​Welcome to your November round-up, where we bring you key dates and the latest industry highlights from the world of registry, along with a market update provided by Geor​geson.​​

This month we cover:

​Industry update

  • AGM's in 2021 - survey results
  • Law Commission – Intermediated Securities 
  • PDMR Notification Changes
  • Annual Review of Corporate Reporting
  • Dividend Timetables
  • s.172 Guidance
  • Ethnic Diversity
  • Global News​
    • Lead on racial diversity, equity and inclusion
    • Virtual Shareholder Meetings​
  • Couch Talk
  • Report on Board Diversity
  • ISS Policy Changes
  • UK
    • ​Mandatory ESG Reporting
    • Climate Risk Reporting
  • ​International
    • ​Proxy Season Review

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Industry update

​Following recent engagement with Issuers, we released a survey in our last newsletter asking issuers some key questions to try to get a better understanding of their views of the 2021 AGM season. While the survey is still open, if you've not responded the current responses have indicated that:

  • If rules on social gatherings and meetings were to broadly stay the same as they currently are, 39% of respondents would still hold a closed-door meeting either in person or electronically, quickly followed by 31% saying that they would look to conduct a hybrid meeting.
  • Whereas if the rules were to be withdrawn and it was possible to allow shareholders to attend in person, then 61% of respondents would return to a traditional meeting, with only 19% still considering holding a hybrid meeting.
  • Issuers expressed that the major influences on their decision for the format of their 2021 AGM would be: 

To hear more on AGMs in 2021 including how technology can help both with the early creation of your reports, things to consider with the likes of your s.172 statement and considerations for conducting your AGM you can watch our webinar on AGMs 2021 – A Governance Perspective held last week.


​In our September newsletter we informed you that the Law Commission had been asked by the Department for Business, Energy and Industrial Strategy to look into intermediated securities, the perceived challenges with ultimate investors exercising rights and consider what if any changes or enhancements could be made to the existing model. 

On 11th November the Law Commission  released their report. As expected, it does not make any recommendations. It does however lay out some potential options as identified during their work with the market and their expert advisory panel, on which we represented the registrar sector.

The report recognises that the current model, through which some investors choose to hold their investments through intermediaries, continues to provide significant benefits by increasing efficiency and delivering economies of scale and convenience for ultimate investors, some of whom hold diverse, cross-border portfolios. However, there remains some criticism over areas such as corporate governance, transparency and uncertainties as to legal rights of ultimate investors.

Some matters discussed within the report include the fact that ultimate investors may not be able to exercise any right to vote without the authority or engagement of the intermediary. The report also discusses the concerns raised by some shareholder groups around schemes of arrangements and the perceived inadequacies of the s.793 provisions within the Companies Act 2006.

The Commission appear to indicate a preference to retain the current model, but work on targeted changes that could alleviate some of the problems felt by market participants. Such work may include greater legal certainty in some areas including previous work of the Commission, enhancing investor rights, improving corporate governance including:

  • Creation of a new obligation to arrange for ultimate investors, upon request, to attend meetings and vote;
  • Extend the application of the Shareholder Rights Directive to ultimate investors;
  • Improve the procedure for s.793 to better help issuers identify ultimate investors
  • Consider removing the 'headcount' test found in s.899 of the Companies Act 2006;
  • Review of the Companies Act 2006 and the Financial Services & Markets Act 2000 by the Commission to identify provisions that inadvertently disadvantage ultimate investors.

The Commission has also recognised the benefits that the introduction of dematerialisation could bring to the market and by extension provide alternative solutions for ultimate investors in how they hold their investments or exercise rights.

The Commission makes clear that it is now for the Government to decide what if any further work should be conducted either by themselves or by the Commission. 

​The new Financial Services Bill, which has been introduced as part of the UK governments post-Brexit transition, will introduce changes to the Market Abuse regime. 

The amendment will ensure that a change to the EU regulation that was introduced in 2019 is applicable to UK law. The change introduces the need for issuers to disclose to the market a transaction within two business days from the date of they are notified. Previously, under UK rules the PDMR had to inform the issuer and the issuer to disclose to the market within the same three days of the transaction occurring.

The bill is due to have it's second reading in the House of Commons on the 9 November and the amendment is expected to be effective from 1 January 2021.

It has been common for many share dealing policies and processes to require notification to the Company within 2 business days to allow time to process the necessary filings and announcements. In light of this change Companies will want to review their share dealing codes and processes, including notification timelines, to ensure they remain appropriate. This is something our Corporate Secretarial team will be happy to discuss further.

​The Financial Reporting Council has published their annual review of corporate reporting, which sets out the key findings based on reviews of annual reports and accounts for periods up until 31 October 2019.

The two most frequently raised topics were in relation to narrative reporting and focused on: 

1. Strategic Reports

Areas of improvement were considered to include the comprehensiveness of the report and whether they gave a fair review. Areas within the report that were felt could be improved further include appropriately addressing non-financial reporting matters and that principal risks including items that merit inclusion such as climate change. 

