Climate Related Disclosures
In a recent policy statement, the Financial Conduct Authority (FCA) confirmed that they will be introducing new measures on climate related disclosures for accounting periods beginning on or after 1 January 2021. This means that the first reports containing the new disclosures will be published in spring 2022.
These new measures, mentioned in a recent speech and noted in our December newsletter, will see new rules and guidance introduced. Companies with a UK premium listing are required to make disclosures consistent with the recommendations of the Taskforce on Climate Related Financial Disclosure (TCFD) or provide an explanation if they have not done so.
The FCA plan to consult in early 2021 on expanding the rule to a wider scope of listed issuers. You can find more information about the rule changes on the website.
Our Company Secretarial team will be glad to discuss the TCFD disclosures with you further should you wish.
Remuneration Committee Guide
The Quoted Company Alliance (QCA) have published their 2020 Remuneration Committee Guide. The document is designed to aid committee chairs and members in performing their duties effectively.
The guide covers what an effective committee looks like by providing objectives, responsibilities and advice on how to conduct evaluations. It also considers the key principles of remuneration and performance measures together with directors' reporting obligations.
It provides a view on good practice and aligns to the QCA's corporate governance code.
Our Company Secretarial team advised that it would be useful for Remuneration Committees to review their terms of reference against the QCA code. Our Company Secretarial team will be glad to discuss this further should you wish.
Small and Mid-Cap Sentiment Survey
The Quoted Company Alliance (QCA) together with YouGov have conducted their latest sentiment index survey of small and mid-cap companies.
Over 180 responses were received from both companies and advisors. There appears to have been a change in the level of optimism when compared to the Q2 survey which showed historic lows. Over 60% of respondents expect to be recruiting within the next 12 months and nearly half of the companies responding will be looking to raise capital over the same period.
However, 13% of respondents (up from 0% previously) are unsure on how they will raise the capital required. This is a trend not seen in other surveys conducted.
Corporate Transparency and Register Reform
Following the UK government's consultation in 2019 and their subsequent response in 2020 that looked at options to enhance the role of Companies House and increase transparency of UK companies, the government have now published three consultations.
The consultations close on 3 February 2021, and the government expects to provide details on how they will proceed later in the year as most of the proposed changes will require primary legislation.
The consultations cover:
Increasing the power of Companies House
There are a range of proposed changes that claim to assist Companies House in combating economic crime and improve the integrity of the information they hold. The proposed powers include the ability to query information where there is an error, inaccuracy or anomaly which is fraudulent, suspicious or could impact the integrity of the information held on the UK market.
More striking is that the government intends to proceed with the introduction of a requirement for individuals to be verified prior to being validly appointed as a director. As such, the consultation is looking at removing the requirement for companies to keep a register of directors.Financial Information filed at Companies HouseThis consultation considers improvements to the quality and value of financial information filed with the registrar.
The proposals include reducing the timescales for filing accounts in the hope that accuracy is improved by having data that is more up to date. The consultation considers reducing the deadline for public companies to three months and for private companies to six months. The consultation is also proposing that all financial accounts must be filed digitally, and that information should be tagged using extensible business reporting language (XBRL) to allow it to be machine readable.Ban on Corporate Directors
The government is seeking to ban corporate directors as it feels that use of such directors can provide a shield to illicit activity and therefore weakens corporate governance.
The ability to introduce the ban already exists within the Small Business, Enterprise & Employment Act 2015 but has never been used. However, the government is seeking views on possible exceptions which will be principle-based to permit corporate directors if all other directors are natural persons and those individuals have been verified prior to the corporate directors' appointment.
These are interesting developments which will require close monitoring to see how the consultations proceed. These consultations highlight the growing focus on statutory compliance obligations for companies, our Company Secretarial team will be glad to discuss how they can assist you with this.
