Legal development

Ashurst Governance and Compliance Update - Issue 34

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    Equity Capital Markets

    1. FCA publishes latest Primary Market Bulletin

    2. HM Treasury launches Investment Research Review


    3. Parker Review 2023 publishes update on board ethnic diversity

    4. FTSE Women Leaders publishes second review of gender balance on boards

    5. Gender pay gap reporting guidance updated

    Corporate Governance

    6. QCA to update its code of governance

    Narrative financial reporting

     7. PERG publishes its latest report and updated good practice guide

     AGMs in 2023

    8. Filing of shareholder resolutions with Companies House

    Equity Capital Markets

    1. FCA publishes latest Primary Market Bulletin

    The Financial Conduct Authority has published Primary Market Bulletin, Issue 44.

    Diversity disclosures

    By way of reminder, the FCA's 'new' diversity disclosure requirements apply to financial reporting periods beginning on or after 1 April 2022. That means that, while reporting was encouraged on a voluntary basis for earlier reporting periods, the first mandatory disclosures are about to be published.

    A reminder of the rules

    The rules require, among other things, companies in-scope (principally premium and standard listed issuers) to provide a statement in their annual report on a 'comply or explain' basis, setting out:

    • Whether the listed company has met the following targets on board diversity as at a chosen reference date within its accounting period:
      • at least 40 per cent of the individuals on its board are women; 
      • at least one of the following senior positions on its board is held by a woman:

        (A) the chair;

        (B) the chief executive;

        (C) the senior independent director; or

        (D) the chief financial officer; and
      • at least one individual on its board is from a minority ethnic background.
    • In cases where the listed company has not met some or all of these targets:
      • the targets it has not met; and
      • the reasons for not meeting those targets.

    PMB 44 sets out a reminder of all material requirements and the FCA's disclosure expectations. In particular, the FCA emphasises that it expects 'clear and meaningful' explanations as to why targets have not been met. It also reminds issuers that, in instances where individuals on a listed company’s board or in its executive management are situated overseas, with the result that the company is not able to provide personal data required due to data protection laws in that jurisdiction, they should explain the extent to which they are unable to make the relevant disclosures. Again, 'clear and meaningful' explanations are expected.

    How will the FCA undertake reviews?

    The FCA will conduct periodic reviews of annual reports to determine whether listed companies are meeting their disclosure requirements. If a listed company's disclosures do not appear to meet the requirements, the FCA will ask the company to take corrective action, for instance enhancing its disclosures in subsequent annual reports.

    Recognising that many listed companies will be applying these requirements for the first time, the FCA aims to identify areas of concern and disseminate examples of good practice.

    What are the consequences if non-disclosure?

    If a listed company fails to disclose diversity-related information or fails to provide a clear explanation in its annual report, the FCA will request that the company publishes this information via a Regulatory Information Service (RIS), as soon as possible. Further sanctions may also be imposed.

    In addition to considering any non-compliance with the relevant Listing Rules and DTRs, the FCA will consider disclosures identified as containing potentially false or misleading information, including the omission of material facts, likely to cause investor harm or which may breach other relevant FCA rules for environmental, social and governance (ESG) matters (see Technical Note TN 801.2).

    Systems, procedures and practicalities

    The FCA reminds in-scope issuers that:

    • Listing Principle 1 (which requires issuers to take reasonable steps to establish and maintain adequate procedures, systems and controls to enable them to comply with their obligations) extends to establishing and embedding D&I reporting procedures, systems and controls.
    • There is an expectation that issuers will retain records to support both the statements and numerical data disclosed in their annual reports.

    To this end, the FCA states that it expects issuers to have considered the following steps:

    • Reviewing governance arrangements for oversight of D&I targets and reporting, including the roles of the board, sub-committees, and senior management.
    • Understanding the compliance framework, including both new and existing rules and regulations relating to D&I matters.
    • Assessing their existing public narrative reporting of D&I.
    • Establishing or enhancing procedures, systems and controls over data collection and reporting, including for choosing an appropriate reference date for data collected.
    • Where it appears an issuer may not meet the targets or have the relevant data:
      • Ensuring clear and meaningful explanations can be made (which could include possible action plans) as to why the targets have not been met or relevant data has not been obtained.
      • Reviewing the effectiveness of existing board succession and recruitment plans.
    • Identifying legal restrictions which may prevent collection or publication of the required data.

