Essential Corporate News – Week ending February 24, 2023

FCA: Primary Market Bulletin No. 43

On February 20, 2023 the Financial Conduct Authority (FCA) published edition 43 of its Primary Market Bulletin (PMB 43). 

Equivalence of non-UK regimes (including Chinese GAAP)

One of the matters covered in PMB43 is the equivalence of non-UK regimes for the purposes of the exemption from certain of the financial reporting rules jn DTR 4 set out in DTR 4.4.8R. The FCA is able to exempt third country issuers from certain requirements in DTRs 4 to 6 if the FCA considers the law of the third country in question to be equivalent, or if the issuer complies with requirements of the law of a third country the FCA considers to be equivalent.

The FCA states that it has recently received queries about the financial reporting rules exemption, and particularly whether it deems Generally Accepted Accounting Principles of the People’s Republic of China (Chinese GAAP) to be equivalent. The FCA is satisfied that:

• for a financial year beginning on or before 31 December 2020, Chinese GAAP are equivalent to International Financial Reporting Standards (IFRS) as adopted by the EU in accordance with Regulation (EC) No 1606/2002 as it applies in the European Union; and
• for a financial year beginning after 31 December 2020, Chinese GAAP are equivalent to UK-adopted international accounting standards (within the meaning given by section 474(1) of the Companies Act 2006) for the purposes of the Transparency Rules.

Consequently, in accordance with DTR 4.4.8R, issuers of securities admitted to trading on a UK regulated market with a registered office in a third country, which report their annual and half-yearly consolidated financial statements following Chinese GAAP are exempt from:

• DTR TP 1(36) and DTR TP 1(38); and
• DTR 4.1.6R(1) and DTR 4.2.4R(1).

Further information on the FCA’s position regarding DTR 4 exemptions, the major shareholding rules (DTR 5) exemption for issuers and the information requirements (DTR 6) exemption, is set out on the FCA’s Equivalence of non-UK regimes webpage.

Other matters in PMB43

PMB43 also covers the following:

• The launch of multi-factor authentication for FCA systems, including the Electronic Submission System
• Reminder of deadline of February 24, 2023 for commenting on the FCA’s digital reporting consultation set out in CP 23/2.

(FCA, Primary Market Bulletin No.43, 20.02.2023)

FRC: Corporate governance and stewardship mythbuster

On February 20, 2023 the Financial Reporting Council (FRC) published a short document to explain, among other things, how corporate governance and stewardship intersect. The FRC states that it is committed to promoting high standards of corporate governance and stewardship in the UK, and ensuring that these standards are properly understood and implemented by companies and investors. To help achieve this, the FRC hopes this document will provide greater clarity and understanding of these important topics.

The document sets out brief answers to questions such as “What is ‘corporate governance’?”, “What do we mean by ‘stewardship’?” and “How does the UK Corporate Governance Code support environmental and social issues?”.

(FRC, Corporate governance and stewardship mythbuster, 20.02.2023)

(FRC, FRC dispels misconceptions of corporate governance and stewardship, 20.02.2023)

QCA: The QCA Corporate Governance Code 10 years on

On February 23, 2023 the Quoted Companies Alliance (QCA) published a report on the QCA Corporate Governance Code (QCA Code), first published in 2013, and its impact on governance on AIM. 

Among other things, the report looks at how the QCA Code is perceived and at how reporting against the 10 principles of the QCA Code has changed over time, looking at the first year of adoption in 2018/19, compared with 2021/22.

The report notes that the key areas where disclosures have improved under the Principles of the QCA Code are as follows: 

• Delivering growth: Principle 2 – seek to understand and meet shareholder needs and expectations.
• Maintaining a dynamic management framework: Principle 5 – maintain the board as a well-functioning, balanced team led by the chair; Principle 6 – ensure that between them the directors have the necessary up-to-date experience, skills and capabilities; Principle 7 – evaluate board performance based on clear and relevant objectives, seeking continuous improvement; and Principle 9 – maintain governance structures and processes that are fit for purpose and support good decision-making by the board.
• Building trust: Principle 10 – communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

(QCA, The QCA Corporate Governance Code 10 years on, 23.02.2023)