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Insurance regulation in Asia Pacific
Ten things to know about insurance regulation in 19 countries.
United Kingdom | Publication | March 2019
On March 6, 2019 the Code Committee of the Takeover Panel (Panel) published Response Statement RS 2018/1 following the receipt of comments on Public Consultation Paper 2018/1 which proposed amendments to Rule 29 of the Takeover Code (Code) which relates to asset valuations.
Having conducted a review of the purpose and operation of Rule 29, the Panel has noted that it does not currently reflect certain aspects of the Panel Executive’s practice. Although it is not intended to materially alter the way in which Rule 29 is currently applied, the Code Committee proposed that a revised Rule be introduced in order to (amongst other things) provide better clarity in certain areas and codify current practice. In light of responses to the consultation, the Code Committee has adopted the amendments proposed in PCP 2018/1 subject to certain modifications.
The following are the key changes to Rule 29
A new requirement to consult the Panel in advance if the publication of information contained in valuation report could constitute a profit forecast is also being introduced in Rule 29.7.
The existing rule that a party to an offer is not normally permitted to publish a valuation of the assets of another party unless supported by an unqualified valuation report is being retained with minor amendments in Rule 29.8.
The amendments to the Code being introduced by RS 2018/1 will take effect on April 1, 2019. The Code, as amended, will be applied from that date to all companies and transactions to which it relates, including those on-going transactions which straddle that date, except where to do so would give the amendments retroactive effect.
(Takeover Panel: Response Statement on asset valuations – RS 2018/1, 06.03.19)
The Takeovers Directive (Directive 2004/25/EC) will cease to apply in the UK on exit day and section 943(1) Companies Act 2006 (CA 2006), which requires the Takeover Panel to make rules giving effect to certain Articles of the Takeovers Directive, will be amended to require the Takeover Panel to make rules in accordance with the new Schedule 1C to the CA 2006 (which will replicate the relevant requirements of the Takeovers Directive, other than those relating to the shared jurisdiction regime, discussed below). This amendment, and certain other amendments to the CA 2006, will be made by the Takeovers (Amendment) (EU Exit) Regulations 2019 (2019 Regulations).
Upon the new section 943(1) CA 2006 coming into force, the Takeover Panel will no longer have a statutory obligation to give effect to Article 4.2 of the Takeovers Directive which sets out a system of shared jurisdiction if a takeover bid is made for a company which has its registered office in one EEA member state and its securities admitted to trading on a regulated market in another EEA member state (but not also on a regulated market in the EEA member state in which the company has its registered office) (the shared jurisdiction regime). Upon the new section 943(1) CA 2006 coming into force, section 3(a)(iii) of the Introduction to the Takeover Code, which implements the shared jurisdiction regime in the UK, will be deleted. Upon the deletion of section 3(a)(iii) of the Introduction, the Takeover Code will no longer apply to an offer for
The Takeover Code will, however, apply in full to an offer for a company which has its registered office in the UK and whose securities are admitted to trading on a regulated market in an EEA member state (but not on a regulated market in the UK) if that company satisfies the residency test in section 3(a)(ii) of the Introduction to the Takeover Code.
Minor amendments are being made to the General Principles of the Takeover Code which will be the same as the general principles in new Schedule 1C of the CA 2006, save that it is being made clear that the Takeover Code’s General Principles will apply to all transactions to which the Takeover Code applies and not only transactions which fall within the definition of a “takeover bid” in paragraph 20(1) of the new Schedule 1C. A few amendments are also to be made to other Rules and Appendices, including providing in Rule 30.4 that documents, announcements and information should be made available to shareholders and employees in the UK, the Channel Islands and the Isle of Man.
The Response Statement notes that it is not yet possible to determine with certainty the date on which these amendments will take effect. The date on which the UK leaves the EU could be extended. Alternatively, if a transition period is agreed in the final version of the Withdrawal Agreement currently being negotiated between the EU and the UK (and the Withdrawal Agreement receives the necessary Parliamentary approvals), then the amendments to the Takeover Code set out in the Response Statement would be expected to come into effect following the end of the transition period. However, if the UK withdraws from the EU in a “no deal” scenario, then the amendments to the Takeover Code set out in the Response Statement will come into effect at 11:00pm on March 29, 2019.
In the case of an offer for a shared jurisdiction company to which the Takeover Code initially applies but to which it will not apply when the Takeovers Directive ceases to apply in the UK, the Takeover Panel’s regulation of that offer will cease when the shared jurisdiction provisions are deleted from the Takeover Code as an offer for the company would cease to be subject to the Takeover Code from that time. The Code Committee would expect the documentation in relation to an offer for such a shared jurisdiction company to make clear that the Takeover Panel’s regulation of the offer would cease on that date. However, in the case of offers for shared jurisdiction companies to which the Takeover Code will apply in full once the Takeovers Directive ceases to apply in the UK, the full requirements of the Takeover Code will be applied to the company and to the transaction with effect from that time (except where to do so would give those requirements retrospective effect) and this should also be made clear in the offer documentation.
