Essential Corporate News: Week ending October 23, 2020

LSE: N16/20 - Dividend Procedure Timetable – Coronavirus (COVID-19)

On October 16, 2020 the London Stock Exchange (LSE) published Market Notice N16/20 withdrawing the temporary measures that were put in place in March 2020 in N07/20 in relation to payment dates under the LSE’s Dividend Procedure Timetable in light of the challenges and uncertainties caused by COVID-19. 

The temporary measures permitted the deferral of dividend payments but are being withdrawn from November 2, 2020. After that date, issuers announcing cash dividends need to revert to the standard 30 business day period from the record date within which the dividend should be paid. 

The Market Notice also states that the Dividend Procedure Timetable for 2021 has been published.

(LSE, N16/20 - Dividend Procedure Timetable – Coronavirus (COVID-19), 16.10.2020)

FRC: Annual review of corporate reporting 2019/20

On October 21, 2020, the Financial Reporting Council (FRC) published the results of its review of 216 sets of company accounts in the last year, including the “top ten” areas where improvements to reporting quality are needed so users of accounts have a clearer understanding of company performance and position. The FRC notes that this will be particularly relevant for future reporting when companies have to explain the effects of the COVID-19 pandemic.

The report sets out the FRC’s views on the current state of reporting in the UK, what makes for better quality reporting and where it sees shortcomings requiring improvements. Case studies and disclosure examples are provided to illustrate key findings, areas for improvement and better disclosure examples. 

The ten topics raised most frequently with companies are considered in detail in the report and are as follows:

• Judgements and estimates.
• Impairment of assets.
• Revenue.
• Financial instruments.
• Alternative performance measures.
• Strategic Report.
• Statement of cash flows.
• Provisions and contingencies.
• Fair value measurement.
• Business combinations.

The FRC’s priorities in monitoring annual reports and accounts prepared in 2020/21 will focus on the following:

• Disclosures addressing risk, judgement and uncertainty in the face of the ongoing social and economic impact of COVID-19.
• The potential consequences of geopolitical tensions and the UK’s exit from the EU.
• Climate-related risks.

(FRC, Annual review of corporate reporting 2019/20, 21.10.2020)

Parliament: Financial Services Bill 2019-21 – MAR provisions

The Financial Services Bill 2019-21 was introduced to Parliament on October 21, 2020. It aims to ensure that the UK’s regulatory framework continues to function effectively after the UK leaves the EU. As a result, it includes, among other things, amendments to the version of the EU Market Abuse Regulation that will form part of retained  EU law after the end of the transition period and so continue to apply in the UK (UK MAR).

The changes to UK MAR made by the Bill are as follows:

• Inside information and insider lists – The Bill clarifies who is required to maintain an insider list, establishing that issuers and any person acting on their behalf or on their account are all required to maintain such a list. It is noted in the explanatory notes that this is intended to remove any confusion about whether issuers’ advisers are required to draw up their own insider lists.
• Transactions by persons discharging managerial responsibilities (PDMRs) and persons closely associated (PCAs) with them – In line with changes to be made to EU MAR, the Bill amends the timetable in UK MAR within which issuers are required to disclose transactions by PDMRs and PCAs to the public, so that issuers will be required to disclose transactions within two working days of those transactions being notified to them by PDMRs/PCAs. 

In addition, the maximum criminal sentence for market abuse is being extended from seven years to ten years as a result of amendments made by the Bill to the Criminal Justice Act 1993 and the Financial Services Act 2012.

The date for the second reading of the FS Bill has not yet been announced.

(Parliament, Financial Services Bill 2019021, 20.10.2020)

(Parliament, Explanatory Notes to Financial Services Bill 2019-21, 20.10.2020)

Investment Association: FTSE 100 cut executive pensions under shareholder pressure

On October 17, 2020, the Investment Association announced in a press release that significant progress has been made in bringing executive pension contributions in line with those received by the majority of the workforce, as requested by investors. As well as providing statistics in relation to this, the press release also looks at the issues and resolutions which have resulted in FTSE All-Share companies being added in 2020 to the Investment Association’s Public Register which tracks votes of 20 per cent or more against a particular resolution at a shareholder meeting.

So far as pension contributions are concerned:

• 98 per cent of FTSE 100 companies analysed aligned new directors’ pension contributions with those of the workforce or have committed to do so.
• 14 FTSE 100 companies reduced existing directors’ pension contributions and 43 more have committed to do so in the future. Six are increasing their workforce rate.
• Ten FTSE 100 companies were red-topped by IVIS for having at least one existing director receiving a pension contribution of more than 25 per cent or more with no commitment to align this to workforce contributions by the end of 2022 and two were red-topped for not committing to align new directors’ pension contributions with workforce contributions. 

In relation to the Public Register, fewer FTSE All-Share companies were added to it in 2020 than in 2019. Executive pay and director re-elections saw the greatest number of shareholder votes against though almost 90 per cent of those companies added to the Public Register made a public statement on how they would respond to the dissent.

(Investment Association, FTSE 100 cut executive pensions under shareholder pressure, 17.10,2020)

FRC: Amendments to FRS 104 Interim Financial reporting – Going concern

On October 19, 2020 the Financial Reporting Council (FRC) published amendments to FRS 104 in light of inconsistencies between the requirements for assessing and reporting on the going concern basis of accounting when preparing interim financial reports in accordance with EU-adopted IFRS and FRS 104 Interim Financial Reporting. 

While FRS 104 is based on the requirements of IAS 34 Interim Financial Reporting, it was brought to the FRC’s attention that FRS 104 did not contain requirements explicitly covering the need for management to assess the entity’s ability to continue as a going concern and disclose any related material uncertainties when preparing interim financial statements. The amendments to FRS 104 introduce requirements covering going concern in a similar way to EU-adopted IFRS so as to ensure consistency between interim financial reports prepared in accordance with IAS 34 and FRS 104. 

The effective date for these amendments is interim periods beginning on or after January 1, 2021, with early application permitted.

(FRC, Amendments to FRS 104 Interim Financial Reporting – Going concern, 19.10.2020)