Essential Corporate News – Week ending 15 December 2023

FCA: Engagement feedback on the new public offers and admissions to trading regime

On 12 December 2023 the Financial Conduct Authority (FCA) published a summary of feedback received on the engagement papers (EPs) it published in May and July 2023 setting out its initial thinking on how (under the reformed UK prospectus regime) it might write rules in relation to various areas. Whilst the summary focuses on written responses to the EPs, it also reflects the discussions the FCA has had in its broader process of engagement.

The FCA has not indicated its likely approach in response to the feedback, and notes that this will be set out in future consultation paper(s) alongside detailed proposals. It may also undertake follow up engagement with stakeholders on key topics to inform its further thinking on specific proposals.

In terms of timing, the FCA is aiming to publish a consultation (including draft rules) in Summer 2024 and, subject to consultation responses and final approval by the FCA Board, will seek to make final rules in the first half of 2025.

(FCA, Engagement feedback on the new public offers and admissions to trading regime, 12.12.2023)

Takeover Panel: New edition of Takeover Code and amended Practice Statements published

On 11 December 2023, the Takeover Panel published a new edition of the Takeover Code (the 14th edition), to accompany the digital version launched on 27 October 2023.

The new edition of the Takeover Code incorporates the rule changes set out in RS 2023/1 (Rule 21 (Restrictions on Frustrating Action) and other matters) published in October 2023. For an overview of the key changes, see our November 2023 briefing, Frustrating Action: UK Takeover Panel confirms significant changes to Rule 21 restrictions. 

The Takeover Panel has also published new Practice Statement 34 (Rule 21.1 – Restriction on actions by the board of the offeree company), withdrawn Practice Statement 32 (Rule 21.1 – Application following the unequivocal rejection of an approach) and made certain consequential and other changes to a number of other Practice Statements. Details of these amendments can be found on the Practice Statements page of the Takeover Panel’s website.

(Takeover Panel, Panel Statement 2023/15, 11.12.2023)

FRC: Audit market and competition developments – Snapshot

On 14 December 2023, the Financial Reporting Council (FRC) published a short report which sets out recent developments in the audit market and its work on competition over the last year to help inform and support the FRC’s ongoing engagement with stakeholders.

The main developments in the FTSE 350 and wider Public Interest Entity (PIE) audit markets are as follows:

• Audit fees increased between 2021 and 2022. Total PIE audit fees increased by 8% to £1.1bn and total FTSE 350 audit fees increased by 13%.
• Challenger audit firms’ share of FTSE 350 audit engagements grew in 2022 but the Big Four firms (Deloitte, EY, KPMG and PwC) earned 98% of FTSE 350 audit fees (90% of PIE audit fees).
• Some FTSE 350 companies (2 out of 17) switched from a Big Four audit firm to a challenger audit firm but the proportion of FTSE 350 companies making such a switch was lower in 2022 than in 2021 (when 4 FTSE 350 companies switched).
• The largest audit firms continued to earn a greater proportion of their income from non-audit clients than from audit clients in 2022, although growth in audit income at the largest challenger firms outpaced growth in non-audit income.

Going forward, the FRC states that a key area of competition policy work in the year ahead will be market studies, which it sees as a useful regulatory tool for exploring issues in a market and which can lead to a range of outcomes, including richer insights about issues and proposals to improve how a market functions. The FRC plans to begin doing market studies from 2024 to enhance its ability to respond to stakeholder issues and concerns about the audit market. The FRC intends to take a flexible approach, adjusting the scope, scale, resourcing and timings of any market studies to fit the circumstances, including the topic(s) being explored.

The FRC notes that it will seek input from its stakeholders for any market studies. In the meantime, it welcomes any feedback on this snapshot report to help inform its ongoing and future work. Comments are requested by email by 29 February 2024.

(FRC, Audit market and competition developments – Snapshot, 14.12.2023)