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
Government seeks to simplify non-financial information reporting framework
The Department of Business and Trade has published a statement setting out the government’s plans to reduce regulation for small and medium-sized companies, ensuring that reporting obligations are proportionate. The statement outlines government plans to lay legislation that will increase the monetary thresholds that determine company size by 50%, in order to reduce burdens on smaller businesses. The proposed legislation would also remove certain requirements from the directors’ report and the directors’ remuneration report and policy and make it easier for companies to issue digital annual reports. The intention is for these changes to be introduced on 1 October 2024.
The Statement also details several proposals that the government plans to consult on later this year, including amending the definition of a medium-sized company for company reporting and on exempting medium-sized companies from having to produce a strategic report and smaller public interest entities from audit tendering and rotation requirements.
FTSE Russell publishes expected changes to the FTSE UK Index Series following listing regime reforms
FTSE Russell has published an overview of proposed changes that it expects to make to the FTSE UK Index Series Ground Rules, as a result of the ongoing review of the listing regime by the FCA. The Ground Rules set out requirements for admission to the FTSE UK Index Series. The proposed changes include the following:
- All issuers with shares in the new ‘Equity Shares in Commercial Companies’ category or the ‘Closed-ended investment fund’ category will become potentially eligible to be included in the FTSE UK Index Series.
- Issuers with equity shares in the ‘Transition’ category or ‘Secondary Listing’ category will not be eligible to be included in the FTSE UK Index Series.
- Premium Listed companies are expected to be mapped onto either of the first two categories, meaning they will continue to be eligible to be included. Standard Listed companies, meanwhile, will be mapped to one of the latter two and as such, will continue to be ineligible. The changes to the listing regime will therefore not have an immediate impact on which companies are included in the FTSE UK indices.
- Issuers with shares in the ‘Equity Shares in Commercial Companies’, ‘Transition’ or ‘Secondary Listing’ categories will be eligible to be included in the FTSE Global Equity Index Series (FTSE GEIS) and associated indices. The impact on the composition of the FTSE GEIS will therefore also be minimal.
HM Treasury publishes paper on next phase of building a Smarter Regulatory Framework
On 21 March 2024, HM Treasury published a paper entitled ‘Building a Smarter Regulatory Framework: The next phase’. This outlines the government’s approach to the next phase of its plan for repealing EU-derived legislation in order to deliver what it terms a Smarter Regulatory Framework (SRF) for financial services that is tailored for the UK. The paper follows the the Treasury’s Delivery Plan that was published in July last year, which considered how the government will deliver on the SRF programme and included a forward look on Tranches 1 and 2 of the programme.
As at February 2024, the government has removed almost half of retained EU financial services law, with 191 pieces of legislation repealed and not replaced following the introduction of the Financial Services and Markets Act 2023. Secondary legislation to replace retained EU law in several policy areas has also now been laid in Parliament, such as the Solvency II reforms and the Public Offers and Admissions to Trading Regulations 2024, which will form part of the new regime replacing the EU prospectus regime.
Areas which the government will prioritise in the next tranche (Tranche 3) include the AIFMD, UCITS, and continuing reform to the Payments and E-money Directive. The government intends to adopt a multi-staged approach to reviewing and replacing assimilated law in these areas due to the significance and size of some of these files.
FCA publishes business plan for 2024-25
The Financial Conduct Authority (FCA) has published its Business Plan 2024/25, setting out the FCA's priorities for the following year in line with its public commitments in its Strategy 2022-25. The FCA’s priorities cover the following areas:
- Reducing and preventing financial crime: The FCA will increase investment in its systems to use intelligence and data more effectively in order to target higher risk firms and activities and continue working with partners to support system-wide improvements.
- Prioritising consumers' needs: The FCA will undertake supervisory work to test firms' implementation of the Consumer Duty and to improve firms' delivery of good consumer outcomes.
- Strengthening the UK's position in global wholesale markets: The FCA will look to support industry work on shortening the settlement cycle (T+1) and continue delivering its primary market policy reforms. The FCA will also work with the Treasury to meet the government's objective of launching PISCES, a new secondary market platform to facilitate the intermittent trading of existing shares in privately held companies, by the end of 2024.
- Preparing financial services for the future: The FCA will continue implementing the Smarter Regulatory Framework (see above) by working with the Treasury and other regulators to ensure the repeal of assimilated law and its replacement, where appropriate, with relevant rules.
Legislation
ECCTA 2023 (Consequential, Supplementary and Incidental Provisions) Regulations 2024 published
The Economic Crime and Corporate Transparency Act 2023 (Consequential, Supplementary and Incidental Provisions) Regulations 2024 were made on 20 March 2024 and published on 25 March 2024. They came into force on 21 March 2024. The Regulations make amendments to primary and secondary legislation as which are consequential, supplementary and incidental to certain provisions of the Economic Crime and Corporate Transparency Act 2023 (“ECCTA 2023”). Drafts of the regulations had already been published on 10 January and 2 February 2024, and the regulations published on 25 March have remained largely consistent with these drafts.
Amendments to primary legislation include transitional provisions bringing existing registrable persons and legal entities into the new identity verification regime (new sections 790LN and 790LP Companies Act 2006 inserted by section 64 ECCTA 2023). Amendments to secondary legislation include applying changes made to the Companies Act 2006 to UK economic groupings, UK Societates, overseas and unregistered companies.
ECCTA 2023 (Financial Penalty) Regulations 2024 published
The Economic Crime and Corporate Transparency Act 2023 (Financial Penalty) Regulations 2024 were published on 26 March 2024 and will come into force on 2 May 2024. The Regulations give the Registrar of Companies the power to impose financial penalties for offences under section 1132A of the Companies Act 2006, as an alternative to bringing criminal proceedings. There are no substantial amendments from the draft published in February 2024.
Reporting on Payment Practices and Performance (Amendment) Regulations 2024 published
The Reporting on Payment Practices and Performance (Amendment) Regulations 2024 were published on 25 March 2024 and come into force on 5 April 2024. The Regulations 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). These Regulations extend the Principal Regulations and the LLP Regulations beyond their initial sunset date of 6 April 2024 to 6 April 2031 and will require additional information from qualifying companies and LLPs.
