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M&A hub: Developments driving and shaping M&A
Key legal and regulatory developments driving and shaping M&A
Essential Corporate News: Week ending 30 June, 2023
United Kingdom | Publication | June 2023
- ISSB: Inaugural global sustainability disclosure standards
- FRC Lab: Insight report – Disclosure of dividends revisited
- Financial Services and Markets Bill receives Royal Assent
- Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023
- Companies House: Guidance on filing update statements for overseas entities
ISSB: Inaugural global sustainability disclosure standards
On 26 June 2023, the International Sustainability Standards Board (ISSB) issued its inaugural standards IFRS S1 and IFRS S2 (Standards) together with associated guidance. The Standards are intended to help improve trust and confidence in company disclosures about sustainability and are designed to ensure that sustainability-related information is provided alongside financial statements in the same reporting package. The final Standards follow on from the publication of exposure drafts in March 2022.
IFRS S1 includes disclosure requirements designed to enable companies to communicate to investors about the sustainability-related risks and opportunities they face over the short, medium and long term. IFRS S2 covers specific climate-related disclosures and is designed to be used with IFRS S1. Both Standards incorporate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). They are effective for annual reporting periods beginning on or after 1 January 2024, with earlier adoption permitted provided both Standards are applied.
The ISSB will now work with jurisdictions and companies to support adoption of the Standards.
The launch of the Standards has been welcomed by the FCA which notes that, once they are available for use in the UK, it intends to update its climate-related disclosure rules to reference them.
For more information see here.
(IFRS: Press release, ISSB issues inaugural global sustainability disclosure standards, 26.06.2023)
(IFRS S2 and associated guidance: Climate-related Disclosures, 26.06.2023)
FRC Lab: Insight report – Disclosure of dividends revisited
On 29 June 2023, the Financial Reporting Council’s FRC Lab published a report which revisits key themes from its November 2015 project report ‘Disclosure of dividends – policy and practice’. It reconsiders them with the current economic environment in mind and it highlights reporting tips and examples to help companies with their dividend-related disclosures.
The report notes that it is not only investors who are interested in the decision-making around dividends, but also a wider set of stakeholders interested in the stability of a company and its future prospects. Whilst in the medium term, the UK Government intends to introduce legislation for additional disclosure in this area (including a Statement of Distributions for certain companies as explained in its response to the White Paper ‘Restoring trust in audit and corporate governance’), there are aspects where more focused disclosure would already be useful to investors and other stakeholders.
The report states that whilst the general expectations of good disclosure around dividends remain, it should also reflect the new macroeconomic context and even when a company makes no change to the dividend policy, it is helpful for companies to explain and contextualise the decision.
The FRC Lab’s review of current market practices has identified three factors that are changing the context in which investors assess dividend policy:
- Macro: How does the policy reflect Macro factors such as economic slowdown, inflation and interest rate environment, etc.
- Market: How does the policy reflect market factors such as peer comparison, the need to respond to industry trends, etc.
- Entity: How does the policy reflect company factors such as the need to invest in green transition, financing and debt repayments, staff and customer support, etc.
It then provides an example of a helpful disclosure in relation to each of these factors.
(FRC Lab, Insight report – Disclosure of dividends revisited, 29.06.2023)
Financial Services and Markets Bill receives Royal Assent
On 29 June 2023, the Financial Services and Markets Bill received Royal Assent. The new Financial Services and Markets Act 2023 is a landmark piece of legislation, intended to ‘seize the opportunities of Brexit by tailoring financial services regulation to fit UK markets’.
For more information see our Regulation Tomorrow blog post here.
Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023
On 22 June 2023, the Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023 (Regulations) were laid before Parliament together with an Explanatory Memorandum. The Regulations were made in exercise of powers under the Economic Crime (Transparency and Enforcement) Act 2022 (Act) and came into force on 23 June 2023.
The Regulations confer power on the Registrar of Companies for England and Wales (Registrar) to impose a financial penalty on a person if satisfied (beyond reasonable doubt) that the person has engaged in conduct amounting to an offence under Part 1 of the Act (registration of overseas entities). They also, amongst other things, cover the process by which the Registrar may issue warning and penalty notices and the mechanism and process for appeals against the issue of a penalty notice.
Companies House: Guidance on filing update statements for overseas entities
On 28 June 2023, Companies House published guidance on how to file an update statement for an overseas entity pursuant to the Economic Crime (Transparency and Enforcement) Act 2022. An update statement must be filed every year by all overseas entities on the register of overseas entities (although they can be filed more frequently). From August 2023 it will be possible to file overseas entity update statements on line.
The guidance covers what an overseas entity update statement is, when it needs to be filed, who can use the service, what information needs to be reviewed/updated, what to do if there are trusts involved in the overseas entity, how to get an authentication code and what verification checks need to be completed.
(Companies House: Guidance - File an overseas entity update statement. 28.06.23)
Law Commission: Final report on digital assets
On 27 June 2023, the Law Commission published its final report on digital assets, which sets out recommendations for reform and development of the law on digital assets with the aim of securing the UK’s position as a global crypto hub. For more information see our separate blog post Law Commission publishes final report on digital assets.
(Law Commission: Digital assets - summary of final report, 27.06.2023)
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Head of Corporate, M&A and Securities, Europe, Middle East and Asia
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