Essential Corporate News – Week ending April 21, 2023

HM Treasury: Insider dealing - Draft SI updating Schedule 2 of the Criminal Justice Act 1993

On April 17, 2023, HM Treasury published a draft of the Insider Dealing (Securities and Regulated Markets) Order 2023, (the draft statutory instrument (SI)), along with a draft explanatory memorandum.

The SI updates Schedule 2 of the Criminal Justice Act 1993 (CJA) bringing the securities and markets on which an offence can be committed in the CJA broadly in line with Market Abuse Regulation (MAR). The SI replaces the securities listed in Schedule 2 with the list of financial instruments found in Part 1 of Schedule 2 to the Financial Services and Markets 2000 (Regulated Activities) Order 2001. It also replaces the list of named trading venues with references to the definitions for regulated markets, organised trading facilities and multilateral trading facilities as used in MAR and the Markets in Financial Instruments Regulation.

The SI will come into force 21 days after the day on which it is made.

(HM Treasury, draft The Insider Dealing (Securities and Regulated Markets) Order 2023, 17.04 2023)

(HM Treasury, Draft Explanatory Memorandum to The Insider Dealing (Securities and Regulated Markets) Order 2023, 17.04.2023)

ICGN: Statement on post Covid AGM practices and shareholder rights

On April 19, 2023 the International Corporate Governance Network (ICGN) published a statement cautioning against a rise in virtual-only Annual General Meetings (AGMs), arguing that they can diminish shareholder rights and board accountability.

During the COVID pandemic, emergency legislation was introduced in a number of jurisdictions to permit virtual-only AGMs, but the ICGN comment that since an ‘emergency’ situation no longer exists, it is not now necessary for companies to restrict AGMs to a virtual-only format. The ICGN consider that a hybrid approach is optimal, allowing for both in-person and virtual participation by shareholders. The ICGN believe that virtual-only AGMs should only be conducted in extremis, particularly audio-only meetings which limit facial expression and if it is necessary for a company to conduct a virtual-only AGM, then the reason for this should be explained by the board to shareholders ahead of the meeting.

In the statement, the ICGN reiterate their expectations in relation to AGMs which are as follows:

• A hybrid format is the optimal AGM format allowing for the in-person presence of shareholders whilst also accommodating access to the meeting via electronic or virtual means.
• The date of the AGM should be coordinated with other company AGMs (to the extent possible) to facilitate a wider dispersion of meetings beyond a few days or weeks in any given year.
• AGM materials should be published at least one month ahead of the meeting, including the meeting format and procedures around registration, access, participant identification, shareholding verification and voting options and approach to questions.
• Reliable technology must be used to allow democratic, secure, and efficient access for all participants to the AGM.
• Robust procedures must be established to verify shareholder identification and level of shareholding and to ensure that all participants can attend the AGM and vote on AGM resolutions.
• Shareholder questions should be permitted in advance or during the AGM and adequate time allowed for discussion and any follow up questions or statements.
• Shareholders proposals that have appeared on the ballot or agreed in advance must be permitted and recognised on the AGM agenda, subject to reasonable thresholds
• Vote execution deadlines must be clearly disclosed and the practice of shareblocking or requirements for lengthy shareholding periods to gain the right to vote be discouraged.
• Voting results must be published promptly on the company website after the meeting.
• The meeting minutes, including all proposals, any questions and answers must be recorded and made available to all shareholders of the company.

(ICGN, Statement on post COVID AGM practices and shareholder rights, 19.04.2023)

FRC: Conversation starters to boost investor- audit committee engagement

On April 19, 2023 the Financial Reporting Council (FRC) announced that they have launched a webpage aimed at promoting better engagement between investors and audit committees to facilitate better understanding of companies and their approach to financial reporting and internal control. 

As well as audit committee reports, the FRC consider that direct conversations with audit committee chairs could act as an additional resource, providing insights into the company's approach to regulatory focus and areas of interest to market participants. As a result, and to encourage such conversations, the FRC has developed a series of conversation starters structured by topic, with an initial broad question followed by several more detailed follow-up questions. These are aimed at investors wishing to engage with audit committees and companies on assurance-related topics. 

The topics covered, with suggested conversation starters, follow-up questions and further reading, are as follows:

• Significant matters
• Effectiveness of the audit committee
• Principal risks
• Risks – climate, cyber and fraud
• Audit effectiveness
• Planning the audit
• Auditor appointment and tendering
• Internal controls/internal audit

The FRC will continue to work with relevant stakeholders to ensure that the conversation starters remain relevant and useful.

(FRC, Conversation starters to boost investor-audit committee engagement, 19.04.2023).