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NEWS ROUND-UP |
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Limited partnership reform See CLM ¶17 Although the Government has decided not to go ahead with its main proposals to reform limited partnership law following the responses to its consultation (see CLM 2009 Newsletter Issue 3), it is taking the opportunity to address some issues pending a decision on the more contentious proposals. It has published a draft Legislative Reform Order which will amend the Limited Partnership Act 1907 (draft Legislative Reform (Limited Partnerships) Order 2009). The Order will clarify the registration requirements for limited partnerships, setting out in more detail what needs to be included in the application for registration and what criteria a limited partnership’s name has to fulfil. It will also provide for a certificate of registration to be provided by Companies House to a new limited partnership on successful registration, which will constitute conclusive proof of when the limited partnership came into existence. The draft Order is expected to come into force on 1 October 2009. Amendments to Community Interest Company Regulations See CLM ¶62+ The Government has published its response to the consultation on its proposed changes to the CIC regulations (SI 2005/1788; see CLM 2009 Newsletter Issue 2 for details of the consultation). While it will proceed as planned with most of the amendments suggested, some notable proposals are not being taken any further at this stage: » the proposal to amend the community interest test by allowing the regulator to take the wider community and public policy into account has been rejected as there was a danger that it would change the regulator’s role too much and impose a quasi-judicial function on him; » the proposal to enable a CIC that is being wound up to transfer its assets to a non-asset-locked public authority or regulatory body has been shelved for now due to concern over how it might work in practice. The Government plans to consult specifically with interested parties to see if the concerns raised can be overcome; and » the questions raised about how to deal with the inconsistency between the requirement for the regulator’s consent for a transfer at an undervalue to an asset-locked body, and the lack of such a requirement where the transfer is for the benefit of the community. Most respondents favoured extending the requirement for consent, but this would move away from a light-touch regulatory approach and may hinder growth. Such transfers are rare and of relatively low value, so the Government will put this issue to one side for now and consider it further. The Government had proposed to leave the provisions dealing with alternate directors in the regulations, on the basis that they do not impose any requirement on CICs. However, it has decided to change its approach in the light of the consultation responses and remove them, leaving CICs to deal with alternate directors in their articles if they wish (as with companies generally). An updated draft of the Community Interest Company (Amendment) Regulations 2009 is available at: http://www.opsi.gov.uk/si/si2009/draft/pdf/ukdsi_9780111481004_en.pdf. They are expected to come into force on 1 October 2009. Updated Financial Reporting Standards See CLM ¶4211+ The ASB has published the following amended FRSs to refer to the new Companies Act and supporting regulations (SI 2008/410): » FRS 2: Accounting for subsidiary undertakings; » FRS 6: Acquisitions and mergers; and » FRS 28: Corresponding amounts. The amended FRSs apply for accounting periods of companies beginning on or after 6 April 2008. They do not make any changes to existing reporting requirements. The amendments can be freely downloaded from the FRC website: http://www.frc.org.uk/asb. EC consultation on the adoption of international standards on auditing in the EU See CLM ¶4290+, ¶4314 The European Commission is consulting with the public on the possible adoption of international standards on auditing, for the audits of all limited companies in the EU. EU law allows the adoption of such auditing standards if they: » have been developed with proper due process, public oversight and transparency; » are generally accepted internationally; » contribute a high level of credibility and quality to companies’ annual accounts; and » are conducive to the European public good. Comments on questions within the consultation paper in relation to the above, and on the scope and timing of adoption are invited by 15 September 2009. The consultation paper can be freely downloaded from the Commission’s website: http://ec.europa.eu/internal_market/consultations/2009/isa_en.htm. European Directive on accounting disclosures for SMEs and consolidated accounts See CLM ¶4356+ A new European Directive has been published which will permit: » small and medium-sized companies to be exempted from the requirement to disclose an explanation of formation expenses in the notes to their accounts; and » parent companies to be exempted from the obligation to draw up consolidated accounts and reports for immaterial subsidiaries. The UK must implement provisions to comply with this directive before January 2011. New OFT guidance on mergers See ¶5507+ Following a consultation process in 2008 (see CLM 2008 Newsletter Issue 3), the OFT has published finalised guidance to companies on its merger review procedures (“Mergers – jurisdictional and procedural guidance” June 2009). The guidance covers various topics, including: » relevant merger situation: a transaction will only fall within OFT’s remit if it constitutes a “relevant merger situation”. The guidance provides an interpretation of the term, and in particular, sets out the circumstances when two enterprises will be considered to have merged and cease to be distinct; » fast-track procedure: this has been introduced so that mergers can be referred to the Competition Commission more quickly (provided that the test for reference has been met). With this procedure, the OFT estimates that it can refer a merger to the Commission in as little as 10 working days after receiving notification from the parties to the merger; » undertakings and orders: the OFT can request initial undertakings at any time while it considers whether to refer a merger. It can then impose initial orders if the parties are unwilling to provide acceptable undertakings within a short timeframe. Even after the OFT has decided to refer the merger, it may still accept undertakings in lieu from the parties (although the OFT has clarified that it will only do so where the undertakings in lieu contain proposals for remedies which are clear cut and ready for implementation); and » informal advice: the guidance clarifies the circumstances where it will provide informal advice on competition issues to the parties involved. These circumstances are in line with existing practice, i.e. the OFT will only consider applications for advice where the parties intend in good faith to proceed with the transaction, and its duty to refer a merger to the Competition Commission is a