    Note that the Parker Review update report (addressed in the next item) contains 'best practice' suggestions as regards ethnicity self-identification as well as various case studies.

    Regulatory news announcements with multimedia content

    By way of reminder, issuers must use a Primary Information Provider (PIP) (also referred to as a Regulatory Information Service or RIS) whenever they are required to disclose regulated information (per DTR 6.3.3 R (2)). Regulated information includes all information which an issuer is required to disclose under the DTRs, the UK Market Abuse Regulation or the Listing Rules.

    The FCA has become aware of a new practice where some PIPs are offering the ability for issuers to include multimedia content, including audio and video content, in regulatory news announcements.

    The FCA states that it appreciates that this new functionality could help enhance the value of corporate communication. However, it states that multimedia content should not form part of any regulated information submitted for dissemination. To permit it creates a risk of harm to market users through a potential reduction in clarity, particularly if it makes it less clear to the reader what is regulated information, including inside information, and what is not. 

    By way of illustration, the FCA states that permitting such content could mean that regulatory announcements could breach certain DTR and UK MAR requirements, in particular UK MAR Article 17(1) which states that an 'issuer shall not combine the disclosure of inside information with the marketing of its activities'.

    Whilst this risk already exists for regulatory announcements published in text format, the FCA believes the risk is heightened when using multimedia content which may not be subject to the same level of due diligence. Thus, the FCA expects issuers to ensure that any announcements containing multimedia content are compliant with UK MAR in this regard.

    In addition, the DTRs require an issuer to 'communicate regulated information to the media in unedited full text'. The FCA is yet to find a case of regulated information being disclosed in a multimedia format, such as an embedded video clip, but believes there is a risk this could occur. The FCA is particularly alive to the risk that splitting information being disclosed in a regulatory announcement between text format and multimedia content could mislead market users.

    Prospectuses on schemes

    Primary Market Bulletin 30 consulted on a proposed technical note relating to the requirement to publish a public offer prospectus where securities are issued under a scheme of arrangement (draft TN/606.1). The FCA has decided not to move forward with proposed TN/606.1, noting respondents' views that where securities are allotted under a scheme there is no 'offer to the public' and therefore no public offer prospectus is required but adding that the question of whether a prospectus is required is ultimately for the courts to decide.

    2. HM Treasury launches Investment Research Review

    As part of the Edinburgh Reforms (see item 8 of AGC update, Issue 31), HM Treasury has published Terms of Reference: Investment Research Review. The Review will:

    • examine the link between levels of investment research and the attractiveness of the UK as a destination for companies to access capital, both in private and public markets; and
    • then evaluate options and make recommendations to improve the UK market for investment research.

    The Review will report back to the government by mid-June 2023.


    3. Parker Review 2023 publishes update on board ethnic diversity

    The Parker Review Committee has published its update report for 2023.

    Achievement of targets

    The report sets out the results of its latest survey on the ethnic diversity of FTSE 350 boards. The report indicates that, as at 31 December 2022:

    • 96 per cent of FTSE 100 companies met the Parker Review target of at least one minority ethnic director on their boards (up from 89 per cent in 2021);
    • 49 FTSE 100 companies have more than one minority ethnic director on their board; and
    • 18 per cent of all FTSE 100 director positions are held by directors from a minority ethnic group.

