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Essential Corporate News: Week ending 24 May 2024
United Kingdom | Publication | mei 2024
- FCA: Primary Market Bulletin 49
- DBT: The Registrar (Identity Verification and Authorised Corporate Service Providers) Regulations 2024 published in draft
- Companies House: Draft Registrar’s rules on identity verification published
- DBT: Sustainability Disclosure Requirements – Implementation Update 2024
- Parliament: Draft regulations – The Reporting on Payment Practices and Performance (Amendment) (No 2) Regulations 2024
FCA: Primary Market Bulletin 49
On 21 May 2024 the Financial Conduct Authority (FCA) published Primary Market Bulletin 49 (PMB 49) covering a range of topics covering a range of areas including those summarised below.
Long-term incentive plans (LTIPs)
PMB 49 includes the findings of a thematic review carried out based on a sample of premium listed commercial companies. One aspect of the review was to assess companies’ compliance with disclosure obligations under the Listing Rules (LR) in relation to LTIPs – in this context, PMB 49 identifies certain areas of poor compliance and reminds issuers of their obligations. The other aspect of the review was to assess the nature of the metrics and performance conditions tied to LTIPs – in this context the FCA sets out its findings in relation to use of financial and non-financial metrics.
Global depositary receipts (GDRs)
PMB 49 also includes the findings of a separate thematic review intended to assess whether issuers of the shares underlying GDRs listed on the standard segment of the Official List were meeting certain continuing obligations, including in relation to annual accounts, corporate governance statements, public disclosure of inside information and disclosure of managers’ transactions. The FCA found that for most GDR issuers, more information was published in their home jurisdiction than in the UK, leading to a risk of less information being available to UK investors. In addition to setting out the findings of its review and the level of compliance, the FCA reminders GDR issuers of their continuing obligations (including under the UK Market Abuse Regulation). It plans to continue to use thematic reviews to assess compliance levels among GDR issuers and whether these have improved.
Annual financial reporting
The FCA reminds issuers of their disclosure and filing requirements for annual financial reports, including structured annual financial reporting obligations. It highlights Primary Market Technical Note: Structured digital reporting, which it published in July 2023 as a supplement to DTR 4.1 on the preparation and publication of annual financial reports. The FCA outlines its observations on compliance rates and its current supervisory approach. PMB 49 also flags the structured digital reporting – 2023 insights published by the FRC Lab in December 2023 which sets outs areas of focus for companies and gives suggestions to optimise reporting to meet the needs of investors and other users.
Changes to ethnicity reporting categories
The FCA reminds issuers of changes proposed in CP23/31 (December 2023) to align ethnic reporting categories with updates made by the ONS.
ISSB Standards and transition plans
PMB 49 also includes an update on the consultation timeline on International Sustainability Standards Boards (ISSB) Standards and transition plans based on the UK endorsement process, as announced on 16 May 2024.
DBT: The Registrar (Identity Verification and Authorised Corporate Service Providers) Regulations 2024 published in draft
On 22 May 2024, The Registrar (Identity Verification and Authorised Corporate Service Providers) Regulations 2024 (ID Verification Regulations) were laid before Parliament in draft.
Background
Identity verification for directors, those filing documents at Companies House and certain other categories of person is being introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA). Under new section 1110A Companies Act 2006 (CA 2006), a person’s identity will be “verified” if it has been verified by the Registrar in accordance with regulations setting out the verification requirements, or if an authorised corporate service provider (ACSP) has delivered a verification statement about that person to the Registrar. Once verified, each individual will have a unique identifier allocated to them.
ID verification procedure
Part 2 of the ID Verification Regulations sets out the procedure that must be followed for an individual to have their identity verified or reverified by either the Registrar or by an ACSP.
An identity verification application will need to contain specific information, but the Registrar can require further types of information, evidence and steps to be taken in rules. A draft version of these rules has been published on the Companies House website and these rules are provided for by Regulation 5 of the ID Verification Regulations.
