The Department for Business, Energy & Industrial Strategy (BEIS) have issued a consultation looking at mandatory climate-related disclosures by publicly quoted companies large private companies and LLPs. The idea behind these proposed changes represent a step forward in environmental, social and governance (ESG) behaviour transparency.
It is proposed that the disclosure regime would apply to those companies who are currently required to produce a non-financial information statements (i.e. those with 500 plus employees which are listed and/or banking and insurance firms); AIM companies with more than 500 employees and other companies or LLPs with more than 500 employees and a turnover of more than £500 million.
For accounting periods starting on or after 6 April 2022, those in scope will be required to factor climate-related disclosures into their non-financial statements within the strategic report. The disclosures will have to be in line with the four principal recommendations put forward by the Task Force on Climate-related Financial Disclosures (TCFD) and not the 11 detailed recommended disclosures.
Those companies which are premium listed are already subject to such disclosures under the listing rules and BEIS intends that these proposed rules complement those in existence.
The consultation closes on the 5 May with legislation introduced once there is time in the parliamentary calendar.
Takeover Code Changes
In response to an earlier consultation the Takeover Panel have published their response relating to the conditions of an offer, regulatory/merger control clearance and the offer timetable.
Rule changes will come into force on 5 July 2021 and will apply to those firm offers announced on or after this date. Those announced prior to the date will be subject to existing rules.
The key changes are:
- Clearance by the European Commission & CMA
The Code will no longer make a distinction between the EC & CMA conditions and other merger control clearance conditions. A bidder may only be able to invoke a condition if the circumstances it is seeking to rely on are material in context to the offer.
- Offer Timetable
A number of changes will be implemented including a requirement that all conditions must be satisfied by Day 60, rather than Day 81. However, there will be a greater ability to freeze the offer timetable where there is outstanding official authorisation or regulatory clearance.
- Long-stop date
Contractual offers will have a long stop date (i.e. the date on which a bidder can seek to lapse an offer if all conditions are not met). Unlike with a Scheme this is not an absolute walk right, but the bidder should have an expectation of being able to obtain consent from the Panel to lapse the offer where there are material regulatory issues.
- Guidance on when conditions can be invoked
Additional guidance on the factors that can be considered when deciding if a bidder should be able to invoke a condition, particularly where the condition relates to an official authorisation or regulatory clearance will be included.
- Clearance by the European Commission & CMA
Publishing Corporate Reporting Reviews
The Financial Reporting Council have announced their new approach to corporate reporting reviews. For the first time they are publishing the summaries of their corporate reporting reviews, of which they generally conduct over 200 to assess if a company’s reports and accounts are compliant with relevant accounting and reporting requirements.
This is being introduced as part of the increasing transparency being introduced to align with the recommendations of the Kingman Review. It should be noted that publication will only be done where the individual companies consent due to existing company law requirements, however as part of the recent consultation (Restoring trust in audit and corporate governance) published by the government there are proposals to remove the requirement of needing companies’ permission, once sufficient safeguards around confidential information are in place.
Our Company Secretarial team is experienced in supporting companies with the management and preparation of their annual reports. Please contact them if you would like to further discuss these issues.
Mid & Small Cap Investor Survey
The Quoted Company Alliance in conjunction with Peel Hunt and YouGov have published their 2021 edition of the Mid & Small Cap Investor Survey entitled ‘Unlocking Growth After Lockdown’.
The findings are based on interviews with 103 UK based fund managers and 141 quoted companies in late 2020. Some of the key findings include that 72% of investors and 52% of companies have found alternative ways to engage during the pandemic which predominantly include online engagement and most believe that this has been a positive development.
Optimism for the future of the UK equity markets is low and respondents felt that decisive action was required to protect and build on mid and small-cap markets. Only 21% of investors and 5% of companies believed that the number of listed companies would increase on UK markets in the future.
Office for Tax Simplification 'Call for Evidence' on Third Party Data Reporting Review
The Office for Tax Simplification (“OTS”) is considering whether and in what ways it could be helpful to individuals for different sources of third-party data to be submitted to HMRC on their behalf, exploring any concerns they may have and whether and in what ways these could be overcome.
