On 19 January 2022 the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 (“CFD Regulations”) were published. They will come into force on 6 April 2022 and apply in respect of any financial year of a company which commences on or after that date.
The Financial Conduct Authority (“FCA”) published its Primary Market Bulletin 36 yesterday.
It introduces specific Task Force on Climate-related Financial Disclosures (TCFD) aligned climate-related disclosure requirements for listed companies and sets out the FCA’s disclosure expectations and supervisory strategy. Transparency remains key to the FCA’s ESG Strategy which was released at COP26.
The Financial Conduct Authority has published its final changes to the Listing Rules in order to encourage SPACs (special purpose acquisition companies) to list on the London Stock Exchange. The new rules will come into force on 10 August 2021.
The FCA consulted previously on the listing of SPACs, noting the need to balance investor protection with the desire to encourage SPACs to list on the Main Market.
The Financial Services Act 2021 has been published, making it the first financial services primary legislation passed by the UK Parliament since the UK left the European single market.
There are some important future changes that issuers need to be aware of.
Directors’ reporting and the statutory audit have taken a battering in light of recent corporate catastrophes such as Thomas Cook Group plc, Carillion plc and BHS. In response, the government commissioned three independent reviews in 2018: Sir John Kingman’s Independent Review of the Financial Reporting Council (FRC), the Competition and Market Authority (CMA)’s Statutory Audit Services Market Study and Sir Donald Brydon’s Independent Review of the Quality and Effectiveness of Audit.
Many listed companies are now starting to prepare for the 2021 annual general meeting (“AGM”) season and plan their next annual report.
This note summarises what we think will be some of the key agenda items for 2021.
On 18 January 2021, the Investment Association (“IA”) published its shareholder priorities for listed companies in 2021. The publication:
The Department for Business, Energy and Industrial Strategy has opened a consultation on the Government’s proposed approach to restricting the use of corporate directors as part of its larger package to enhance corporate transparency, reform Companies House and fight economic crime in the UK.
On the one hand, corporate directors may be seen to weaken corporate governance by preventing individual accountability yet on the other, they may be a useful and legitimate option.
On 16 November 2020, the Investment Association (“IA”) published amendments to its principles of remuneration for 2021 and updated its guidance on COVID-19 and executive pay.
IA Principles
The covering letter to chairs of remuneration committees of FTSE 350 companies highlights the main (minor) changes to the IA principles which essentially seek to clarify investor expectations on the following issues:
The use of non-financial performance measures, in particular environmental, social and governance (“ESG”) related measures – on trend with companies increasingly incorporating material ESG risks into their incentive plans, companies will need to ensure ESG performance conditions are clearly linked to the company’s strategy. However, the IA’s view remains that financial targets should comprise the majority of any annual bonus.
Deferral of bonuses – where a bonus opportunity is more than 100% of salary, a proportion should always be deferred into shares, not given as cash.
Post-employment shareholding requirements – companies should explain what mechanisms are in place to enforce shareholding policies once a director has left the company.
The FRC have published a discussion paper in which they question whether the traditional concept of the annual report remains fit for purpose. Arguably, annual reports are too long, impenetrable and fragmented. In looking at the future of corporate reporting, the challenge is how to balance the need for more concise reporting against demands for more transparency.
