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Publication
Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Global | Publication | November 24, 2017
Welcome to Essential Corporate News, our weekly news service covering the latest developments in the UK corporate world.
On November 21, 2017 ESMA published its latest version of Q&As on the Market Abuse Regulation (MAR).
ESMA has added two new questions in relation to transactions by PDMRs covering:
On November 16, 2017 Institutional Shareholder Services (ISS) announced updates to its 2018 benchmark Proxy Voting Guidelines (Guidelines) for various regions, including the UK, Ireland and Europe. The updates for the UK and Ireland include a new voting recommendation on virtual meetings following a consultation launched on the topic by ISS in October 2017.
Changes to the UK and Ireland Guidelines include the following:
The updated Guidelines will be applied to shareholder meetings taking place on or after February 1, 2018.
On November 23, 2017 the Financial Reporting Lab (the Lab) published a report on ‘Risk and viability reporting’. The project on risk and viability began in May 2017 and the Lab report examines the views of those companies and investors that participated in the project on the key attributes of principal risk and viability reporting, their value and use. It also provides illustrative examples of reporting favoured by investors.
Principal risk reporting
The Lab found that, since the financial crisis, companies have made enhancements to their risk reporting and investors have seen better engagement with them on how they are managing their risks. A number of developments have been made:
In terms of risk reporting generally, the report notes that:
Viability statements
On the viability statement, companies have found the process of developing their statement to be helpful in better analysing their risk appetite, particularly by incorporating stress and sensitivity analyses into their risk management processes.
In terms of viability statement reporting, the report notes:
The Lab report encourages companies to refer to the Investment Association’s Guidelines for Viability Statements and the Financial Reporting Council’s (FRC) Developments in Corporate Governance and Stewardship where the FRC notes that there is room for improvement in explaining what qualifications and assumptions have been made and the quality of reporting of the principal risk linkages.
The Lab urges companies to be bolder in their viability report disclosures to ensure that they provide investors with better information on the company’s longevity and relevance in the market. The report encourages companies to develop their viability statements in two stages: first companies must assess prospects; and second make their statement of viability.
Next steps
The Lab is keen to hear from readers of the report and asks for comments on its content and presentation. Comments will be taken into consideration when producing future Lab reports.
On November 21, 2017 the report of an independent review into the Financial Reporting Council’s (FRC) enforcement sanctions, chaired by former Court of Appeal Judge Sir Christopher Clarke, was published.
The report makes a number of recommendations, including:
Although the report concludes that it is not appropriate to set a tariff or range for financial sanctions, it does suggest that in certain circumstances a fine of £10 million or more could be appropriate for cases involving seriously poor audit work, carried out by a Big Four firm.
Next steps
The FRC will take the report’s recommendations into account and decide which recommendations it ought to adopt and incorporate into its revised sanctions guidance.
(Review of FRC’s Enforcement Procedures Sanctions, 21.11.17)
On November 21, 2017 the European Commission wrote to stakeholders reminding them that preparation for the withdrawal from the EU is not just a matter for EU and national administrations, but one also for private parties.
The European Commission states that as of the withdrawal date, the EU rules in the field of company law will no longer apply to the UK and this has the following consequences in the different areas of EU company law:
Publication
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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