    As regards the target for FTSE 250 companies to appoint at least one minority ethnic director by 2024, as at 31 December 2022:

    • 149 companies (equivalent to 60 per cent of all FTSE 250 constituents) already meet the target; and
    • directors from a minority ethnic group hold 11 per cent of all director positions within the FTSE 250 companies which responded.
    New targets

    The report also sets out new targets, including:

    • Each FTSE 350 company will be asked to set a percentage target, by December 2023, for senior management positions that will be occupied by ethnic minority executives in December 2027 (for this purpose, senior management are members of the Executive Committee and senior managers who report directly to them). FTSE 350 companies are encouraged to describe in their annual reports the management development plans they have in place to help create a diverse and inclusive pipeline of talent.
    • 50 of the UK's largest private companies (as defined by the FTSE Women Leaders Review) will be asked to provide ethnic diversity data from December 2023. Such companies should have at least one ethnic minority director on the main board by December 2027. These private companies will also be asked to set a target for the percentage of ethnic minority executives within their senior management teams.
    • The report also notes that companies should seek to encourage as many of their employees as possible to self-declare their ethnicity to enable data to drive decision-making.

    4. FTSE Women Leaders publishes second review of gender balance on boards

    FTSE Women Leaders Review has published its second report focused on gender balance on the boards of the largest companies.

    By way of reminder, the FTSE Women Leaders Review builds on the work of the Hampton-Alexander Review and is an independent, business-led framework supported by the government, which monitors and sets recommendations in respect of women's representation on the boards of, and in senior leadership positions within, FTSE 350 companies and the UK's 50 largest private companies.

    Women on boards (as at 11 January 2023):

    • FTSE 100: Women made up 40.5 per cent of FTSE 100 boards (39.1 per cent in 2021).
    • FTSE 250: Women made 40.1 per cent of FTSE 250 boards (36.8 per cent in 2021).
    • FTSE 350: Women made up 40.2 per cent of FTSE 350 boards (37.6 per cent in 2021).
    • UK's 50 largest private companies: Women made up 31.8 per cent of these boards.
    • The number of FTSE 350 boards that met or exceeded the previous 33 per cent Hampton-Alexander target stands at 319 boards in 2022 (278 in 2021). 31 FTSE 350 boards are yet to meet the 33 per cent 2020 target.
    • 57 boards in the FTSE 100, 137 boards in the FTSE 250 and 194 boards in the FTSE 350 met or exceeded 40 per cent in 2022, thereby also meeting the recommended level of representation in the FCA's Listing Rules (see first item in this update).

    As for individuals on boards:

    • Chairs: There were 19 women Chairs in the FTSE 100 (16 in 2021); 36 in the FTSE 250 (32 in 2021); and 55 in the FTSE 350 (48 in 2021).
    • Senior Independent Directors: There were 37 women Senior Independent Directors in the FTSE 100 (32 in 2021); 93 in the FTSE 250 (83 in 2021); and 130 in the FTSE 350 (115 in 2021).
    • CEOs: There were 9 women CEOs in the FTSE 100 (8 in 2021); 12 in the FTSE 250 (10 in 2021); and 55 in the FTSE 350 (48 in 2021).
    • The FTSE 350 ranked second of 11 other countries considered by the Review based on gender diversity metrics.

    Women in senior leadership (as at 31 October 2022):

    • Women in senior leadership positions – being the Executive Committee and direct reports: 34.3 per cent for the FTSE 100 (32.5 per cent in 2021); 32.8 per cent for the FTSE 250 (30.7 per cent in 2021); 33.5 per cent for the FTSE 350 (31.5 per cent in 2021); and 34.3 per cent for the 50 largest UK private companies.
    • Women on Executive Committees: 28.8 per cent for the FTSE 100 (25.9 per cent in 2021); 25.7 per cent for the FTSE 250 (24.4 per cent in 2021); and 27 per cent for the FTSE 350 (25 per cent in 2021).
    • All male Executive Committees: 10 in the FTSE 350 (16 in 2021).

    Recommendations – a reminder

    By way of reminder, the Review's four recommendations are:

    • FTSE 350 boards and leadership teams should comprise 40 per cent women by the end of 2025.
    • FTSE 350 companies should have at least one woman in the Chair or Senior Independent Director role and/or one woman in the CEO or Finance Director role by the end of 2025.
    • Key stakeholders should continue to set best-practice guidelines or use alternative mechanisms to encourage any FTSE 350 board that has not yet achieved the 33 per cent target for 2020 to do so.
    • FTSE 350 Boards below 33 per cent women should look to the underrepresented gender when considering additional appointments.