ACSPs
Sections 1098A to 1098H CA 2006 set out the framework for registration of ACSPs with the Registrar. Part 3 of the ID Verification Regulations complements this framework, by making provisions about suspension and cessation of an ACSP’s status and allocation of unique identifiers to them. The ID Verification Regulations also require ACSPs to keep records relating to the identity verification checks they complete as well as requiring them to provide further information to the Registrar and keep it up to date.
The duties to keep records as well as to provide and update certain information to the Registrar are subject to new offences under Regulations 16 and 22 in Part 3 of the ID Verification Regulations. The first offence is committed if a person who is or has been an ACSP fails to comply with the duty to keep records under Regulation 15. This duty is subject to a penalty of imprisonment or a fine (or both). The second offence is committed if a person fails to comply with Regulation 19 or 21 which require, respectively, an ACSP to provide information to the Registrar upon notice, and to notify the Registrar of any changes to particular information contained in their application to become an ACSP. These duties are subject to a summary-only offence for which the penalty on conviction is an unlimited fine.
Unique identifiers
Part 4 of the ID Verification Regulations also makes provision for the allocation and discontinuation of ‘unique identifiers’, which will be allocated to all individuals who have had their identity verified and to ACSPs.
Dates in force
Part 3 of the ID Verification Regulations comes into force when section 66 ECCTA (authorisation of corporate service providers) comes fully into force. Part 4 will come into force when section 68 ECCTA (allocation of unique identifiers) comes fully into force. The remaining regulations will come into force when section 65 ECCTA (procedure etc for verifying identity) comes fully into force.
(The Registrar (Identity Verification and Authorised Corporate Service Providers) Regulations 2024 – draft and draft Explanatory Memorandum, 22.05.2024)
Companies House: Draft Registrar’s rules on identity verification published
On 22 May 2024, Companies House published draft rules pursuant to the power being conferred on the Registrar of Companies (Registrar) by regulation 5 of the Registrar (Identity Verification and Authorised Corporate Service Providers) Regulations 2024, which were published in draft on the same date.
Identity verification for directors, those filing documents at Companies House and certain other categories of person is being introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA). Under new section 1110A Companies Act 2006 (as introduced by ECCTA), a person’s identity will be “verified” if it has been verified by the Registrar in accordance with regulations setting out the verification requirements, or if an authorised corporate service provider (ACSP) has delivered a verification statement about that person to the Registrar.
The purpose of these Registrar’s rules is to set out:
- the contact information, personal information and types of evidence an applicant must provide when applying for verification of their identity; and
- the additional steps an applicant must take in order for their application to be determined.
In broad terms, applicants will have to provide a valid email address which in the ordinary course of events, emails sent to it by the Registrar or otherwise would be expected to come to the attention of the applicant and their current residential address, together with “approved evidence”, as set out in Schedules to the draft rules. That “approved evidence” list will depend on whether an applicant is verifying their identity via the Registrar or via an ACSP.
The draft rules are included on the Companies House guidance page on the Registrar’s rules.
(Companies House, Identity Verification (Draft), 22.05.2024)
DBT: Sustainability Disclosure Requirements – Implementation Update 2024
On 16 May 2024, the Department for Business and Trade (DBT), with HM Treasury and other Government departments, published a policy paper summarising how the UK Government’s Sustainability Disclosure Requirements (SDR) fit together across the financial services sector and wider economy, and when engagement with the proposals is needed.
The policy paper follows a commitment to provide an SDR implementation update to reflect the development of international standards in the 2023 Green Finance Strategy published in March 2023 and it covers a number of areas, including those summarised below.
IFRS Sustainability Disclosure Standards
Following publication by DBT of a framework document which sets out an endorsement and implementation process for IFRS Sustainability Disclosure Standards, it is stated that:
- The Government aims to make the UK-endorsed ISSB standards available in Q1 2025. The endorsement process will assess the standards and, subject to a positive endorsement decision, will conclude with the publication of UK-endorsed standards, to be known as UK Sustainability Reporting Standards.
