Essential Corporate News: Week ending April 28, 2023

FRC: Pre-Emption Group Terms of Reference

On April 26, 2023, the Financial Reporting Council (FRC) published Terms of Reference for the Pre-Emption Group (PEG). This meets a recommendation of the Secondary Capital Raising Review which, in their July 2022 report, recommended that the PEG should be put on a more formal and transparent footing with a more formal and transparent governance structure, including terms of reference.

The Terms of Reference set out the following:

Role of the PEG

The Terms of Reference state that the PEG’s role is to:

• monitor practice in relation to the disapplication of pre-emption rights and report annually on the application of the Statement of Principles published by the PEG as well as on observance by stakeholders of the UK pre-emption regime more generally;
• regularly review the Statement of Principles and, if necessary, agree any revisions to them and the supporting template resolutions after consultation with interested parties, and promote stakeholder awareness of the revised Principles;
• monitor whether the processes relevant to pre-emptive and non-pre-emptive issues could operate more efficiently for the benefit of companies and shareholders and, where appropriate and relevant, make recommendations to the appropriate authorities; and
• provide the market with a clear view of what is regarded as acceptable practice when raising equity and equity-related capital non-pre-emptively in the UK equity capital markets.

Membership of the PEG

The Terms of Reference state that the PEG will have at least fourteen members and its membership will represent the key stakeholders in the UK equity capital markets. The key stakeholders who will be represented on the PEG, alongside an independent chair, are specified, with a representative from each the Investment Association and Investor Forum being entitled to attend meetings as observers. The names of the PEG members will be publicised on the PEG’s website.

Other matters included

The Terms of Reference also cover, among other things, the nomination process for membership of the PEG (new members to be appointed by a Nomination Committee) and the process around meetings of the PEG, of which there will be at least two per year to consider market developments, consider any required revisions to the Statement of Principles and to discuss and agree its annual report on pre-emption. A summary of the minutes of any meeting will be publicly available on the PEG’s website which is currently here, hosted by the FRC.

(FRC, Pre-Emption Group Terms of Reference, 26.04.2023)

DBT: New Digital Markets, Competition and Consumers Bill

The Digital Markets, Competition and Consumers Bill (the Bill) was introduced into Parliament on April 25, 2023 and is expected to enter into force in 2024. According to the Government’s press release, the new legislation is intended to “ensure businesses and consumers are protected from rip-offs and can reap the full benefits of the digital economy with confidence”.

In order to achieve this, the Bill will (inter alia):

• strengthen the powers of the Competition and Markets Authority (CMA) to investigate and directly enforce consumer protection law, including a new power to impose penalties on businesses of up to 10 per cent of global turnover;
• update and enhance consumer rights in a number of areas including subscription traps, fake online reviews and prepayments; and
• underpin and provide statutory powers for the CMA’s Digital Markets Unit which will oversee a new regulatory regime aimed at boosting competition in digital markets.

The Government states that the new measures will come into effect as soon as possible following Parliamentary approval, subject to secondary legislation and the publication of guidance.

For more information on the consumer-related aspects of the new Bill, see our briefing here.

(DBT, New Bill to crack down on rip-offs, protect consumer cash online and boost competition in digital markets, 25.04.2023) and (Digital Markets, Competition and Consumer Bill, 25.04.2023)