Welcome to the October 2024 edition of our quarterly update for listed companies. If you would like to discuss any of these developments in further detail, please feel free to get in touch with any of the contacts listed at the end of this note.
1 The Investment Association's Principles of Remuneration
The Investment Association has published its highly anticipated revamped Principles of Remuneration (the "Principles"). While much of the content remains as before, there have been a few key changes including: (i) an emphasis that the Principles are guidance rather than rules (in a similar way to how the FRC has been emphasising the flexibility offered by UK Corporate Governance Code); (ii) a clarification that the aim of the shareholder engagement exercise on remuneration policies and schemes is to seek to understand views and expectations, not to seek approval or endorsement; (iii) an updated provision on "hybrid" schemes which notes how these may be used by companies with a US footprint and who are competing for global talent (with such schemes having been a 2024 "hot topic"); and (iv) a relaxation to the dilution limits from 5% to 10% (over 10 years). Listed companies should consider how to apply the updated guidance to their own remuneration arrangements. For further information, see our Q&A document.
2 Updated FCA technical notes
In the 51st edition of its Primary Market Bulletin ("PMB"), the FCA provided feedback on its consultation in PMB 48 and confirmed subsequent changes to a number of technical notes in its Knowledge Base to reflect the new UK Listing Rules, which took effect on 29 July 2024. Listed companies should familiarise themselves with the updated guidance, of which further details are set out in PMB 51. Not all the Technical Notes and Procedural Notes in the FCA's Knowledge Base have been updated to reflect the changes to the UK Listing Rules but the FCA has confirmed that issuers should "interpret purposively" references to old rules in light of the changes.
3 FRC Review of Corporate Reporting
On 24 September 2024, the FRC published its Annual Review of Corporate Reporting for 2023/2024. The FRC was pleased with the quality of reporting in the FTSE 350 overall, and noted, in relation to sustainability reporting, that there were comparatively few reporting compliance issues against the Taskforce for Climate-related Financial Disclosures framework, despite the complexities involved in such reporting. However, the FRC was disappointed that there had been an increase in the number of restatements in relation to impairment of assets and cash flow statements, predominantly in companies outside the FTSE 350. The FRC noted that these will remain an area of close focus and has suggested that companies, and their auditors, may reduce the risk of challenge by closely reviewing the FRC's findings to avoid similar breaches of the reporting requirements in future.
4 The Future of Digital Reporting
The FRC is currently seeking feedback from stakeholders on The Future of Digital Reporting in the UK. Together with Companies House, HMRC and the Charity Commission for England and Wales, the FRC is seeking feedback on developments in digital reporting, including: (i) potential alternatives to the European Single Electronic Format (ESEF) taxonomy for UK regulated markets; (ii) proposing changes to the structured digital reporting to support regulatory disclosure initiatives; (iii) considering mandatory assurance of digital tagging; (iv) reviewing the impact of the "full tagging" requirements on companies; and (v) considering strategies to support stakeholders in adapting to the new digital reporting requirements. The FRC has asked for responses to be submitted to XBRL@frc.org.uk by 1 November 2024.
5 London Stock Exchange Dividend Procedure Timetable 2025
The London Stock Exchange has published its Dividend Procedure Timetable 2025, which listed companies should use when setting their interim and final dividend programmes for 2025.
6 Updated Guidance on Duty to Report Payment Practices and Performance
In September, the Department for Business and Trade published updated guidance on the duty to report on payment practices and performance, which applies to large companies and LLPs. This guidance was last updated in September 2019. Changes include:
- an update to the meaning of "balance sheet total" for the purpose of determining whether an in scope company or LLP exceeds two or all of the thresholds for qualifying as a medium-sized company under the Companies Act 2006;
- an expansion of the guidance to refer to additional reporting requirements introduced by the Reporting on Payment Practices and Performance (Amendment) Regulations 2024;
- an extension to the guidance on the meaning of "receipt of invoice", together with new examples; and
- an update to the guidance on reporting statistics when supply chain finance is used.
7 Company Law Reforms
The Government has announced two key upcoming corporate law reforms:
- Reporting: There will be a consultation next year on simplifying and modernising the UK's non-financial reporting framework, something that was also proposed by the previous Conservative Government.
- AGMs: The Government will look at "clarifying" the law on virtual AGMs (which have generally been viewed as not permitted under English law because of the Companies Act 2006 being interpreted as requiring a physical place). The views of institutional investors on this remain to be seen but if these changes go ahead and are supported, companies will likely need to amend their articles of association to expressly include virtual general meetings (rather than just physical and hybrid meetings).
The Government has also confirmed its commitment to the Secondary Capital Raising Review which aims to speed up the process for raising share capital.
8 Institute of Directors' Code of Conduct
In the previous edition we reported on the proposed Institute of Directors' Code of Conduct and this has now been launched. The Code of Conduct is divided into six principles, with each principle being supported by undertakings. Although the Code is directed at individual directors, the Institute of Directors is encouraging boards to publicly commit to the Code of Conduct, with suggested mechanisms for demonstrating such commitment being: (i) disclosure in annual reports or on websites; (ii) communication to employees and other stakeholders; and (iii) through social media.
The Code of Conduct is for guidance only and has no legal status. Compliance is entirely voluntary and there is no link between this Code of Conduct and the UK Listing Rules, as there is with the Corporate Governance Code.
9 Prospectus Reforms
At the end of July the FCA published a consultation paper on the prospectus reforms, which aim to simplify the current regime and reduce the number of circumstances which require a prospectus. One of the proposed new exemptions for companies that are already listed is that a prospectus would not be required where the new shares issued equate to less than 75% of the Company's existing securities (increased from 20%). The consultation has now closed and the new rules are expected to come into force next year. For further details see our client note.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
