Ashurst Governance and Compliance Update - Issue 31

1.  Our annual briefing to help you prepare for your AGM and annual report in 2023

We have recently published our annual briefing which summarises key developments to be aware of when preparing for 2023 annual general meetings and compiling the narrative aspects of annual reports. It is aimed principally at premium listed companies. It also covers material developments for standard listed companies, AIM companies and large private companies including:

Considerations for 2023 AGMs

• Pre-emption disapplication resolutions
• Resolutions to approve directors' remuneration policies
• A retrospective on practice and resolutions in 2022
• The Financial Reporting Council's good practice guidance for company meetings
• Updated voting guidelines
• Effect of further postal strikes on notice periods

Considerations for 2023 narrative reporting

• Climate-related reporting: more businesses now caught
• Diversity reporting: Financial Conduct Authority final rules now in force
• Remuneration reporting
• Corporate reporting: The views of the FCA, FRC and others
• Future developments affecting annual reports
• Key publications from 2022

Please access the PDF of the briefing here and the online version here.

On a related note, Georgeson has published a second 'Investor survey insights report' which focuses on how emerging ESG trends appear to be driving investor engagement and impacting voting and investment decisions.

2.  FRC publishes report on 'What makes good annual reports and accounts'

The Financial Reporting Council has published the latest in its 'What makes a good' series, this time focusing on annual report and accounts, describing high quality annual reports as the cornerstone of corporate reporting.

The document: sets out the FRC's view on the attributes of a good annual report and accounts; considers materiality; and looks at each of its corporate reporting principles and effective communication principles, giving examples of good reporting in each case. In doing so, it acknowledges that every business is different and, as a result, what a good annual report looks like will vary accordingly.

The FRC states that a high quality annual report:

• complies with relevant accounting standards, laws, regulations, and codes;
• responds to the needs of stakeholders in an accessible way; and
• demonstrates the FRC's corporate reporting principles and effective communication characteristics.

Helpfully, the report includes links to FRC resources and guidance on various aspects of corporate reporting. It also maps out the corporate reporting process and highlights areas for companies to consider when preparing accounts.

3.  FRC announces areas of supervisory focus for 2023/24

The FRC has announced its areas of supervisory focus for 2023/24, including priority sectors for corporate reporting reviews and audit quality inspections.

In selecting both corporate reports and audits for review, the FRC will give priority to the following 'higher risk' sectors:

• Travel, Hospitality and Leisure.
• Retail and Personal Goods.
• Construction and Materials.
• Industrial Transportation.

In addition, the FRC will conduct four thematic reviews during the next year including:

• Large private companies: In light of the government's reforms to restore trust in audit and corporate governance, it proposes to create a new category of 'size-based' Public Interest Entity, bringing an enhanced regulatory focus to the largest private companies. The government’s intended threshold will capture entities that exceed £750 million or more annual revenue and 750 or more employees. With a view to informing its monitoring activities going forward, the FRC will begin by reviewing a selection of private company annual reports to identify whether and where there are areas of poor compliance with reporting requirements.
• Task Force on Climate-related Financial Disclosures (TCFD) – metrics and targets: Climate-related metrics and targets, including companies’ 'net zero' plans, are seen as increasingly important by investors; accordingly the TCFD’s recommendations in this area were updated in 2021. Following the FRC’s thematic review of TCFD disclosures in 2022 (carried out in collaboration with the FCA) which highlighted room for improvement in many companies’ metrics and targets disclosures, the FRC will undertake a targeted follow-up in 2023, with a focus on the metrics and targets disclosures of companies from four relevant sectors. The FRC will also consider how adequately these companies’ net zero commitments have been addressed in their financial statements.

The FRC has stated that its Audit Quality Review team will pay particular attention in its audit quality inspections to areas including going concern, fraud risks, climate-related risks, and risk identification and assessment.