genuine issue. This new guidance supersedes the OFT’s previously published information on its merger review process. A copy of the guidance can be found on the OFT’s website: http://www.oft.gov.uk/shared_oft/mergers_ea02/oft527.pdf. Consultation on various Takeover Code amendments See CLM ¶6788, ¶6805+, ¶6818, ¶6850, ¶6872+ The Takeover Panel has issued a consultation paper on various proposed amendments to the Code. Many of the amendments are minor in nature and simply codify existing practice, or are designed to remove any ambiguity in the application of the Code Rules. The more substantial amendments relate to the following areas: » mandatory offers: currently, if a bidder makes a mandatory offer for a company (“B”) where B owns at least 50% of another company (“C”), the Panel may require the bidder to make a separate offer for C (r 9.1 City Code note 8). The Panel proposes to reduce this ownership threshold from 50% to 30% (i.e. the Panel may require the bidder to make a separate offer to C’s shareholders if B owns at least 30% of C); » management incentivisation: in general, any favourable conditions to the deal must be available to all of the target’s shareholders, so if the bidder has any incentivisation arrangements with the target’s management, the target’s independent adviser must publicly state its opinion on whether the arrangements are fair and reasonable to its shareholders (r 16 City Code note 4). The Panel proposes to amend this rule to require the independent adviser to state its opinion even when limited discussions on the arrangements have taken place; » documents on display: the Code requires certain documents to be available for inspection from the time the offer document or the target board’s circular is published (r 26 City Code). These include, for example, the auditors’ report where a profit forecast has been used. The Panel proposes to require the parties to the offer to make these documents available on their websites as well; » proceeding with the offer: a bidder is usually expected to proceed with an offer that it has announced unless, for example, a competitor has posted a higher offer (r 2.7 City Code). In practice, the bidder should consult the Panel first before deciding not to proceed. The Panel proposes to codify this practice and require mandatory consultation; and » offers subject to competition clearance: an offer will lapse if it has been referred to a merger control authority, which then decides that the offer cannot proceed (r 12 City Code). However, the current rules do not state the restrictions that will apply to the bidder after the offer lapses. The Panel proposes to amend the rules to prohibit the bidder from making a new offer for the target for 6 months (from the date of the authority’s decision). The consultation is open until 25 September 2009. A copy of the consultation paper is available at: http://www.thetakeoverpanel.org.uk/wp-content/uploads/2008/11/pcp200902.pdf. Insolvency Service reports on first 6 months of new guidelines for pre-packs See CLM ¶8904+ The Insolvency Service has published the results of its review of compliance with SIP 16 “Pre-packaged sales in administration” (see CLM 2009 Newsletter Issue 1) by insolvency practitioners engaged in pre-pack sales during the first 6 months of 2009 (“Report on the First Six Months’ Operation of Statement of Insolvency Practice 16”). During that period the Insolvency Service received SIP 16 information from insolvency practitioners relating to 572 pre-pack sales concerning companies in administration. Of these, 370 cases (65%) were compliant with the requirements of SIP 16. In the 202 cases (35%) that were not compliant the Insolvency Service states that there was significant room for improvement. In particular, there were concerns regarding: » the timing of the SIP 16 information being provided; » the lack of explanation, in a large minority of cases, of the background to the circumstances surrounding the administrator’s appointment, their prior involvement with the company and why the company needed to enter into administration; and » the lack of detailed disclosures and explanations as to the nature of any marketing activity that had been undertaken, any offers received for the purchase of the business or assets of the company, whether any assets were subject to any security (and the amount owed to secured creditors) and in relation to valuations obtained of the company’s business or underlying assets (including goodwill). The Insolvency Service wrote to the insolvency practitioners who had not complied with SIP 16, in most cases requesting further information. In only 3% of the cases, the insolvency practitioner(s) was reported to his appropriate authorising body for consideration for regulatory or disciplinary action. The Insolvency Service points out that a failure to comply does not imply that there was any misconduct on the part of the insolvency practitioner in relation to the pre-pack sale itself, nor a lack of good faith or a failure to act in the interests of creditors. SIP 16 is in its early stages and the Insolvency Service has recognised that there may have been some initial misunderstanding of what is required, or expected. Indeed a recent independent survey undertaken by R3 (the Association of Business Recovery Professionals) indicated that 99% of its member insolvency practitioners believed that they were complying with SIP 16. The report clarifies what information is expected to be provided and the Insolvency Service expects compliance with SIP 16 to improve. It remains confident that SIP 16, when complied with, does give better information to creditors at an early stage and a greater degree of transparency in pre-pack sales. The Insolvency Service acknowledged that many of the concerns raised by the review are not strict requirements of SIP 16 and confirmed that it is looking to make amendments to require: » the information be sent to creditors, and the Insolvency Service, within a set timescale; » full disclosures as to any: - security to which the company’s assets are subject; - valuations obtained; and - director’s financial interests. SIP 16 is only one method by which the Insolvency Service seeks to uncover any misconduct by directors of companies in administration. It also receives information about suspected director conduct issues from insolvency practitioners’ reports (required to be made if it appears that the director(s) is unfit to be concerned in company management, see CLM ¶8856) and complaints from members of the public made via the Insolvency Service hotline, or directly to the CIB (see CLM ¶7195+). The Insolvency Service has considered such information as part of this review and (although the review is in its early stages at present) the report confirms that so far there is no suggestion of a disproportionately high level of director misconduct in pre-pack sales as compared to other company administrations. The Insolvency Service will continue to monitor the information it receives and will report again on the operation of SIP 16 in early 2010. |
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