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NEWS |
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Government targets to reduce administrative burdens for businesses According to a report recently published by BIS, businesses are saving nearly £3 billion a year due to the Government’s simplification programme (of which the new Companies Act formed part). The programme was introduced in 2005 with the target of cutting administrative burdens for businesses by 25% by March 2010. The Government has reported that it is on track to meet this target, with businesses saving £2.9 billion by December 2009. A new target was set by the Government in October 2009 to reduce the administrative burden for businesses of compliance with regulation by a further £6.5 billion each year. The Government intends to achieve this by 2015, concentrating on: » business law: regulatory issues relating to setting up and operating a company (or other incorporated business) including auditing, accounting requirements, the provision of better guidance, insolvency regimes and data protection; » workplace health and safety: regulations and approved codes of practice, primarily dealing with the protection of workers in the workplace; » consumer issues: considering existing consumer law and retailing goods and services, basing this on clear, understandable principles to make compliance easier, especially for small firms; » employment and skills: including obligations within employment law in general, on-line services through government resources, pre-employment checks and integrated employment and skills services; » transport: the simplification of policies and regulations covering transport operations and transport service providers, and the regulation of the manufacturing of transport equipment where they relate to safety; » natural environment: considering the full range of environmental regulation; » built environment: considering planning and building regulations, home buying and selling and the regulation of private and social housing; and » health and social welfare: considering areas such as medicines, research and development (clinical trials), private healthcare, social care, opticians, pharmacy services, health protection and prevention (including alcohol and tobacco), animal health and other areas related to public health which impact on business. In addition to engaging with various stakeholders, the Government has issued a call for evidence and is keen to receive suggestions from businesses of all sizes and other interested parties on which business processes could be improved and how. Responses are requested by 12 February 2010. Further details are available from the BIS website: http://www.berr.gov.uk/whatwedo/bre/policy/simplifying-existing-regulation/simplification-plans/page54027.html. Proposed changes to dividend and interest caps for CICs See CLM ¶65 Following on from the recent consultation (see CLM 2009 Newsletter Issue 3) and wider research on access to finance in the sector, the Regulator of Community Interest Companies has proposed changes to the caps on dividends paid to non-asset-locked bodies and on interest on loans where the rate of interest is linked to the CIC's performance. The following proposed changes are intended to take effect from 6 April 2010: » the maximum dividend per share will be 20% of the paid up value of the share, subject to any lower rate set by the CIC. This will apply to shares issued on or after 6 April 2010. It will not apply retrospectively to shares issued before that date. The maximum aggregate dividend per year of 35% of distributable profits will remain unchanged; and » the cap on interest on loans, where the rate of interest is linked to the CIC's performance, will be 10% of the average amount of the CIC's debt, or sum outstanding under the loan, during the 12-month period before the interest becomes due. This will apply to agreements to pay performance-related interest made on or after 6 April 2010 and will be subject to any lower contractual interest rate. The changes are being proposed to take into account the change in market conditions since the CIC format was introduced. For example, access to finance for all enterprises has become more constrained; an effect which is magnified for CICs because of the perceived higher risks and restricted financial returns. In addition, the ability to attract investment has become increasingly important in terms of the value provided to the public benefit and of being able to recycle the money within the sector and the activities of the CIC constituting a return on investment by a social investor, charity or trust. The Regulator considers that the proposed changes are reasonably cautious but will allow her to monitor their effect in the next review (likely to be in 2 to 3 years time). A copy of the decision can be downloaded from the Regulator’s website: http://www.cicregulator.gov.uk/Response%20to%20the%20consultation%20January%202010.pdf FRC proposes to reform Combined Code See CLM ¶3199 The FRC has launched a consultation on proposals to update the Combined Code, the standard on corporate governance that applies to listed companies. The proposed reforms come in the wake of scrutiny directed at big business in the current economic climate, as a result of which the FRC brought forward its regular review of the Code. Although it has concluded that the Code is generally fit for purpose, the FRC is keen to re-focus companies’ approach to the Code from box-ticking compliance to a genuine consideration of and adherence to the underlying principles. New principles are proposed to emphasise the roles of the different components of the board, including the chairman’s leadership role and non-executive directors’ responsibility to challenge where appropriate and assist in developing strategy. Overall, the board needs to have an appropriate mix of skills, experience and independence in order to function in the company’s best interests. New principles are also proposed that deal with the board’s responsibility for and handling of risk. The other proposals include: » the chairman or board being re-elected annually; » the board being externally evaluated every 3 years; » the chairman carrying out a development review with each director on a regular basis; and » making sure that performance-related pay is linked to the company’s long-term interests and risk policy. The Combined Code is to be renamed the “UK Corporate Governance Code”.