Separately, the FRC has published its '2023-2026 draft 3-year Plan'. The plan is an update on its 2022-2025 Plan and reflects the 12 month delay to the anticipated legislation required to create the FRC's successor body, the Audit, Reporting and Governance Authority (ARGA).

Finally, the FRC Lab has published a newsletter focusing on corporate reporting in the year ahead. This aggregates all significant FRC and FRC Lab publications and is designed to assist reporting teams in preparing their annual reports in the coming months.

4.  FRS 102: draft amendments published

The FRC has published draft amendments to FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland) resulting from the second periodic review of FRS 102 and other financial reporting standards.

The proposed amendments include providing greater clarity for small entities in the UK regarding which disclosures need to be provided in order to give a 'true and fair view'.

The proposed effective date for these amendments is accounting periods beginning on or after 1 January 2025, with early application permitted provided that all amendments are applied at the same time. The amendments include transitional provisions.

Comments on the draft amendments should be submitted to the FRC by 30 April 2023.

5.  FCA's latest Primary Market Bulletin focuses on climate-related reporting and UK MAR

The Financial Conduct Authority has published the 42nd edition of its Primary Market Bulletin, in which it covers the following:

• Climate-related disclosure requirements (ahead of standard listed companies publishing their first mandatory climate-related financial disclosures for accounting periods beginning on or after 1 January 2022).
• The relationship between the National Security and Investment Act (the NSIA), the Listing Rules and the UK Market Abuse Regulation (UK MAR) (including the fact that void transactions under the NSIA may constitute inside information).
• The FCA's decision to impose a financial penalty on Sir Christopher Gent for unlawfully disclosing inside information together with themes arising from FCA enquiries into unlawful disclosure.
• The FCA's rules and guidance for cash shells and SPACs on reverse takeovers.
• The FRC Lab's report on structured digital reporting (published in September 2022).

Further detail on selected items is set out below.

Climate-related disclosure requirements

The Bulletin provides a reminder of the FCA's rules, guidance and expectations in relation to such disclosures including by:

• reiterating the importance of building capabilities to make relevant disclosures ('Getting ready for TCFD-aligned climate-related disclosures');
• reminding companies to assess their disclosures against the TCFD's Guidance for All Sectors and, where relevant, Supplemental Guidance for the Financial Sector and for Non-Financial Groups;
• identifying areas for improvement in listed companies' disclosure of forward-looking information, particularly by companies falling into the 'TCFD Non-Financial Groups'(Energy; Transportation; Materials and Buildings; and Agriculture, Food and Forest Products);
• encouraging better consideration of climate-related risks and opportunities in financial statements, and better connectivity between non-financial and financial disclosures; and
• encouraging listed companies, especially those making net zero commitments, to use the TCFD’s Guidance on Metrics, Targets and Transition Plans and, in addition, to consider the UK Transition Plan Taskforce (TPT) Disclosure Framework and Implementation Guidance, published for consultation in November 2022 and which we covered in AGC update, Issue 29.

In terms of next steps, the FCA states that it will:

• continue to monitor listed companies' climate-related financial disclosures under the Listing Rules and, where necessary, take action in line with its stated supervisory approach (set out in Primary Market Bulletin - Issue 36 and FCA Technical Note 802.1);
• build on its TCFD-aligned disclosure rules in line with domestic and international developments, including by referencing the ISSB's standards once these are finalised and considering moving to a mandatory compliance basis for reporting (from the current 'comply or explain' basis) ; and
• consult on strengthening its disclosure expectations for transition plans, drawing on the outputs of the TPT, once these have been finalised.