(Takeover Panel: Response Statement on the UK’s withdrawal from the EU, 06.03.19)
On March 7, 2019 the London Stock Exchange (LSE) published proposed changes to its rulebooks, including the AIM Rules for Companies and the AIM Rules for Nominated Advisers, that will apply if no transitional or other agreement is reached before the UK withdraws from the EU on March 29, 2019. The purpose of the amendments is to enable the LSE to continue to operate its markets effectively and meet its regulatory objectives.
The AIM Rules for Companies and the AIM Rules for Nominated Advisers refer to EU legislation and to UK law which relates to or refers to the EU, as well as to EU concepts. The changes proposed reflect the UK’s new legal and regulatory framework in the event of a hard Brexit and follow amendments the Government is proposing to make under the European Union (Withdrawal) Act 2018. The changes are set out in marked up copies of the AIM Rules for Companies and the AIM Rules for Nominated Advisers attached to LSE Notice N04/19.
The amendments will become effective as at 11pm on March 29, 2019 in the event of a hard Brexit but will otherwise not come into effect on that day.
(AIM Notice 55, Brexit: Amendments to the AIM Rulebooks, 07.03.19)
(LSE Notice N04/19, Brexit: Amendments to London Stock Exchange Primary Market Rulebooks, 07.03.19)
(Mark up of AIM Rules for Companies – Attachment B to LSE Notice N04/19, 07.03.19)
(Mark up of AIM Rules for Nominated Advisers – Attachment C to LSE Notice N04/19, 07.03.19)
On March 5, 2019 the Financial Reporting Council (FRC) published a position paper setting out how Ethical and Auditing Standards will be developed to respond better to the needs of users of audited financial information, following a recent call for feedback. The position paper addresses the issues that will be developed to support a public consultation on the text of revised standards in the summer of 2019, the intention being that the revised standards will apply to audits for financial periods commencing on or after December 15, 2019.
The position paper makes several proposals, including the following
The position paper addresses implications for auditors and audited entities if the UK leaves the EU without a withdrawal agreement and no transition period (no-deal scenario). The position paper sets out changes that will be made to the standards to reflect changes to the law, including that PIEs will only be UK-incorporated entities; that the prohibition on the provision of non-audit services will apply globally for periods commencing on or after March 29, 2019, and that non-audit services required by EU law will no longer be exempt for the non-audit services fee cap.
The position paper also highlights how the FRC’s work on the standards responds to certain recommendations made by Sir John Kingman in his independent review of the FRC, how proposals are being developed to support the Competition and Market Authority’s Market Study of the UK Statutory Audit Market; and how revisions made to the international Code of Ethics will be incorporated into the FRC Ethical Standard.
The FRC intends to consult on the revised text in July 2019, and for those standards to apply to the audit of financial periods commencing on or after December 15, 2019.
(FRC: Position Paper on 2016 Ethical and Auditing Standards, 05.03.19)
(FRC: Position Paper on 2016 Ethical and Auditing Standards press release, 05.03.19)
On March 4, 2019 the Financial Reporting Council (FRC) launched a consultation on revisions to International Standard on Auditing (ISA) (UK) 570 – Going Concern. The Consultation follows concerns about the quality and rigour of audit and well-publicised corporate failures where the auditor’s report failed to highlight concerns about the prospects of entities which collapsed shortly after as well as findings from recent FRC Enforcement cases. Under the proposed revisions, requirements on UK auditors will be significantly stronger than those required by international standards.
The proposed revisions include
Responses to the consultation are requested by 5pm on June 14, 2019.
(FRC: Revisions to International Standard on Auditing (ISA) (UK) 570 - Going Concern, 04.03.19)
On March 5, 2019 the Council of the European Union approved a proposed regulation to establish a framework for the screening of foreign direct investments into the EU.
The text is in substantially the same form as that adopted by the European Parliament on February 14, 2019 and will, amongst other things
The approved regulation will be published on March 21, 2019 and will enter into force twenty days later and will apply 18 months after that date.
(European Commission: New framework for Foreign Investment Screening press release, 05.03.19)
(European Commission: New framework for Foreign Investment Screening, 05.03.19)
On March 1, 2019 the European Commission launched a Consultation seeking feedback on draft Guidelines on the standardised presentation of the remuneration report under the Shareholder Rights’ Directive.
The aim of the Guidelines is to assist companies in disclosing clear, understandable, comprehensive and comparable information on individual directors’ remuneration which meets the requirements of Shareholder Rights’ Directive. The draft Guidelines provide direction on several matters, including the following
Responses to the Consultation are requested by March 21, 2019.
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