Welcome to the latest edition of Corporate Update, our fortnightly bulletin offering a two-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
PLSA publishes 2023 Stewardship Guide and Voting Guidelines
The Pensions and Lifetime Savings Association (PLSA) has published its 2023 Stewardship and Voting Guidelines. These provide a framework for pension schemes trustees, and investors, of key issues to consider over the AGM season, taking into account recent political and social developments. The guidelines highlight certain topics it expects investors to engage in including: (i) executive remuneration; (ii) Climate-Related Financial Disclosures; (iii) workforce diversity and inclusion; (iv) risk of modern slavery within the business and supply chains; and (v) cybersecurity risks. Amendments of note include those relating to:
- Virtual AGMs: the PLSA will not support permanent virtual AGMs.
- Chair appointment: when assessing the suitability of a new Chair, the PLSA expects board diversity to be considered.
- Board composition and diversity: investors should consider voting against the re-election of the Chair and Nomination Committee Chair if the board consistently fails to move towards the PLSA recommendations regarding board diversity or fails to move towards the latest FCA diversity and requirements.
Government publishes 2023 Green Finance Strategy
The government has published its 2023 Green Finance Strategy , its latest policy blueprint aimed at reinforcing and expanding the UK’s position in green finance and investment. The Strategy builds on previous government published strategies set out in the 2019 Green Finance Strategy and the 2021 Greening Finance Roadmap. Key proposals include:
- Commissioning an industry-led market review into how the UK can enhance its position for raising transition capital, in response to feedback from leading stakeholders.
- Launching a consultation in Autumn/Winter 2023, supported by the Transition Plan Taskforce, on the introduction of requirements for the UK’s largest companies to disclose their climate transition plans.
- Delivering a UK Green Taxonomy following a consultation in Autumn 2023.
- Re-launching the Green Finance Education Charter with a broader remit.
- Fulfilling commitments regarding all new bilateral UK Official Development Assistance including its alignment with the Paris Agreement, ensuring spending does no harm to nature, and stopping new direct financial or promotional support for the fossil fuel energy sector overseas.
- Communicating via its Environmental Improvement Plan and Powering Up Britain funding to stimulate investment in energy and infrastructure, such as the Floating Offshore Wind Manufacturing Investment Scheme.
- Attracting more private investment through the work of the Local Net Zero Hubs and the UK Infrastructure Bank.
- Supporting emerging and developing economies by delivering on its commitment to provide £11.6 billion in International Climate Finance between 2021/22 and 2025/26.
The Government publishes Economic Crime Plan 2023-26
Following the government’s commitment to reviewing the criminal regime as part of its Economic Crime Plan 2019-22, it has also now published its Economic Crime Plan 2 (2023-26) setting out measures to build on the foundations of the joint efforts by public and private sectors to combat economic crime established by the initial Plan. The Plan focuses on combatting money laundering, fraud and kleptocracy and sanctions evasion. Key proposals include:
- establishing a Crypto Cell to focus on the criminal abuse of cryptoassets; and
- reforming the role of Companies House and improving transparency through the Economic Crime and Corporate Transparency Bill, by providing the Registrar with enhanced powers to challenge and reject information filed with it, and proactively share information where it has evidence of suspicious behaviour.
The new Plan is supported by a £400 million investment until financial year 2024/25, to be part funded by the Economic Crime (Anti-Money Laundering) Levy (paid by firms subject to the Money Laundering Regulations).
HM Treasury and FCA publish joint statement on criminal market abuse regime
HM Treasury and the Financial Conduct Authority (FCA) have released a statement following completion of their joint review of the criminal market abuse regime which identifies several areas where the government believes the criminal regime should be updated. This review took place within the context of the government’s wider Future Regulatory Framework Review, which was established to structure the government’s framework for repealing and replacing retained EU law on financial services. As part of this framework, the government intends to replace both the Market Abuse Regulation and the civil market abuse regime with UK-specific regulation. A timetable for this will be published by the government in due course.