Unlawful disclosure by Sir Christopher Gent – key issues

The FCA refers to the financial penalty of £80,000 it imposed on Sir Christopher Gent (former Chairman of Convatec Group plc) – see AGC update, Issue 25 - for unlawfully disclosing inside information in breach of Article 10 of the EU Market Abuse Regulation (EU MAR) and notes that the decision has generated significant market and media commentary about both the specific case and Article 10 of EU MAR more broadly. The key issues relating to unlawful disclosure as far as the FCA is concerned include:

• EU MAR does not prohibit discussions of a general nature between an issuer and its shareholders; however it does operate with the fundamental aim of protecting market integrity and enhancing investor confidence such that investors should be placed on an equal footing. No investor should be given an unfair advantage by the misuse of inside information.
• While engaging and fostering good relations with major shareholders may be considered part of a chair's duties, when Sir Christopher made the disclosures, he was not doing so in the normal exercise of his employment, profession or duties for the purposes of EU MAR. The disclosures were not necessary for Sir Christopher to perform his functions. Sir Christopher's primary objective in making the disclosures was to forewarn the shareholders of imminent events.
• Sir Christopher's actions were considered in the light of his own considerable experience and position, having received relevant training on EU MAR. In this context, he could not justify the disclosures on the basis that Convatec (having engaged its brokers) had not formally classified the information as inside information and that he had not been warned against the disclosures by another Convatec board member and one of Convatec's brokers, despite having discussed the disclosures with them.
• Imposing confidentiality and no-dealing obligations on the recipient of inside information does not render a disclosure of inside information lawful if the disclosure was not reasonable (or strictly necessary) in the first place. This is explained in DTR 2.5.7G(2) which provides examples of when selective disclosure of inside information (including to major shareholders) may be permissible, none of which applied to Sir Christopher's disclosures.

Unlawful disclosure: Themes and behaviours from Market Oversight enquiries

The Bulletin also looks at general themes arising, and 'concerning behaviours' identified, in enquiries which the FCA's Primary Market Oversight (PMO) department has carried out in respect of suspected unlawful disclosures. Examples are set out so that issuers can consider how they can mitigate or avoid such risks in future.

The FCA starts by referring to the following legislation and rules which are critical to its observations:

• Article 17(1) of UK MAR: inside information must be disclosed to the 'public' as soon as possible;
• Article 17(1) of UK MAR: which forbids issuers from combining the disclosure of inside information with marketing material;
• DTR 6.3.3R: which requires issuers to use a Regulatory Information Service (RIS) to disclose inside information – an issuer's website or social media account alone will not suffice; and
• DTR 2.5.9G: which guides that 'An issuer should bear in mind that the wider the group of recipients of inside information, the greater the likelihood of a leak…'.

The FCA then makes the following observations:

• Social media: In recent years, the PMO has opened numerous enquiries into suspected disclosure of inside information via issuers' social media offerings, particularly Twitter, or in direct communications between issuers' executives and investors through open or private social media channels. When developing their communication and social media offerings, issuers should remember that inside information must be disclosed via an RIS (which ensures disclosure to the 'public') and cannot be disclosed by social media alone. Further, inside information cannot be disclosed in a way that combines the information with marketing material.
• Mainstream media: The PMO has opened numerous enquiries of suspected unlawful disclosure where issuers, through their executives or communications departments, have leaked significant (and possibly inside) information to mainstream media outlets, often resulting in press articles being published before the requisite RIS announcement has been issued.
  
