8 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 Budget
On 30 October 2024, the Chancellor, Rachel Reeves, delivered her Autumn Budget to Parliament. The government has also published a Corporate Tax Roadmap although that mostly confirms measures already announced including capping the main corporation tax rate at 25% for the duration of this Parliament. For more details of the various measures and their impact for businesses, see our Resources hub on the Budget 2024, our blog post here and here, as well as our HR Budget Briefing (see Publications below).
Institute of Directors publishes Code of Conduct for Directors
On 23 October 2024, the Institute of Directors (IoD) announced the publication of the final version of its voluntary Code of Conduct for Directors. The Code is intended as a tool to help directors of organisations of all sizes in the private, public and not-for-profit sectors fulfil their responsibilities by providing guidance on good conduct. The Code is structured around six key ‘Principles of Director Conduct’, with each Principle supported by a number of specific 'Undertakings'.
The final version of the Code is little changed from the version consulted on although a caveat has been included to the effect that if anything in the Code is at odds with a director’s legal and/or regulatory duties, then those duties prevail. This goes some way to addressing concerns raised by industry bodies (including the City of London Law Society) that, among other things, no reference is made to directors’ statutory duties under the Companies Act 2006, but it still contains unhelpful language suggesting a director’s behaviour should be above the legal baseline currently set out in Companies Act 2006.
The IoD plans to update the Code periodically and will develop guidance on applying the Code in various circumstances.
Companies House publishes ECCTA 2023 implementation plan
On 16 October 2024, Companies House (CH) published a policy paper which outlines a transition plan for implementing the key provisions of the Economic Crime and Corporate Transparency Act 2023 (ECCTA). The policy paper reviews progress made to date and includes an intended timetable for implementation of ECCTA-related changes.
While the policy paper indicates that it is not yet possible to publish a final timetable for implementation of the company law reforms in ECCTA, it does note that around 50 statutory instruments will be commenced over the next one and a half years, with implementation and transitional plans continuing until 2027. Increased CH fees will be used to fund the ongoing development of new systems and processes to deal with the scale and scope of changes introduced by ECCTA. Notably, under the outline timetable:
- Professional advisers (which must be entities regulated for anti-money laundering purposes) will be able to register as authorised corporate service providers, enabling them to verify the identity of those subject to the identity verification regime by Spring 2025.
- Identity verification will be made a compulsory part of incorporation and new appointments for directors and persons with significant control by Autumn 2025. A 12-month transition period will be put in place for existing companies to provide IDV credentials for directors and PSCs with their next confirmation statement. By Spring 2026, presenters filing any document at CH will also be required to have their identities verified.
- Reforms to the limited partnership regime will commence in Spring 2026 at the earliest.
Financial Services Regulatory Initiatives Forum publishes interim update
On 15 October 2024, the Financial Services Regulatory Initiatives Forum (Forum) published an interim update on known regulatory initiatives affecting regulated firms from October 2024 to March 2025. The Regulatory Initiatives Grid is usually published biannually to support firms in planning for the operational impact of planned reforms. As a result of the change in government, the Forum has not been able to publish a complete Grid (the last version being published in November 2023). Key takeaways include the following:
- The Financial Conduct Authority (FCA) intends to publish information relating to the new public offers and admissions to trading regime in Q1 2025, following the publication of its consultation paper in July 2024 setting out its proposed regulatory framework for the admission of securities to trading on UK regulated markets and primary multilateral trading facilities under the Public Offers and Admissions to Trading Regulations 2024.
- Over Q4 2024 and Q1 2025, the Financial Reporting Council (FRC) will continue to review the UK Stewardship Code, which sets stewardship standards for asset owners, asset managers and service providers, and will continue to engage with relevant regulators.
- The FCA aims to publish a Policy Statement on ‘Tackling Non-financial Misconduct in the Financial Sector’ in Q4 2024, and both the FCA and Prudential Regulatory Authority (PRA) plan to publish Policy Statements on further diversity and inclusion proposals in 2025, following their proposals to introduce a regulatory framework on diversity and inclusion in the financial sector in September 2023.
TNFD publishes draft guidance on nature transition planning
On 27 October 2024, the Taskforce on Nature-related Financial Disclosures (TNFD) published a discussion paper setting out draft guidance on nature transition planning for companies and financial institutions. The paper defines a nature transition plan as a plan laying out an organisation’s goals, targets, actions, accountability mechanisms and intended resources to respond and contribute to the transition implied by the Kunming-Montreal Global Biodiversity Framework, which was adopted at the fifteenth meeting of the Conference of the Parties (COP 15) and which aims to halt and reverse biodiversity loss by 2030.
The guidance builds on current market practice for climate transition planning – in particular the initiatives of the Glasgow Financial Alliance for Net Zero and on the recommendations of the Transition Plan Taskforce for climate transition plan disclosure. The TFND is to gather feedback on their approach by 1 February 2025, which alongside potential pilot testing, will be used to help the TNFD develop final guidance on nature transition plans to be published in 2025.
CASE LAW
High Court interprets material adverse effects condition in a share purchase agreement
In this case, the High Court considered whether a no “material adverse effect” (MAE) condition in share purchase agreements (SPAs) discharged the defendant buyer from its obligation to complete the purchase of Brazilian mining assets. The buyer claimed that a geotechnical event associated with one of the mines, which occurred between exchange and completion, amounted to a MAE, entitling it to terminate one of the SPAs. The SPAs defined a MAE as a “change, event or effect that…is or would reasonably be expected to be material and adverse to the business, financial condition, results of operations, the properties, assets, liabilities or operations of the [target group]…”.
The Court held that the geotechnical event did not in fact constitute an MAE and that the buyer was not entitled to repudiate the SPA. In relation to the MAE provisions, the Court stated the following:
- The MAE condition should be read in the context of the whole SPA, as it was only one of a number of risk allocation provisions in the SPA.
- As drafted, the MAE clause was only relevant to a change or event (i.e. the geotechnical event itself) occurring since signing, and only applied to any “change, event or effect” that was material and adverse, meaning that any consequence of such a “change, event or effect” in relation to any existing issues when the SPAs were signed was irrelevant. The fact that the event might reveal other potentially significant issues already in existence at exchange was not relevant to that assessment.
- “Material” meant something significant or substantial and was case-specific. Relevant factors when determining materiality in this case were transaction size, the nature of the assets concerned, the length of the sale process and the complexity of the SPAs. Based on these factors, the court concluded that the geotechnical event was not in fact material.
PUBLICATIONS
Autumn 2024 HR Budget speedread
In her first Budget, the Chancellor has announced significant changes to the ways in which businesses and individuals will be taxed. Slaughter and May has published a ‘speedread’ briefing, explaining and exploring the key implications of the Chancellor’s statement to Parliament for employers and their staff.
Twin Peaks: Transition Finance and the Agenda for Growth
Following publication of the Transition Finance Market Review’s (TFMR) (which was mandated to conduct an independent review of the barriers to scaling transition finance) Report setting out its findings on scaling transition finance, Slaughter and May has published a briefing highlighting the implications of the government’s ambitions for the “transition finance market” for finance and treasury teams, including the key elements of the TFMR Report’s recommendations to consider monitoring or engaging with in more detail.
This material is provided for general information only. It does not constitute legal or other professional advice.