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 second tranche of draft rules relating to listing regime reforms
Following the publication of CP23/31 setting out further details of its proposed reform to the UK listing regime, the Financial Conduct Authority (FCA) has, on 7 March 2024, published the second tranche of draft rules alongside the original tranche 1 draft to form a complete draft instrument for the new UK Listing Rules Sourcebook (“UKLR”). This updated draft instrument supersedes Appendix 1 of CP23/31 and should be taken as the full and complete draft UKLR for consultation purposes.
Notably, the instrument sets out Transitional Provisions which modify the application of the Rules to transactions that are in progress when the new Rules take effect. Broadly, the Transitional Provisions provide that where an issuer is doing a significant transaction, and before the new Rules came into force it made a “Class 2”-style announcement on signing the transaction agreement, but it has not yet published the Class 1 circular then, as soon as reasonably practicable after the new Rules take effect, it will have to make a “top up” announcement that includes all the additional information required under the new Rules.
The FCA has also published a separate draft instrument that contains proposed consequential changes to other FCA Handbook sourcebooks. The date on which CP23/31 is closed for consultation on the full set of policy positions and the tranche 1 draft rules remains 22 March 2024. However, the closing date for comments on the additional tranche 2 draft rules and the consequential changes instrument is 2 April 2024. The FCA is also in the process of reviewing and updating Technical and Procedural Notes and expects to consult on these during April and June.
Government consults on proposed PISCES platform for trading of private company shares
On 6 March 2024, HM Treasury announced the publication of a consultation on a new platform that will allow private companies to trade their securities in a controlled environment and on an intermittent basis known as Private Intermittent Securities and Capital Exchange System (PISCES). As proposed, the new platform will incorporate elements from public markets, such as those that offer multilateral trading, and elements from private markets that provide greater discretion on what company disclosures should be made public. The consultation closes on 17 April 2024.
Parker Review publishes report on Ethnic Diversity of UK Business
The Parker Review has published an updated report setting out their findings on ethnic minority representation on the boards of FTSE350 companies. The report found encouraging progress among companies to meet the board target and disclose their board ethnic minority representation. In particular:
- 70% of FTSE 250 companies has met the target of having at least one ethnic minority director on their board (an increase from 60% in 2022)
- 96% of FTSE 100 companies met the same target (matching that of 2022)
- There has been an increase of 5 ethnic minority CEOs in FTSE 100 when compared to last year (for a total of 12)
- 13.5% of director positions in the FTSE 250 companies are now held by ethnic minorities (of the 222 companies which provided data), an annual increase of 2.5%
Consultation on improving the effectiveness of the Money Laundering Regulations published
On 11 March 2024, HM Treasury published an open consultation on the effectiveness of the Money Laundering Regulations. The four key themes covered by the consultation are:
- Making customer due diligence more proportionate and effective
- Strengthening system coordination,
- Providing clarity on scope of the MLRs,
- Reforming registration requirements for the Trust Registration Service.
The consultation will close on 9 June 2024.
Market Insights
ONS publishes Q4 2023 data on UK M&A activity
On 5 March 2024, the Office of National Statistics (ONS) published its bulletin on UK M&A activity for of the fourth quarter of 2023 (October-December). The provisional estimates show that the total number of monthly domestic and cross-border M&A involving UK companies fell sharply between November and December 2023.
- In Q4 2023, the total combined number of domestic and cross-border M&A was 367 (33 transactions fewer than the previous quarter).
- The value of inward M&A was £8.6 billion (£3.3 billion higher than the previous quarter) while the total value of outward M&A was £3.2 billion (£1.1 billion higher than the previous quarter).
Case Law
Re Bramber Road Management Ltd, Clarke v Lakha [2024] EWHC 51 (Ch)
High Court decides that a company’s articles of association were amended via shareholders’ conduct
The claimants were members of a company, Bramber Road Management Ltd (the “Company”), which owned freehold title to, and which carried on the business of managing and maintaining, the courtyard of a development of 4 office units. The claimants owned 2 of the units and the defendants owned the other 2 units and the relationship between the two groups had deteriorated. Although the defendants' names were not entered in the register of members, they asserted an entitlement to exercise voting rights as members of the Company. The claimants sought various declarations from the Court regarding, among other things, the appointment of certain persons as directors of the Company.
One of the issues hinged on whether the members were entitled to appoint a director by notice to the Company in circumstances where the Company’s articles of association were silent on how directors are to be appointed but where it was claimed that the articles had been amended by conduct. The Company’s past shareholders had historically been appointing directors by notice to the Company without any board or members’ resolution. The articles included a separate provision (Article 19) providing that all the powers of the Company which are not by the law or the articles (or by provisions of Table A which apply to the Company) required to be exercised by the Company in general meeting shall be exercised by the directors.
- The judge concluded that, as a matter of construction, the effect of Article 19, construed in the context of the articles as a whole, was to confer the power to appoint directors on the directors themselves, but that, applying the Duomatic principle, the shareholders had amended the articles through their conduct so as to entitle each registered member to appoint one director by notice to the Company (with the right to remove and/or replace any director so appointed by notice to the Company). The judge was satisfied that all the shareholders at the relevant time had been fully aware that no formal board or members’ resolutions had been passed in relation to previous appointments of directors. The judge noted that the multiple appointments over several years indicated an intention for a permanent amendment to the articles rather than ad hoc exceptions.
Publications
2024 Investment Association guidance - executive remuneration briefing
Slaughter and May has published a briefing on the IA’s long-awaited guidance on executive remuneration for UK-listed companies, discussing a couple of particular issues highlighted for Remuneration Committees’ consideration and the potential approach of the IA to remuneration.