  Whilst the FCA understands that issuers will want to develop proactive and successful media strategies and will need to pass information to high-profile media outlets for this purpose, this does not justify leaking inside information and, before any such communications, the issuer must consider very carefully whether the information to be disclosed constitutes inside information. In the FCA's view, such disclosures will very rarely, if ever, be made in the normal exercise of an employment, a profession or duties for the purposes of Article 10 of UK MAR. Furthermore, where a press article containing inside information is subsequently published, the FCA does not consider it a significant mitigant that the article was published outside market hours.
• Fundraisings: The PMO has opened numerous enquiries into potential leaks of inside information in relation to issuers' fundraising activities, such as placings, subscriptions and rights issues. Often, such leaks are in respect of smaller issuers and are reported on bulletin boards, smaller media outlets or 'blogspots'. In view of the guidance in DTR 2.5.9G (see above), issuers can protect themselves from such behaviours by putting in place effective systems and controls around fundraisings, restricting access to the information as far as possible, creating proper UK MAR-compliant insider lists and insisting that their advisers do the same and follow wall-crossing procedures as set out in Article 11 of UK MAR.
• Analyst and media briefings: While executives will often be briefed on market disclosure obligations prior to such events, the PMO continues to open enquiries into suspected unlawful disclosures by issuers' senior executives in analyst briefings, earnings calls and media events. Typically, troublesome disclosures have arisen where executives are unsure about the detail of the results being presented, speak unscripted or where they are drawn-off script in Q&A sessions. Issuers are reminded that analysts do not represent the 'public' for the purposes of UK MAR and that its executives must be thoroughly prepared for market and media events to avoid selective disclosure of inside information to those attending such events.
• Systems and controls: The PMO typically asks issuers to provide their written policies and procedures for handling inside information and, if the relevant disclosure has taken place over social media, their social media policies. The FCA notes that while it is comforting that all issuers it has questioned have some form of written policies and procedures in place, they vary in quality - some are cursory and many are lengthy reproductions of UK MAR and the relevant FCA rules and guidance which will be difficult for relevant employees and executives to digest and put in context.
  
  The FCA highlights that it has not seen a written policy or procedure that puts the issuer's (and its employees' and executives') legal obligations in the context of its day-to-day activities and identifies practical situations or behaviours that create risk. Nor has the FCA seen any social media policy that explicitly recognises the specific risk of unlawful disclosure of inside information through the improper use of social media. Issuers should therefore consider the adequacy of their policies and procedures and update and socialise them as necessary.
• Shareholder engagement: The FCA has received feedback from a number of stakeholders that the public outcome relating to the conduct of Sir Christopher Gent has raised concerns over a broader spectrum of engagement with listed companies than is covered by the facts of the case. One particular concern was the extent to which any kind of collective engagement by shareholders might be seen as being inconsistent with UK MAR. The FCA is keen that the public outcomes of the case do not inhibit or stifle high quality engagement with shareholders. The FCA notes that the extent to which engagement between a company and its shareholders might contravene UK MAR will depend on the circumstances and any analysis is likely to focus primarily on the nature of the information that is shared and the rationale for doing so, rather than on the number of shareholders involved in the discussion.

6.  FCA's Market Watch 71 focuses on Insider Lists

The FCA has published Market Watch 71 which makes various observations on how investment and advisory firms produce and maintain insider lists. These provide relevant insights for all market participants subject to the UK MAR regime, particularly confirmation of the FCA's views on what constitutes the UK's 'national identification number'.

Steps taken by firms to reduce permanent insider lists

The FCA has seen considerable reductions in the numbers of permanent insiders at several advisory firms (since the publication of Market Watch 60 in 2019), together with enhanced monitoring of access to inside information.

Methods to reduce the number of permanent insiders (from which issuers might learn) have included:

• Introducing registers of events and/or product specific 'permanent insiders'. If persons only need access to specific inside information, they should be on the specific lists for that inside information rather than permanent insider lists;
• Periodic reviews of the roles of all permanent insiders, to ensure that each one requires access to systems containing inside information in order to perform its role; and
• Consideration of the necessity of non-deal team employees in particular functions, as well as multiple jurisdictions, having access to inside information.

In the FCA's view, the ongoing reduction in the numbers of those able to access inside information enhances the integrity of UK markets by reducing the opportunities for unlawful disclosure of that information.

Insider lists, Article 18 of UK MAR and the sufficiency of personal information

The FCA has received insider lists in response to regulatory requests which do not contain personal information, other than names, and stresses that additional information, such as telephone numbers, dates of birth and national identification numbers, are also required to enable it to eliminate people from its enquiries. Insider lists must be in the required format and include information set out in relevant technical standards.

