Corporate Update is our fortnightly bulletin highlighting the latest legal and regulatory developments which we consider to be of relevance to in-house corporate counsel. If you would like to subscribe to this bulletin as a regular email, please click here.
In this issue
Insolvency Service publishes Interim Report on permanent measures introduced under CIGA 2020
The Insolvency Service has published its Interim Report reviewing the permanent measures of the Corporate Insolvency and Governance Act 2020 relating to business rescue procedures – the restructuring plan under Part 26A of the Companies Act, as well as the standalone Moratorium and the restrictions on contractual termination (ipso facto clauses) under the Insolvency Act:
- Part 26A restructuring plan: The Insolvency Service found that the restructuring plan is generally a success but that it is too costly and time-consuming for small and medium-sized companies. It recommended that courts be more pragmatic about the required documentation.
- Standalone Moratorium: The Report found that this is generally considered a success but that it is not being used by some practitioners who are concerned that it alters pre-existing priorities in a subsequent insolvency.
- Ipso facto clauses: The Report found that it was too early to tell how this will operate going forward and more evidence is needed to assess it.
FRC publishes consultation on reporting on audit quality indicators
On 22 June 2022, the Financial Reporting Council (FRC) published a consultation on the public reporting of audit firms’ audit quality indicators (AQIs) at the “whole firm” (audit practice) level. AQIs are quantitative and qualitative metrics to measure external audit quality and could be used by various parties (such as audit committees) to encourage high quality audits. Views are being sought (including from users of audit services and investors) on a number of questions relating to the proposals. The consultation closes on 18 August 2022.
Government review of the UK’s Anti-Money Laundering regime
On 24 June 2022, the Government published a review of the UK’s Anti-Money Laundering and Combatting the Financing of Terrorism regulatory and supervisory regime which considers the systemic, regulatory and supervisory effectiveness of the regime.
The review found that supervisory reform is needed but has not decided on the best approach to achieve this. It plans to consult on options for reform. It also found that the requirements and provisions currently in force are correct but set out some changes to improve the effectiveness of the Money Laundering Regulations.
Register of Overseas Entities (Verification and Provision of Information) Regulations 2022 laid
On 30 June 2022, the Register of Overseas Entities (Verification and Provision of Information) Regulations 2022 (SI 2022/725) were laid before Parliament. These Regulations will implement aspects of the new register of beneficial owners of overseas entities relating to the verification of information about beneficial owners and managing officers. The Regulations are due to come into force on the same date as the relevant provisions of the Economic Crime (Transparency and Enforcement) Act 2022 which provide for the establishment of the register.
QCA publishes survey of non-executive directors of small and medium-sized companies
The Quoted Companies Alliance (QCA) has published the results of its most recent survey of non-executive directors (NEDs) of small and medium-sized companies (SMEs). Information was gathered in Q2 2022 from 107 small and mid-size quoted companies.
Areas surveyed include the average salary of a quoted SME NED, their actual and expected average number of monthly working hours, and the number of NED positions held at any given time. Points of note include companies’ responses to the questions on:
- Where NEDs bring most value: 29% thought NEDs wider business experience, 24% the provision of checks and balances, 19% improved corporate governance and 16% long term vision and planning. Interestingly, 40% of respondents also cited the latter as being the area where NEDs could deliver more value.
- Skills boards currently lack: 60% cited cyber/IT skills while 34% cited ESG knowledge.
- Methods for assessing board effectiveness: 79% conducted self-assessment facilitated by their chair or senior independent director, 17% used external consultants, and 10% conducted self-assessment through the use of external software. Interestingly, the use of external consultants has dropped dramatically from 2019 (where the figure was 41%), but this may be due to the impact of Covid restrictions on the availability and ability of external consultants to conduct evaluations.
The future of corporate criminal liability
Slaughter and May has published a briefing discussing the Law Commission’s recently published Options Paper for reforming the laws on corporate criminal liability for economic crimes.