FRC publishes plan for 2023 to 2026
On 27 March 2023, the Financial Reporting Council (FRC) published its Three Year Plan outlining its priorities and objectives for the period 2023-2026. Most of the anticipated developments in the plan, including the creation of the Audit, Reporting and Governance Authority (ARGA) and the first revisions to the UK Corporate Governance Code since 2018, are already known, but it should be noted that, due to the absence of a 'firm legislative timetable', the FRC now intends to push back its planning for creating ARGA to April 2024. The FRC also notes that it will publish in 2023 the Minimum Standard for Audit Committees, which can be adopted on a voluntary basis by FTSE 350 audit committees before it becomes mandatory under ARGA.
Companies House Direct and WebCHeck service to close in November 2023
Companies House has announced that its Companies House Direct (CHD) and WebCHeck services are closing on 30 November 2023. Users will need to use the Find and update company information service instead, which is already a fully accessible service.
Records of companies dissolved before January 2010 up to 20 years from the date of dissolution will not be available on the replacement service until specific measures introduced by the Economic Crime and Corporate Transparency Bill, relating to the suppression of personal information, are implemented.
Legislation
Spring Finance Bill 2023 published
On 23 March 2023, the Spring Finance Bill 2023 and its Explanatory Notes were published. The Bill introduces tax measures previously announced in the Chancellor’s Spring Budget, as well as measures previously published as draft legislation last year. For more details on the Spring Budget 2023 and its key reforms, please see Corporate Update Bulletin n.23.
Draft Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023 published
On 27 March 2023, the draft Financial Services and Markets Act 2000 (Financial Promotion) (Amendment) Order 2023 was published along with its Explanatory Memorandum.
The aim of the proposed legislation is to improve consumers’ understanding of the investment risks associated with cryptoassets by holding cryptoasset promotions to the same standards as for other financial services. The amendment will widen the scope of s. 21 of the Financial Services and Markets Act 2000 to include financial promotions in respect of certain cryptoassets by creating a new controlled investment defined as a “qualifying cryptoasset” and incorporating this into the relevant provisions (such as controlled activities and exemptions to financial promotion restrictions).
Case Law
High Court considers whether the conversion of preference shares into ordinary shares constitutes a variation or abrogation of special rights attaching to such shares.
A drafting error in a company’s articles of association meant that two articles, one (Article 9.2(a)) which purported to provide for the automatic conversion of preference shares into ordinary shares on notice by the “Investor Majority” (defined as majority of all shareholders combined), and the other (Article 10.1) which provided that special rights attached to any such class may only be varied or abrogated with the consent in writing of the holders of more than 75% in nominal value of the issued shares of that class, were in tension with each other. Various ordinary shareholders constituting an “Investor Majority” had purported to give notice requiring the preference shares to be converted pursuant to Article 9.2(a).
The High Court held that the conversion was invalid, void and of no effect, because it constituted a variation or abrogation of the rights attached to the preference shares and consent from holders of more than 75% of value of the preference shares had not been obtained. This implied a limitation on the scope of Article 9.2(a), making it conditional upon the satisfaction of Article 10.1.
The High Court did this to give “effect to the true bargain made between the company and all its shareholders, whereby they always intended that the special rights attached to the preference shares should enjoy effective protection from any attempt to vary or abrogate them.” While it seems clear that the parties cannot have contemplated Article 9.2(a) as capable of enabling ordinary shareholders to abrogate the rights attaching to the preference shares simply by giving notice especially given the substantial premium paid for the preference shares, there is a question as to whether the Court’s reasoning that the conversion constitutes a variation or abrogation of class rights has wider implications. It is unclear, for example, whether, in the absence of an express provision for varying class rights in the articles, the Court would have concluded that the Company would, in any event, be required to comply with the statutory variation procedure pursuant to section 630(2)(b) of Companies Act 2006.