Government response to the consultation on expanding the Dormant Assets Scheme
Following on from the dormant asset consultation published by the Department of Digital, Culture, Media and Sport in February 2020, the government have now published their response.Because of the widespread support for the proposed expansion of the existing scheme the government will be proceeding by including insurance, pension, investments, wealth management and securities in the newly expanded scheme.Remaining at the heart of the expanded scheme will be the concept of tracing, verification & reunification and the securities sector is being called upon to set up an industry best practice so as to ensure consistency for those issuers who opt to voluntarily participate in the scheme.One of the key things to note is that the definition of dormancy for shares and dividends is being set as:• No contact has been made in relation to the assets by or on the instructions of the owner for 12 years since the owner has been identified as gone-away, in line with industry best practiceAnother item that Issuers will be interested in is that the concept of reclaim value is going to be formalised by the Government so that it reflect the most common market approach found, such as those found in Articles of Association in relation to forfeiture. However participants of the scheme will still have to agree that reclaim values will be the same for all owners of the same class of shares, therefore, if an issuer participates in the scheme and later opts to leave the scheme they could be tied to providing identical reclaim values used by the scheme.The government will seek to amend legislation and model articles in due course as parliamentary time allows. We’ll continue to participate with the government and industry groups on this subject and keep you informed.
A new corporate governance podcast series has been launched by Freshfields Bruckhaus Deringer that looks at core governance topics for public companies from a big picture perspective.
Highly relevant for those new to a governance role or those seeking a refresher, the episodes are on average 10 minutes long and can be listened to on a one-off basis. Topics covered include
- Taking control of the narrative
- Virtual shareholder meetings
- C-suite succession planning
- Intercompany communications
- Human capital management
- Secrets of board evaluations
European Company Law and Corporate Social Responsibility
The European Commission have published a study that provides an overview of the CSR policies and legislation within several key member states of the EU. The study looks at France, Germany, Italy, the Netherlands, Poland and Spain and pays particular attention to due diligence.
Nasdaq – Board Diversity Listing Requirements
Nasdaq have filed a proposal with the Securities and Exchange Commission (SEC) to amend a listing rule that will require listed companies to:
- Disclose board diversity data in a prescribed format within a year of the date of the approved rule change via a disclosure in their shareholder meeting proxy or on their corporate website;
- For companies listed on the Global Select Market or the Global Market tiers to have or explain the absence of one diverse director within two years of the rule change and to have or explain the absence of two diverse directors (one female director and one underrepresented minority or LGBTQ director) within four years.
- For companies listed on the Capital Markets tier to have one diverse director within two years or explain the absence and have at least two within five years or again explain their absence.
Smaller reporting companies and foreign issuers may meet the new requirements with two female directors and will take into account home country variations on diversity for foreign issuers.
Board ESG Oversight Guide
PwC have released a new guide aimed at aiding directors' in ESG oversight. ESG Oversight: The Corporate Directors' Guide is designed to give readers the 'what', 'why', and 'how' of oversight by explaining high-level terminology, reporting, investor, regulator and other stakeholder interests. It also provides information on disclosure frameworks and standards including TCFD.
The guide suggests dividing oversight responsibilities across the board and key committees.
Georgeson market update
Georgeson is a leading Corporate Governance advisory and Shareholder Engagement company, and part of the Computershare group
Memo on Glass Lewis 2021 Policy Updates
EuropeanIssuers webinar on the Role of Corporates in Sustainable Finance
ESG fuelling shareholder activism
Alpha Week reports on ESG issues fuelling shareholder activism growth
"Nine out of ten U.S. institutional investors think shareholder activism will surge in importance as environmental issues drive increased levels of engagement, research shows."
Activism in an age of COVID
Financier Worldwide reports on Shareholder activism in the age of COVID-19
"For shareholders contemplating or already conducting an activist campaign, COVID-19 has created practical obstacles and shifts in timing and strategy, as well as new opportunities."
ShareAction has published a report named Voting Matters 2020. Are asset managers using proxy voting for action on climate and social issues
"Asset managers are still not effectively using their proxy voting power when it comes to environmental and social issues."
COVID puts bullseye on UK companies
Wealth Manager reports that Covid-19 puts activist bullseye on UK companies
"UK companies are set to become the main targets of shareholder activism in Europe, with 60 companies predicted to be at risk by law firm Alvarez & Marsal."
Church of England divest
"The Church of England's National Investing Bodies (NIBs), comprised of the Church Commissioners for England, the Church of England Pensions Board and CBF Church of England Funds announced the addition of nine companies to its restricted list, due to the companies' failure to meet the standards of the NIBs' 2020 climate change hurdles. The NIBs also announced that twelve companies avoided being added to the list due to positive changes, including setting emissions targets and improving climate-related disclosures and transparency."
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