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Publication
Keeping your dawn raid guidance current
Unannounced inspections or ‘dawn raids’ are used by antitrust authorities to obtain evidence when there are suspicions that individuals or businesses have infringed the antitrust rules.
United Kingdom | Publication | January 2019
Welcome to Essential Corporate News, our weekly news service covering the latest developments in the UK corporate world.
On November 22, 2018 the Investment Association (IA) released their updated Principles of Remuneration accompanied by a letter to Remuneration Committee Chairs to highlight the items of focus for IA members ahead of the 2019 AGM season. Following this, on January 23, 2018 the IA circulated an email explaining that IA members have asked the Institutional Voting Information Service (IVIS) to take a specific approach to pensions and post-employment holding periods at AGMs in 2019.
The approach is to be taken as follows
Executive director pensions
For new appointments (including new joiners and promotions)
For existing directors
The IA asks that companies disclose the pension contribution level which they consider to be the level for the majority of the workforce and that remuneration reports confirm if the pension contributions for new joiners, new appointees or existing executive directors are at the level for the majority of the workforce.
Post-employment holding periods
IVIS will adopt these approaches for remuneration policies and remuneration reports for companies with year-ends on or after December 31, 2018.
In December 2018, the ICAEW published for consultation an Exposure Draft of new guidance for preparers of prospective financial information (PFI). The Exposure Draft updates 2003 guidance, “Prospective Financial Information: Guidance for UK Directors”, and it follows a July 2017 consultation paper which set out a case for updating the 2003 guidance.
As well as updating the 2003 guidance, the Exposure Draft includes general guidance for preparing any PFI, including, on a proportionate basis, any unpublished PFI. It aims to reflect developments since the 2003 guidance was published, such as demands for greater accountability, closer board engagement with management, higher standards of regulation, and investor expectations of cohesion between business strategy, corporate appetite for risk and prospects.
The Exposure Draft is structured as follows
Comments on the Exposure Draft are requested by April 30, 2019. Following the consultation process, guidance in the form of a technical release will be published which will replace the 2013 guidance.
(ICAEW: Consultation on guidance for preparers of prospective financial information, December 2018)
On January 21, 2019 the Financial Reporting Council’s (FRC) Financial Reporting Lab (Lab) published a report, "Artificial intelligence and corporate reporting: How does it measure up?", which considers artificial intelligence and its role in the future of corporate reporting.
The report is the third in a series of technology deep-dive reports exploring how different technologies might impact corporate reporting production, distribution and consumption. It follows from the Lab’s report on blockchain and corporate reporting published in June 2018. It also highlights key decisions and considerations that boards and others need to think about when using artificial intelligence (AI).
The nature of corporate reporting and reporting process challenges
The report highlights the potential uses of AI in corporate reporting and addresses some of the challenges faced across the various stages
Corporate reporting actions and questions
The report emphasises that the quality of company financial and accounting data is critical to the development of AI in corporate reporting, and advises that if AI is to be used to improve the efficiency and effectiveness of companies’ financial processes then they need data that is of sufficient quality and quantity and is relevant to financial decision making.
The report suggests a number of key considerations for companies considering AI-based accounting and finance systems, including: the source of data used to train systems and how quality and lack of bias is ensured; what controls and processes need to be changed or modified to reflect the new system; and, where significant to the company’s operations, how the risks associated with the use of AI and data are being managed and disclosed.
The report acknowledges that the opportunities for achieving efficiencies require a rethinking of processes with AI in mind, and highlights the need to embed the expertise of AI directly into governance, finance, the board, advisers and regulators through training and development. Boards are advised to consider how they are going to meet the challenges that AI brings either through including AI focused individuals in the boardroom, or through wider training.
(FRC: Artificial Intelligence and corporate reporting report – How does it measure up?, 21.01.19)
On January 18, 2019 the International Organization of Securities Commissions (IOSCO) published a statement setting out the importance for issuers of considering the inclusion of environmental, social and governance (ESG) matters when disclosing information material to investors’ decisions.
The statement notes that the disclosure of ESG information in the market has increased in recent years and investors have highlighted that ESG disclosure is necessary to supplement their investment and voting decisions. However, IOSCO has observed that disclosure practices are varied, with the type of information disclosed and the quality of information differing in and between markets. It notes that there are also various disclosure frameworks that issuers can consider on a voluntary basis when disclosing ESG information, including those developed by the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures.
IOSCO encourages issuers to consider the materiality of ESG matters to their business and to assess risks and opportunities in light of their business strategy and risk assessment methodology. When ESG matters are considered to be material, issuers should disclose the impact or potential impact on their financial performance and value creation. In doing so, issuers should give insight into the governance and oversight of ESG-related material risks.
(IOSCO: Statement on disclosure of ESG matters by issuers, 18.1.19)
On January 17, 2019 the World Economic Forum published a report in collaboration with PwC which sets out guiding principles and questions to assist corporate boards in driving climate governance effectively.
The principles built on existing corporate governance frameworks, such as the International Corporate Governance Network’s Global Governance Principles, as well as other climate risk and resilience guidelines such as the recommendations of the Financial Stability Board’s Task Force on Climate Related Financial Disclosures. Each principle is accompanied by a set of guiding questions to help a company identify and fill potential gaps in its current approach to governing climate. The principles are designed to increase directors’ climate awareness, embed climate considerations into board structures and processes, and improve navigation of the risks and opportunities that climate change poses to business.
The eight guiding principles for effective climate governance on corporate boards are as follows
On January 22, 2019 the Home Office published the Second Interim Report from the independent review team which is reviewing the Modern Slavery Act 2015 (Act). The review, launched by the Home Secretary in July 2018, aims to report on the operation and effectiveness of, and potential improvements to provisions in the Act.
The First Interim Report published in December 2018, addressed the role of the Independent Anti-Slavery Commissioner. This Second Interim Report considers the legal application of the Act and transparency in supply chains and addresses the question of how to ensure compliance with the Act and how to improve the quality of slavery and human trafficking statements produced by eligible companies.
The report’s recommendations include the following
(Home Office: Second interim report reviewing the Modern Slavery Act 2015, 22.1.18)
Publication
Unannounced inspections or ‘dawn raids’ are used by antitrust authorities to obtain evidence when there are suspicions that individuals or businesses have infringed the antitrust rules.
Publication
The EU Foreign Subsidies Regulation, or FSR, is intended to prevent or remedy distortions of the EU internal market caused by “foreign” – meaning non-EU – subsidies benefitting companies active in the EU.
Publication
In July 2024, the English High Court handed down a judgment on whether or not the insurers under a charterer’s liability policy were obliged to indemnify third parties, where the insured went insolvent and had not paid the underlying claim to the third parties.
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