    5. Gender pay gap reporting guidance updated

    The Department of Business and Trade has published updated guidance on the production and reporting of gender pay gap information. The revised guidance is intended to be clearer and simpler, removing unnecessary duplication and repetition.

    By way of reminder, any employer with 250 or more employees on a specific date each year (the 'snapshot date') must report its gender pay gap data. This must be reported and published within a year of the snapshot date for every year that an employer has 250 or more employees on the snapshot date.

    Corpporate Governance

    6. QCA to update its code of governance

    To mark 10 years of the QCA Corporate Governance Code, the Quoted Companies Alliance has published a report which looks at the history of the QCA Code and its adoption, how the QCA Code is perceived, how reporting and disclosures have changed over time and how the QCA Code has benefited the market. The Report also covers the progress between 2018 and 2022 of AIM-quoted companies in meeting the QCA Code Principles, charting the extent of disclosure against each of the Code's Principles.

    The QCA has also announced its intention to review the Code during 2023. By way of reminder, the Financial Reporting Council also intends to consult on changes to the UK Corporate Governance Code this year.

    Narrative financial reporting

    7. PERG publishes its latest report and updated good practice guide

    The Private Equity Reporting Group has published its 15th report on conformity with the Walker Guidelines. In doing so it has updated its guide to good practice reporting by portfolio companies under the Walker Guidelines.

    The PERG report covers 73 portfolio companies (2021: 64) that fall within the scope of the Guidelines and the 64 firms (2021: 56) that back them (private equity firms and those operating in a private-equity like manner).

    PERG states that the war in Ukraine, Covid 19, Brexit and the associated rise in inflation and the cost of living have had an adverse impact on many businesses both globally and in the UK. The impact on UK companies is brought out in some of the narrative reporting, with increased disclosure on liquidity, loan covenants and forecasting.

    Other findings include:

    • All portfolio companies reviewed in the sample complied with the disclosure requirements.
    • Fewer companies prepared disclosures to a 'good' standard and no company produced 'excellent' disclosure. Only 52 per cent of those surveyed included a statement of compliance with the Guidelines.
    • Areas were PERG discovered improvement in reporting include on environmental matters, business model disclosure and gender diversity. Areas in need of improvement include disclosure of financial position and in relation to employees.
    • Only 52 per cent of companies included a statement of compliance with the Guidelines in their annual report.
    • The number of 'addendums' required to meet all of the disclosure requirements is increasing year on year. PERG's view is that these should only be used as a last resort to address areas of omission.
    • 11 per cent did not comply with any of the three components of the Guidelines that applied to them: enhanced disclosures, publication of reports and provision of data.

    PERG recommends that firms need to spend more time familiarising themselves and their portfolio companies with the requirements of the Guidelines and consider more carefully when companies may come into scope. Portfolio companies, with support from the professions, should ensure knowledge of the Guidelines' requirements is embedded in the annual reporting cycle, and that companies seek continuously to improve the quality of the disclosures they provide. This is especially true for new companies in the population that have to comply with the Guidelines for the first time.

    The Guidelines are currently being reviewed, including in light of the government's Audit and Corporate Governance reform package. No date has been set for publication or implementation.

    AGMs in 2023

    8. Filing of shareholder resolutions with Companies House

    Companies House has written to customers in relation to the filing of resolutions. By way of reminder, the Companies Act 2006 requires a company to submit a copy of a resolution to the Registrar of Companies in order to comply with several different filing obligations. It has previously been the Registrar’s practice to accept a set of minutes that contains details of the resolution.

    The requirements of the 2006 Act are only that the resolution must be filed. Indeed, the remainder of the minutes filed often contain unnecessary material which does not need to be part of the register and often gives rise to customer requests to remove it after the event.

    Therefore, in line with its aim to improve the quality of information on the register, Companies House will no longer accept a set of minutes which have a resolution embedded within them. In other words, a company will need to file a separate copy of the resolution in order to comply with its filing requirements. Resolutions which are incorporated in minutes will be rejected.

    If you would like to receive future Ashurst Governance and Compliance updates, please contact our Data Compliance Team on

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.

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