Essential Corporate News: Week ending December 18, 2020

LSE: Updated AIM Rules for Companies as at January 1, 2020

On December 10, 2020, the London Stock Exchange (LSE) published Notice N20/20 confirming proposed changes to the LSE’s Primary Market Rulebooks, including the AIM Rules for Companies, that will apply following the end of the Brexit transition period on December 31, 2020. Amendments appear in track changes in the document.

Changes include the following:

• References to the FCA’s Prospectus Rules have been replaced in a number of places by reference to the Prospectus Regulation (being the EU Prospectus Regulation as applied in the UK).
• The definition of “International Accounting Standards” has been amended  to make it clear that for a UK incorporated AIM company, this means UK-adopted International accounting Standards in accordance with section 474(1) Companies Act 2006.
• The definition of MAR has been amended to state that it is the Market Abuse Regulation as applied in the UK.
• The guidance on Rules 18 and 19 (Half yearly reports and annual accounts) states that UK incorporated AIM companies must use UK-adopted International Accounting Standards for financial years beginning on or after January 1, 2021 but can continue to use EU-adopted International Accounting Standards as they stand at the end of the transition period for financial years beginning before January 1, 2021.

(LSE, Attachment B to N20/20, Updated AIM Rules for Companies, 10.12.2020)

LSE: Updated AIM Rules for Nominated Advisers as at January 1, 2020

On December 10, 2020, the London Stock Exchange (LSE) published Notice N20/20 confirming proposed changes to the LSE’s Primary Market Rulebooks, including the AIM Rules for Nominated Advisers, that will apply following the end of the Brexit transition period on December 31, 2020. Amendments appear in track changes in the document.

The AIM Rules for Nominated Advisers refer to EU legislation and to UK law, as it relates to or refers to the EU. The Rulebooks also refer to EU concepts. Accordingly, the proposed changes are consequential in nature to reflect the UK’s new legal and regulatory framework from January 1, 2020.

(LSE, Attachment C to N20/20, Updated AIM Rules for Nominated Advisers, 10.12.2020)

LSE: Updated Admission and Disclosure Standards as at January 1, 2020

On December 10, 2020 the London Stock Exchange (LSE) published Notice N20/20 confirming proposed changes to the LSE’s Primary Market Rulebooks, including the Admission and Disclosure Standards, that will apply following the end of the Brexit transition period on December 31, 2020. Amendments appear in track changes in the document.

The Admission and Disclosure Standards refer to EU legislation and to UK law, as it relates to or refers to the EU, as well as to EU concepts. Accordingly, the proposed changes are consequential in nature to reflect the UK’s new legal and regulatory framework from January 1, 2020.

(LSE, Attachment A to N20/20, Updated Admission and Disclosure Standards, 10.12.2020)

BEIS: Non-compete clauses – Consultation on measures to reform post-termination non-compete clauses in contracts of employment

On December 4, 2020, the Department for Business, Energy and Industrial Strategy (BEIS)  launched a consultation on reforming post-termination non-compete clauses in employment contracts. The consultation seeks views on proposals to require employers to pay employees for the period of the restriction; requiring employers to provide additional transparency by providing in writing the exact terms of the non-compete clause before their employment commence; introducing a statutory limit on the length of non-compete clauses; or, alternatively prohibiting the use of such clauses altogether.

For further information, please see here.

(BEIS: Non-compete clauses – Consultation on measures to reform post-termination non-compete clauses in contracts of employment, 04.12.2020)

European Commission: Delegated regulation supplementing the Prospectus Regulation concerning minimum information in prospectus relating to a takeover via an exchange offer, merger or division

On December 16, 2020, the European Commission published the final version of its delegated regulation supplementing the Prospectus Regulation in relation to the minimum information required in a document to be published to benefit from the exemption to publish a prospectus in connection with a takeover by means of an exchange offer, a merger or a division.

The draft regulation was published for consultation in June 2020 and in light of that consultation a more comprehensive exemption document will need to be drawn up on a takeover by means of an exchange offer where:

• The equity securities offered are not fungible with existing equity securities already admitted to trading on a regulated market prior to the takeover and its related transaction.
• The takeover is a reverse acquisition transaction within the meaning of IFRS 3 (Business Combinations).

In those situations, the applicable minimum information content requirements are set out in a new annex to the regulation, Annex II, with the minimum information content requirements otherwise being set out in Annex I to the regulation.

The regulation will enter into force on the 20th day following that of its publication in the Official Journal.

(European Commission, Delegated regulation supplementing the Prospectus Regulation concerning minimum information in prospectus relating to a takeover via an exchange offer, merger or division, C(2020) 8822 final, 16.12.2020)

(European Commission, Annexes to the delegated regulation supplementing the Prospectus Regulation concerning minimum information in prospectus relating to a takeover via an exchange offer, merger or division, C(2020) 8822 final, 16.12.2020)

FRC: Technological resources – Using technology to enhance audit quality

On December 17, 2020, the Financial Reporting Council (FRC) published its response to a consultation it undertook earlier in 2020 to help identify the practical steps it could take to support the use of technology in promoting audit quality and help inform the FRC’s engagement with international standard setters. This follows a thematic review on the use of technology in the audit of financial statements published in March 2020 by the FRC’s Audit Quality review team and comments and recommendations by Sir Donald Brydon in his December 2019 report on audit.

The FRC reports that almost all those that responded agreed that the use of technology could significantly improve audit quality, when deployed at the right time in the audit process and, crucially, by those with the right training. Respondents also agreed that, whilst additional application material and guidance would be beneficial, the current assurance model and audit standards do not represent a significant impediment to the development and deployment of technology in audit.

Training and skillset were identified as many respondents’ primary concerns. A significant majority of respondents saw the recruitment of staff members with the right skillsets alongside the development of appropriate training for current staff (both trainees and experienced), as a priority. Respondents also described significant challenges in accessing high-quality client data in a reliable and consistent format, meaning that the application of technological resources to improve audit quality can be practically challenging to deploy, requiring substantial work on the data itself before analysis can be conducted.

There were a number of discussions around Artificial Intelligence (AI) and Machine Learning (ML) and the response sets out a number of specific actions the FRC proposes to take to address some of the concerns raised.

(FRC, Technological resources – Using technology to enhance audit quality, 17.12.2020)

QCA: QCA Remuneration Committee Guide

On December 9, 2020, the Quoted Companies Alliance (QCA) published an updated Remuneration Committee Guide (2020), which is available to members and for purchase by non-members. The guide takes account of the interests of shareholders, executives, the wider workforce, and other stakeholders in small and mid-sized quoted companies.

Areas covered in the guide include:

• The objectives and responsibilities of an effective remuneration committee.
• Practical aspects of running a remuneration committee such as roles, terms of reference, appointment and meetings.
• The key principles of remuneration and performance measures.
• Directors' reporting obligations, including summaries of the legal requirements and regulatory rules, as well as QCA recommendations where disclosure is not obligatory.
• How to foster good relations with shareholders.
• Information on agenda topics, further detail on disclosure requirements and links to further reading.

The Guide can be purchased from the QCA.

(QCA, Remuneration Committee Guide, 09.12.2020)