The consultation can be found on the FRC’s website: http://www.frc.org.uk/press/pub2175.html. Comments are invited by 5 March. The revised Code is intended to apply to accounting periods starting on or after 29 June 2010. Improvements to FRSs See CLM ¶4211+ The APB has issued improvements to certain FRSs in order to maintain convergence between UK GAAP and international financial reporting standards. The FRSs that have been amended are: » FRS 11: Impairment of fixed assets and goodwill; » FRS 20: Share-based payment; » FRS 26: Financial instruments: Recognition and measurement; » UITF Abstract 42: Reassessment of embedded derivatives; and » UITF Abstract 46: Hedges of a net investment in a foreign operation. The amendments can be freely downloaded from the FRC website: http://www.frc.org.uk/asb. Support for the EC’s proposals to reduce administrative burdens for micro entities See CLM ¶4356 The European Economic and Social Committee (EESC) has confirmed its opinion in support of the EC’s proposal to allow member states to exempt very small companies (to be known as “micro entities”) from certain administrative and accounting requirements. The EESC acknowledges that the current requirements can be burdensome and disproportionate for micro entities, which often only operate at a local or regional level. The EESC considers that exemption measures for micro entities should be obligatory and introduced promptly throughout the EEA, but also flexible and geared to individual member states. It considers that the changes should be easy to implement and be applied in a transparent manner. The Takeover Code Committee adopts amendments to the Code See CLM ¶6765+ The Takeover Code Committee has published two response statements in which it sets out amendments to the Code, made as a result of two recent consultations (see CLM 2009 Newsletter Issue 3 and CLM 2009 Newsletter Issue 4). The Code Committee has adopted most of the amendments proposed, with some minor changes. Various amendments, which took effect on 25 January 2010, apply to all offers and possible offers which are announced on or after that date. Of the more substantial amendments that were proposed: » management incentivisation: the application of the Code has been extended to management incentivisation arrangements, but only in relation to members of management who are also interested in the target’s shares (unless the incentivisation arrangements are significant or unusual, in which case the Panel must still be consulted). The target’s independent adviser is required to publicly state its opinion on whether the arrangements are fair and reasonable both where agreement on the arrangements has been reached and where discussions have reached an advanced stage. However, they need only consider whether the incentives are fair and reasonable in the context of managers acting in their capacity as such or whether the arrangements also include incentives to them in their capacity as shareholders of the target. The proposed inclusion of the words “as far as the shareholders are concerned” has not been adopted, but the Code Committee has stated that the independent adviser should take all relevant circumstances into account in forming their opinion; » mandatory offers: currently, if a bidder makes a mandatory offer for a company (“B”) where B owns at least 50% of another company (“C”), a “chain principle” can apply in which the Panel may require the bidder to make a separate offer for C (r 9.1 City Code note 8). The Committee has decided not to adopt the lower percentage threshold proposed of 30%, as this might significantly increase the number of situations where this, relatively rare, chain principle would apply. The percentage threshold therefore remains at 50%; » documents on display: certain documents which are required to be available for inspection in hard copy form, from the time the offer document or the target board’s circular is published, must also be made available on a website. These documents include, for example, the auditors’ report where a profit forecast has been used; » proceeding with an offer: a bidder must consult the Panel before deciding not to proceed with an offer that has been announced, and may do so if, for example, a competitor has announced a firm intention to make a higher offer; and » offers subject to competition clearance: a bidder is prohibited from making a new offer for the target where an offer has lapsed because it was referred to a merger control authority (which decided that the offer could not proceed) for a period of 6 months from the date of the relevant authority’s decision. The disclosure regime amendments, to take effect on 19 April 2010, will apply to all offers and possible offers from that date. They include: » the introduction of a new opening position disclosure requirement, in addition to the current Code requirement to disclose interests and dealings in the relevant securities during the offer period. This means that persons with disclosure obligations under the Code will have to disclose their opening positions in the relevant securities: - shortly after the offer announcement (if it is a securities exchange offer); or - when the offer period commences (for all other offers); » extension of the disclosure to a composite basis. This means that disclosures must be made not only in respect of the target’s securities as currently required, but also those of other parties to the offer, except in the case of a cash bidder; » amendments to the contents of a firm intention announcement; and » deleting the Code definition of “associate”, so that the current rules which refer to a party’s associates will be amended to refer instead to “persons acting in concert”. This is intended to avoid the overlap between the two concepts. As part of the consultation the Panel also considered requiring disclosures of securities borrowing and lending positions in the target. In the light of responses received it has decided not to introduce any proposals at this stage but intends to take a further review of this, and financial collateral arrangement generally, at some point in the future. Further details, the revised Code and new specimen disclosure forms are available from the Takeover Panel’s website: http://www.thetakeoverpanel.org.uk. Date set for first corporate manslaughter trial See CLM ¶7179+ The trial date for the first company prosecution under the Corporate Manslaughter and Corporate Homicide Act 2007 has been set (see CLM 2009 Newsletter Issue 3). It is due to take place in Bristol Crown Court from 23 February 2010 and is expected to run for 6 weeks. The case will be very interesting to follow, being the first of its kind. A successful prosecution could set an important precedent in relation to the level of fines likely to be imposed and it will be particularly interesting to see how the court deals with the sentencing guidelines recently published for consultation by the Sentencing Guidelines Council (see CLM 2009 Newsletter Issue 6). |