The FCA also sets out the responses to various queries it has received, including:

• National identifiers: For natural persons on insider lists, the national identification number column should contain the relevant national identifier for that individual, in line with the requirements of Article 6 of RTS 22. The FCA states that the first priority national identifier for UK nationals is the national insurance number.
• Personal telephone numbers: These must be included in insider lists.
• Contractors: Issuers should have arrangements in place to ensure that firms with whom they contract provide personal data in response to regulatory requests and advisory firms should have similar arrangements with their contractors. If a person does not provide these details, firms should consider whether that person should be given access to inside information.
• Data protection: UK MAR does not provide an exemption for the provision of personal data based on the location of people identified on insider lists and data protection laws in those locations. Firms must consider what arrangements they can put in place to meet their obligations under UK MAR, as well as the appropriateness of providing access to inside information to persons who cannot provide the personal data required to enable firms to meet those obligations.
• Storing and producing lists efficiently: To reduce the burden of work and to mitigate possible risks to data protection, the FCA confirms that it has no issues with firms storing insider lists and personal data separately, adding the personal data to the template when insider lists are requested by the FCA. However, the FCA expects issuers and persons acting on their behalf to be able to respond to its requests for insider lists promptly, for example, within two days.

7.  FCA publishes decision notices in relation to Metro Bank and two former executive directors

The FCA has published a final notice in relation to Metro Bank PLC and fined it approximately £10 million for breaching Listing Rule 1.3.3R by publishing inaccurate information to investors. The FCA has also published decision notices in relation to Metro Bank's former CEO and former CFO for being knowingly concerned in the breach, fining them £223,000 and £134,000 respectively. As the former executive directors have appealed their decisions to the Upper Tribunal, the fines imposed on them are provisional at this stage.

By way of reminder, in December 2021, the Prudential Regulation Authority fined Metro Bank £5.4 million for matters relating to the misstatement.

Facts

As part of its quarterly financial results, Metro Bank regularly reported to the market on its prudential position, including the Risk Weighted Assets (RWA) on which its regulatory capital requirements are based. In its Q3 trading update released in October 2018, Metro Bank published inaccurate information concerning the figure for its RWA, in breach of Listing Rule 1.3.3R, which requires an issuer to take reasonable care to ensure that any information it notifies to a RIS or makes available through the FCA is not misleading, false or deceptive and does not omit anything likely to affect the import of the information. The RWA figure had particular significance for Metro Bank given its business model and intended growth strategy: an increase in RWA could lead to an increased regulatory capital requirement and the need to raise further capital, with the potential resultant risk of dilution for existing shareholders and drag on the bank's rate of growth.

It was not until 23 January 2019, when Metro Bank issued its full year 2018 Results Preview and Trading Update, that it corrected the RWA figure. In that Update, it announced an expected increase in RWA to 'approximately £8.9 billion'. The error itself was first mentioned during an analyst presentation call later the same day, during which the CFO stated that the estimated increase in RWA included adjustments of 'around £900 million'. Following the Update, Metro Bank's share price fell by 39 per cent - the largest single price drop for a UK bank since 2009.

FCA findings

The FCA found that Metro Bank was aware of the market significance of its RWA figures, which had been the subject of both analyst commentary and specific questioning at an analyst meeting prior to the inaccurate announcement. However, when the inaccurate RWA figure was published in the misleading announcement, Metro Bank failed to explain that (a) the risk weighting which had been applied was incorrect; (b) Metro Bank had recognised that it needed to correct this error; (c) Metro Bank was carrying out an ongoing review to determine the quantum of the correction; and (d) the quantum of the correction would be substantial. The FCA highlighted that, although Metro Bank sought and received legal advice from its external lawyers on whether it was required to make a proactive announcement about its miscalculation of the risk weighting (prior to the release of the announcement), Metro Bank did not return to its external lawyers to seek advice specifically in relation to the announcement, and whether that announcement could properly give an RWA figure that was based on an incorrect risk weighting. In the FCA's view, this was a key reason why Metro Bank was considered to have failed to take reasonable care in breach of Listing Rule 1.3.3R.

