at preventing the registration of fake directors or beneficial owners and to prohibit fraudulent appointments and other false information making it onto the public register. The regulations make provision for the identity verification procedure, requirements relating to authorised corporate service providers and unique identifiers.

Two other ECCTA 2023-related statutory instruments were also laid before Parliament:

Case Law

RTI Ltd v MUR Shipping BV [2024] UKSC 18

Supreme Court decides that force majeure does not require party to accept non-contractual performance

This appeal related to the interpretation of a force majeure clause in a shipping contract between MUR Shipping BV (the Appellant) and RTI Ltd (the Respondent). The central issue was whether the exercise of reasonable endeavours may require the affected party to accept non-contractual performance from the other contracting party to overcome the effects of the force majeure event.

The shipping contract contained a force majeure clause with a “reasonable endeavours” proviso, which required the party which was affected by force majeure to exercise reasonable endeavours to overcome it. RTI’s parent company was sanctioned by the US government, which meant that it would be difficult for RTI to make contractual payments in US dollars on time. MUR claimed force majeure and served notice of a force majeure event. The Respondent rejected the notice and offered to pay the Appellant in Euros instead and to cover the cost of transferring the payment from Euros to US dollars MUR rejected this offer and subsequently suspended shipments.  RTI commenced arbitration for breach of contract and argued that MUR could not rely on force majeure because it had not satisfied the reasonable endeavours part of the clause, in rejecting RTI’s offer to make payments in an alternative currency.

The Supreme Court unanimously allowed the appeal, holding that MUR’s rejection of RTI’s offer of non-contractual performance did not mean that it had failed to exercise reasonable endeavours, so the reasonable endeavours wording did not prevent MUR from relying on the force majeure clause.

Lifestyle Equities CV v Ahmed [2024] UKSC 17

Supreme Court considers directors' accessory liability for causing company to commit a strict liability tort

In this case, the Supreme Court considered whether company directors could be liable as accessories for causing the company to commit a strict liability tort and whether such liability is strict or whether it is dependent on knowledge or another mental element.

The defendants were directors of a company which had proceedings brought against it for infringement of registered trade marks and passing off. Proceedings were also brought against two directors of the company. The company was found liable and the directors jointly liable for the infringements.

The Supreme Court overruled the Court of Appeal, finding that the directors could not be held jointly liable, stating that there was no requirement for the knowledge or mental state required for an accessory liability to be the same as that required for primary liability for strict liability torts. The judge stated it would be unjust to extend strict liability to individuals who caused others to commit torts, where they were acting in good faith and without knowledge of the facts which made the act of the other person tortious.

Publications

Slaughter and May has published further briefings in its “Getting Ready” series, which explores upcoming ESG regulatory developments, to help companies with the volume of sustainability reporting obligations across the UK, EU and globally. These cover the EU Deforestation Regulation, the Corporate Sustainability Reporting Directive, the International Sustainability Standards Board’s disclosure standards, and the Corporate Sustainability Due Diligence Directive.