2. Alternative Performance Measures (APMs)

The FRC expect issuers to continue to follow ESMA guidelines on APMs regardless of the Brexit transition period ending. 

Our team of dedicate Corporate Secretarial professionals will be glad to discuss these findings and the Annual Reporting process with you further.

​The London Stock Exchange has announced that the temporary measures introduced to dividend timetables due to Covid-19 will end on the 2 November.

The measures gave issuers a deferral period of up to 30 days for the payment of dividends, up to a maximum of 60 days from the record date. Now that the measures have ended, cash dividends will have to be paid within 30 days of the record date. 

​The FRC Reporting Lab has released a guidance note on s.172 statements. The note aims to aid companies in considering what content to include, how to present it and facilitate the preparation of the statement.

The key aspects of the note include:

  • Content 

A statement should explain why certain stakeholders are considered key and which methods of engagement were effective and how such engagement impacted decisions or planned actions.

  • Presentation 

The statement must be clearly labelled and ensure it cross-references to other relevant areas of the annual report and where appropriate provide linked case-studies. 

  • Process

Agendas and board papers are identified as helpful prompts on stakeholder related matters.

s.172 statements are an important chance to aide a company in telling its story and linking the wider work which it is undertaking whilst helping to demonstrate the discharging of the general duty owed by Directors. Our Company Secretarial team will be glad to discuss s.172 statements and Director Duties training further should you wish.

​The Investment Association (IA) have published a statement calling for increased transparency in relation to ethnic diversity on boards. 

The IA recognise the progress that has been made in gender diversity following the Hampton-Alexander review but note that the recommendations from the Parker Review on ethnic diversity have been slower to be adopted.

It calls on boards to have greater transparency as to their ethnic diversity to allow investors the ability to assess the progress towards the recommendations. It states that investors expect more than just a statement confirming if a board is meeting the recommendations and that they want to see a disclosure of the percentage of the board that are from an ethnic minority background.

The IA statement came at the same time Legal & General Investment Management began engaging with FTSE 100 boards on the same matter, where they have confirmed that from 2022 they will vote against the chair of a nomination committee of the chair of the board where expectations on ethnic diversity haven't been met.

Our Company Secretarial team added that FTSE100 companies must have at least 1 non-white director appointed by 2021 and FTSE250 companies by 2024. Like the recommendations from the Hampton-Alexander review this should not be treated as a 'one and done' and companies will need to articulate their plans for ensure a robust, diverse, succession plan.

Lead on racial diversity, equity & inclusion

The EY Centre for Board Matters has issued a report looking at how boards can lead on diversity & inclusion. The report explains how it impacts corporate performance and long-term value.

It suggests actions that boards can take to lead on the issue and provides a flexible framework for use by management. These include having the subject as a regular board agenda topic and directing the CEO to establish a management team to develop, implement and report on a dedicated strategy.


Virtual Shareholder Meetings

PwC have released their virtual shareholder meeting lessons learned report. The report identifies a range of common problems and complaints experienced by companies and shareholders.

Such problems include technology, submission and selection of shareholder questions. It also contains some best practice suggestions for issuers who are considering holding virtual meetings in 2021, which includes a series of questions for boards to ask of senior management to ensure a successful meeting. 

Georgeson market update

Georgeson is a leading Corporate Governance advisory and Shareholder Engagement company, and part of the Computershare group

​On 20 October, our own Domenic Brancati, CEO UK/Europe at Georgeson and Rob Hardy, the former Head of Investment Stewardship at JPMorgan had a conversation all around ESG.

Watch their recent couch talk here

​While in prior years investors' focus was largely centered on gender diversity, this report explores how ongoing social unrest and protests over systemic racism have catalysed an expanded view on board diversity to now include consideration of racial and ethnic diversity in 2020.

Find out more about the report here.


​ISS has announced the launch of their annual benchmark voting policy comment period. The announcement comes following the ISS release on 25 September 2020 of the results of their annual global benchmark policy survey.

Find out more about ISS policy changes and survey results here.

UK

​Responsible Investor reports that UK regulator favours mandatory ESG reporting to stop fragmentation

"FRC pitches a Public Interest Report as one-stop shop for non-financial information."

​The Guardian reports on Make climate risk reports mandatory for 480 FTSE firms, say investors

"Group urges UK regulators to impose measure on premium-listed companies."

International

​State Street has published its Proxy Season Review

"This report covers our Stewardship Engagement Guidance to companies in response to COVID-19, the integration of R-Factor™ into our Proxy Voting and Engagement Guidelines, the enhancement of our Proxy Voting Guidelines on board quality and composition, the impact of our Fearless Girl Campaign following its third anniversary, the launch of our new Stewardship Platform to enhance operational efficiency and reporting, Q1 2020 engagement highlights, and regulatory submissions."

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