According to the FCA, the CEO and CFO were knowingly concerned in Metro Bank's breach of the Listing Rules. They were aware that the RWA figure in the announcement was materially inaccurate but they failed to consider whether the inaccurate RWA figure needed to be qualified or explained and did not seek legal advice on this question. Further, they failed to ensure that the Audit Committee and the board considered whether the inclusion of the inaccurate RWA figure in the announcement without any qualification was appropriate.

Sanctions

The FCA has imposed a fine of £10,002,300 on Metro Bank. In assessing the seriousness of the breach, the FCA considered the appropriate indicator to be Metro Bank’s average daily market capitalisation throughout the period of the breach as this reflects the harm or risk of harm resulting from the breach. In assessing the factor of deterrence, the FCA highlighted the fact that Metro Bank is a premium listed issuer and, at the time of the breach, was a constituent of the FTSE 250 index, and in order to achieve the objective of credible deterrence, the FCA applied a multiplier of two to the penalty calculation.

Commenting on the decisions, Mark Steward, Executive Director of FCA Enforcement and Market Oversight, said: 'Listed firms must ensure that the information they are disclosing to the market is right. This is what investors are entitled to receive……The UK's Listing Rules impose high standards on issuers and their officers which Metro Bank [and the relevant executives] failed to meet in this case.'

The Metro Bank decision follows a number of recent FCA enforcement cases in which it has found a breach of LR 1.3.3R including in relation to Barclays Bank plc, Carillion plc (in liquidation) and Aviva plc.

8.  Chancellor publishes flagship reforms including illustrative reforms to the prospectus regime

The Chancellor has unveiled the "Edinburgh Reforms" of UK financial services, consisting of over 30 regulatory reforms, which aim to drive growth and competitiveness in the UK financial services sector. The reforms build on the government's vision for UK financial services in a post-Brexit landscape, presented in the (then) Chancellor's 2021 Mansion House speech.

HMT's Policy Statement, published as part of the Edinburgh Reforms, sets out the government's implementation plan to repeal EU retained laws governing financial services and to deliver a comprehensive 'FSMA model' of regulation through the powers established in the Financial Services and Markets Bill, which is currently before Parliament. Under this model, financial services regulators will be responsible for determining the regulatory requirements that are currently set out in retained EU law, within a regulatory framework that is more agile, responsive and tailored to the UK's needs.

UK prospectus regime

A key element of the Edinburgh Reforms is the overhaul of the UK prospectus regime, the overarching aim of which is to increase the attractiveness of London as an international listing venue. The Edinburgh Reforms also cover new remit letters for the FCA and the PRA, with clear, targeted recommendations on growth and international competitiveness, the ring-fencing regime, and the implementation of the outcomes of the UK Secondary Capital Raising Review (see AGC Update – Issue 23), amongst many other reforms.

As part of this new approach to financial services, the government has published three illustrative statutory instruments, including the Financial Services and Markets Act 2000 (Public Offers and Admissions to Trading) Regulations 2023 (POAT SI). These demonstrate how new powers to repeal and replace retained EU law being taken forward in the Financial Services and Markets Bill will be used - in the case of the POAT SI, to replace the existing UK Prospectus Regulation with a more effective regulatory framework for prospectuses and public offers.

It is intended that the POAT SI will implement the recommendations of Lord Hill's UK Listings Review, with a view to widening participation in the ownership of public companies, simplifying the capital raising process for companies on UK markets and increasing the attractiveness of the UK for companies looking to list. However, the POAT SI is not in final form and will continue to be developed before being put before Parliament. The accompanying Policy Note stresses that important issues, including details in respect of enforcement, general transitional provisions, and the full scope of the consequential amendments across other legislation have intentionally not been included at this stage.