The Call for Evidence closed on 9 April 2021 and is likely to be pre-cursor to formal proposals in the event that such measures are to be considered.
The review is looking at the potential for third party data reporting to contribute to improving the taxpayer experience, as well as the principles that should apply in relation to third-party data and taxpayers generally.
The sources of data that the OTS is interested in considering are:
- Bank and building society interest (building on the information already available)
- Dividends of UK companies and distributions from authorised unit trusts
- Distributions from UK and overseas open-ended investment companies
- Pension contributions
- Gift aid payments to charities
- Data from investment and wealth managers, including information about chargeable gains, excess reportable income, interest, dividends and equalisation payments
- Insurance bond chargeable events
The Governance Institute Registrars’ Group, chaired by Computershare, provided both verbal feedback to the OTS and a formal written response to the ‘call for evidence’. That feedback included:
- he proposals would require the collection of National Insurance Number or Tax ID for retail shareholders who might be UK taxpayers. Issuers don’t hold this information and it would be costly to collect.
- If there was a future requirement to collect such data, there would likely be a high proportion of non-documented holders (i.e. non-respondents), resulting in gaps in the reporting.
- On the basis that most shareholders only hold relatively small numbers of shares in a few securities, it was questioned whether the modest benefits for a small number of individuals would be worth the costs of collection.
- Legal change would potentially be required to require/allow companies to collect and store the required data.
We will keep you informed if this information gathering phase evolves into more formal proposals for consideration.
Linking DE&I to Executive Pay
Semler Brossy the executive compensation consultants have published a considered framework and considerations for companies so that they can assess their readiness to include diversity, equity, and inclusion metrics into their incentive programmes. The documents entitled ‘Using Compensation to Promote Diversity, Equity and Inclusion’ suggests alternatives that companies may consider if they are prepared to move forward with metrics. Those companies who are not able to pass the ‘readiness test’ are then advised to consider enhanced reporting as a means of elevating the importance of DE&I in place of implementing metrics.
Going Concern Statements & Disclosures
The International Organisation of Securities Commissions (IOSCO) have published a statement regarding going concern statements and disclosures during the continuing pandemic. Issuers, audit committees and external auditors are reminded of their important roles providing investors with high-quality, reliable, timely and transparent financial information.
Georgeson market update
Georgeson is a leading Corporate Governance advisory and Shareholder Engagement company, and part of the Computershare group
The rise of voluntary say-on-climate proposals
At least 13 companies in Europe and the UK (and more elsewhere) have announced that they will put forward board-sponsored advisory resolutions on their climate disclosures and action plans at their 2021 and 2022 Annual General Meetings. These are commonly referred to as “Say on Climate” votes. This memo covers the proposals announced by European companies so far, as well as the relevant proxy advisor recommendations (where available).
If you would like to receive a copy of this client memo please contact Daniele Vitale.
Australia 2021 AGM Intelligence Report
Computershare fulfils the registry needs of 50% of the ASX200 and in 2020 managed over 2200 virtual and hybrid meetings across the globe. Our expertise enables us to provide in-depth insight into the AGM landscape. This report analyses the AGMs that Computershare helped to deliver in Australia throughout 2020.
Investment Stewardship Engagement Priorities
BlackRock has published its Investment Stewardship Engagement Priorities for 2021.
“In 2021, our priorities reflect our continuing emphasis on board effectiveness alongside the impact of sustainability-related factors on a company’s ability to generate long-term financial returns. We have mapped our priorities to specific United Nations Sustainable Development Goals, such as Gender Equality and Clean and Affordable Energy, and provided high level, globally relevant Key Performance Indicators (KPIs) for each priority so companies are aware of our expectations.”
Top Governance & Stewardship Issues
“Drawing on extensive and differentiated ISS data and research on governance and stewardship trends globally, the report provides timely insight into many key areas of focus this year including diversity and inclusion, climate change, executive compensation, SPAC transactions and shareholder activism.”