Osborne Clarke's quoted company legal news update: February 2015

Welcome to the first edition of Osborne Clarke’s quoted company legal and regulatory news update.
We hope that you find it interesting. If you would like to discuss any of the content, or have a subject that you would like us to cover in next month’s edition, please let one of us know. Our contact details are set out below.

Best practice on managing share dealings by senior executives: Listed company fined £589,000 for breach of listing and disclosure rules

After an investigation lasting more than two years, Reckitt Benckiser has been fined by the Financial Conduct Authority for “inadequate systems and controls to monitor share-dealing by its senior executives in its own shares”. These “contributed to late and incomplete disclosure to the market of share dealings by two senior executives”. The FCA’s investigation followed on from the company’s own discovery of its inadvertent breach of the rules.

So we’ve looked at best practice – for both listed and AIM companies – around monitoring and disclosing senior executive share dealing, following the FCA’s decision.

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Compliance think twice: Sponsor fined £231,000 for failing to tell part of the FCA that key individuals had left

Another FCA fine. Execution Noble has been fined for omitting to inform the regulator that key individuals in its sponsor team had left. This is the first time that the FCA has used its (new-ish) powers to fine sponsors.

A peculiarity of this incident is that Execution Noble had told the FCA about the individuals’ departure. But it had only told the part of the FCA that deals with approved persons. It should also, according to the FCA – and to guidance the FCA had issued in 2013 – have told the UK Listing Authority department at the FCA.

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After the affair: The Panel’s new regime for post-offer undertakings and post-offer intention statements

Kraft-Cadbury. Pfizer-AstraZeneca. After these two takeover battles – one consummated, the other not – the attention of some focused on how what an offeror says when in pursuit of the offeree might be enforced post-deal. This problem was handed to the Takeover Panel, and the result was a new regime for “post-offer undertakings” and “post-offer intention statements” that came into force on 12 January 2015.

We’ve looked at the new rules, how they will be enforced and what they may mean for strategy on takeover deals.

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Interim management statements: Issuers start to stop

Following a rule change on 7 November 2014, it is no longer compulsory for Official List companies to publish interim management statements. Some issuers will continue to release IMSs, particularly those which also have US quarterly reporting obligations. Other companies will no doubt agree with National Grid that “mandatory requirements to publish information can frequently provide an unnecessary focus on matters of little relevance to a long term business”.

The abolition of the IMS only applies to issuers of shares admitted to trading on a regulated market where the UK acts as home Member State and the FCA’s Disclosure Rules and Transparency Rules apply. The EU-wide abolition has yet to happen.

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Guards and guardians: A “cultural” resignation at the Financial Reporting Council?

The Chairman of the Codes & Standards Committee of the Financial Reporting Council – the guardian of UK best practice on corporate governance – has stepped down. The resignation follows his appointment to an executive directorship at high-profile AIM company Quindell and the grant to him of 10.9 million share options to vest over the next 12 months. An apparent although, in the circumstances, perhaps defendable breach of the UK Corporate Governance Code.

We discuss the nuances of the situation in our note.

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Transaction guidelines, the Investment Management Association and ABI Investment Affairs

The IMA has merged with ABI Investment Affairs and from 1 January 2015 is called “The Investment Association”. See the new website here.

One of the final acts of the old Investment Management Association was to update its guidance on aspects of equity capital market transactions. That guidance sets out the views of institutional investors on IPOs, secondary offerings and corporate governance during corporate transactions. We summarise that guidance and pick out key themes in our note.

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Cancellation schemes cancelled: HM Treasury prohibits use on takeovers

In his Autumn Statement the Chancellor announced that it will no longer be possible to use a cancellation scheme on a takeover. Cancellation schemes were often used in takeovers (and still can be – the abolition hasn’t been put into law yet) because the way they work means that no stamp duty is payable.

It will still be possible to use a transfer scheme to effect a takeover. This means that the principal benefit of a scheme – to reduce the threshold required to enable the purchaser to acquire compulsorily the entire issued share capital of the target from (in broad terms) 90% to 75% – will be retained. We cover this, the continued use of cancellation schemes in restructurings and the timing of the prohibition, in our note.

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What is the “people with significant control register”? And are corporate directorships being abolished?

A big and looming development in corporate law is the proposed new “people with significant control register”. Nearly every UK company will have to maintain a PSC register, which will contain information on individuals who ultimately own or control more than 25% of a company’s shares or voting rights, or who otherwise exercise control over the company and its management. The latest from the Government is that these registers will have to be kept from January 2016.

But some good news for listed companies: Main Market and AIM companies that already have to comply with DTR 5 will be exempt from the requirement to maintain this new, public, register.

Another prospective change is the abolition of the regime by which a company can serve as the director of another company. Such “corporate directorships” are being banned – from October 2015, it seems. How a proposed exemption for subsidiaries of large groups will work remains to be clarified.

We have a page dedicated to know-how on these developments. See it here.

18% of people “approved” by the FCA are women: Some data about the UK financial services industry

The Financial Conduct Authority published some data about the UK financial services industry last week. We’re not pretending there are any great themes here – although decide for yourself! – but there are some interesting snippets.

Click here to read more.

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