Key prospectus regime changes

The illustrative POAT SI covers most of the proposals in HMT's UK Prospectus Regime Review (see AGC Update – Issue 14) which sets out the policy approach the government will take to reform the UK's prospectus regime, including:

• A new public offer architecture: Under the new regime, there will be a general prohibition on public offers of securities which will be achieved by amending the criminal offence contained in section 85(1) of the Financial Services and Markets Act 2000. There will then be exemptions from this prohibition, which will be based on Article 1(4) of the UK Prospectus Regulation, but expanded to include, amongst other things, offerings of securities which are, or will be, admitted to UK regulated markets.
• Admissions to trading on regulated markets: The concept of a prospectus will be retained as an important part of the regulation of offers of securities to be admitted to trading on UK regulated markets, with the FCA being given enhanced rulemaking responsibilities. This will allow the FCA to specify when a prospectus is required, what should be included, and how it should be produced, validated and published.
• Forward-looking information: 'Forward-looking information' was highlighted by Lord Hill as particularly useful for investors when making investment decisions. It was also argued that the existing liability regime deters companies from including such information in prospectuses. The new regime will aim to respond to market imperatives by raising the liability threshold – to a fraud and recklessness standard - for certain categories of forward-looking information in prospectuses. These categories will be specified by the FCA. In other respects, the revised regime will generally retain the existing negligence-based threshold for liability for false, misleading or omitted information.
• Admissions to trading on multilateral trading facilities operating primary markets: The FCA will be given rulemaking powers to ensure that, in appropriate cases, the rulebooks of MTFs (such as AIM) operating as primary markets require an admission document to be published and treated as a prospectus. These admission documents will therefore also be subject to the statutory compensation remedy regime attaching to prospectuses.
• Public offerings from overseas: The government intends to develop a new regime of regulatory deference permitting offers into the UK of securities listed on certain designated overseas stock markets on the basis of offering documents prepared according to the rules of the relevant overseas jurisdiction and market. HMT is continuing to consider the details of this regime.

Overall, the effect of this legislation will be to delegate a greater degree of responsibility to the FCA to put in place a regime that is tailored to the needs of UK markets and reflects the difference between public offers and admissions of securities to trading. As such, the full suite of reforms will take effect after the FCA has consulted on and, in some cases, implemented relevant rules.

For the view of our Financial Regulation team on the Reforms more generally – click here.

EU Capital Markets Union Proposals

It is perhaps no coincidence to report that the European Commission has published a package of proposals to develop the EU's Capital Markets Union by, amongst other things, reducing the regulatory burden on companies so that they can better access public funding by listing on stock exchanges.

The proposed amendments to the EU prospectus regime include extending the exemptions for secondary issuances of securities fungible with securities admitted to trading on a regulated market or on an SME growth market, standardising and streamlining a prospectus for primary issuances  and providing for a new EU 'follow-on' prospectus to replace the current 'simplified disclosure regime' for secondary issuances.

9.  Gender diversity on boards: EU Directive published in Official Journal

In AGC update, Issue 27, we reported on the EU's proposals to increase gender diversity in listed company boardrooms. The relevant Directive (EU 2022/2381) has now been published in the Official Journal. It will come into force on the twentieth day following that of its publication in the Journal, and will expire on 31 December 2038. EU Member States must adopt the required national measures by 28 December 2024; many have already done so.

By way of reminder, the Directive applies to companies which have their registered office in an EU Member State and whose shares are admitted to trading on an EU regulated market. The Directive does not apply to UK companies, however those with securities admitted to an EU regulated market should consider whether they wish to meet the Directive’s targets on a voluntary basis.

10.  How flexible is flexible working about to become?

Following the pandemic, many organisations have staff working flexibly at least some of the time. Building on its manifesto commitment to encourage flexible working, the government has published the response to its 2021 consultation, 'Making Flexible Working the Default'.

Our Employment team briefing considers the government's key proposals and how flexible working is set to change.

Item contributed by Crowley Woodford and Ruth Buchanan, Partners in our Employment team.