- Subject to a positive endorsement decision by the Government, and following a consultation process, in Q2 2025, the Financial Conduct Authority (FCA) will be able to use the UK Sustainability Reporting Standards to introduce requirements for UK-listed companies to report sustainability-related information.
- Subject to a positive endorsement decision, the Government will also decide in Q2 2025 on disclosure requirements against UK Sustainability Reporting Standards for UK companies that do not fall within the FCA’s regulatory perimeter.
- The Government expects a decision regarding future requirements to be taken in Q2 2025. At that time, the Government will also consider whether to create exemptions from pre-existing requirements in the Companies Act 2006 for those companies that choose to use the standards on a voluntary basis. Since this will involve consultation (and require Parliamentary approval for the introduction of any new legislation), any changes that may be introduced would be effective no earlier than accounting periods beginning on or after 1 January 2026.
Transition Plan disclosures
Following publication in October 2023 by the Transition Plan Taskforce of its TPT Disclosure Framework, and publication by the ISSB of climate-related disclosure standard IFRS S2, which includes a requirement for companies to disclose details about their transition plan if they have one, the FCA plans, through its consultation on implementing UK-endorsed ISSB standards, to consult in Q2 2025 on strengthening its expectations for transition plan disclosures with reference to the TPT Disclosure Framework.
The Government will also consult shortly on how the UK’s largest companies can most effectively disclose their transition plans.
UK Green Taxonomy
The Government expects to consult later in 2024 on the proposed UK Green Taxonomy, seeking feedback on both the overarching framework and use cases, as well as the specific activity level criteria which defines green activities. After the Taxonomy has been finalised, the Government will introduce a testing period for voluntary disclosures and use for at least two reporting years before exploring mandating disclosures. The Government has not yet decided whether to introduce mandatory disclosures against the Taxonomy.
(DBT, Sustainability Disclosure Requirements: Implementation Update 2024, 16.05.2024)
Parliament: Draft regulations – The Reporting on Payment Practices and Performance (Amendment) (No 2) Regulations 2024
The draft Reporting on Payment Practices and Performance (Amendment) (No 2) Regulations 2024 were published on 21 May 2024, together with a draft Explanatory Memorandum.
These draft Regulations amend the Reporting on Payment Practices and Performance Regulations 2017 (Principal Regulations) and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 (LLP Regulations), which impose a requirement on large companies (“qualifying companies”) and qualifying limited liability partnerships (LLPs) to publish certain information twice per financial year about their practices, policies and performance in relation to paying suppliers. These draft Regulations introduce requirements for qualifying companies and LLPs to publish certain information on practices, policies and performance with respect to retention clauses in any qualifying construction contracts with suppliers.
Such qualifying companies and LLPs will be required to report on standard terms for holding monies in retention in qualifying construction contracts. This will include a statement as to whether the company’s payment practices and policies include or do not include retention clauses. Where a company makes a statement that retention clauses are included, further information about those clauses and the company’s retention practice will be required, together with certain retention payment performance data for qualifying construction contracts in the reporting period.
The draft regulations are expected to come into force on 1 October 2024, and require additional information to be reported by qualifying companies and LLPs for financial years beginning on or after 1 January 2025.
A formal consultation on Principal Regulations 2017 was conducted from 31 January 2023. Through the consultation there was strong support for extending the Principal Regulations beyond the sunset date of 6 April 2024 and for amending and improving the requirements further. These amendments were introduced by the Reporting on Payment Practices and Performance (Amendment) Regulations 2024 (S.I. 2024/444) which came into effect on 5 April 2024.
(Parliament: Draft regulations – The Reporting on Payment Practices and Performance (Amendment) (No 2) Regulations 2024, 21.05.2024 and draft Explanatory Memorandum)
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