Welcome to Essential Corporate News, our weekly news service covering the latest developments in the UK corporate world.
Back to top
FSA: Quarterly Consultation Paper CP 12/11 - Proposed changes to Chapters 5 and 8 of the Listing Rules
On 6 June 2012, the Financial Services Authority (FSA) published its quarterly consultation paper CP 12/11 (No.33) which includes proposed amendments to Chapter 5 of the Listing Rules (LR) in relation to the cancellation of a listing of securities and to Chapter 8 in relation to the annual notification requirements for sponsors. The text of the proposed amendments is set out in Appendix 7 of CP 12/11.
Changes to Chapter 5
Under LR 5.2.12R, an issuer with a premium listing may dispense with the requirement under LR 5.2.5R (in the case of premium listed issuers) to obtain the prior approval of shareholders for a cancellation of a listing and the requirement under LR 5.2.8R to give at least 20 business days’ notice of the cancellation, where there is a takeover or a restructuring of the issuer effected by a scheme of arrangement under Part 26 of the Companies Act 2006 or where the issuer is in liquidation or administration under a court order.
The FSA is proposing to make the following changes to LR 5.2:
- the application of the exemption set out in LR 5.2.12R will be extended to cancellations of a listing of equity shares with a standard listing, as well as those with a premium listing;
- the range of insolvency or reconstruction measures which will benefit from the exemption provided in LR 5.2.12R will be extended;
- the application of the exemption provided in LR 5.2.12R will be explicitly extended to overseas issuers; and`
- new guidance will be inserted in LR 5.2.13G for the application of LR 5.2.12R to overseas issuers.
Changes to Chapter 8
Under LR 8.7.7R, a sponsor must provide to the FSA, on an annual basis, written confirmation that it continues to satisfy the criteria for approval as a sponsor as set out in LR 8.6.5R, as well as details of the basis upon which it considers that it meets each criteria in that rule. The FSA has traditionally allocated each sponsor its own ‘annual confirmation birthday’. This is normally the first day of a calendar month. Each year, on its annual confirmation birthday, the FSA sends a letter to the sponsor requesting its written confirmation under LR 8.7.7R that it continues to satisfy the criteria for approval as a sponsor as set out in LR 8.6.5R.
The FSA is proposing to make the following changes to the annual notification requirement for sponsors in LR 8.7 so that FSA and sponsor resources can be used in a more efficient and economic way:
- the arrangements for the annual notification will be modified so that all sponsors will have to provide their written confirmation in January, rather than on the anniversary of the date of their particular approval as a sponsor; and
- written confirmation can be provided by submitting a completed ‘sponsor annual notification form’ to the FSA which will be available on the UK Listing Authority section of the FSA website. This consolidated form is designed to allow sponsors to provide written confirmation under LR 8.7.7R and to provide supporting information, while also allowing the FSA to collect information to support its supervisory functions in a single communication.
The FSA is proposing transitional relief for sponsors who would be required to provide a written confirmation to the FSA under the current arrangements and who, under the proposed changes, would then be required in quick succession to provide a written confirmation in January 2013. As the changes are scheduled to come into force on 6 October 2012, the FSA is proposing that under the revised LR 8.7.7R, there would be no obligation for sponsors with ‘annual confirmation birthdays’ falling on or after 6 October 2012 to submit an annual notification until January 2013. Sponsors with ‘annual confirmation birthdays’ falling on or before 5 October 2012 would be required to submit a written confirmation in accordance with the current LR 8.7.7R
The deadline for responses to these proposals is 6 August 2012.
(FSA, Quarterly Consultation Paper CP 12/11 - Proposed changes to chapters 5 and 8 of the Listing Rules, 06.06.12)
Back to top
Transparency International UK: Guidance for anti-bribery due diligence in mergers, acquisitions and investments
On 1 June 2012, Transparency International UK published guidance for companies wishing to undertake due diligence in mergers, acquisitions and investments. The guidance, published in draft for consultation in July 2011, aims to promote good practice in the private sector and help companies to be compliant with the Bribery Act 2010 and the US Foreign Corrupt Practices Act. It contains ten good practice principles focusing on internal policies and procedures and on due diligence before and after an acquisition. The guidance is provided in the context of three overarching considerations:
- anti-bribery due diligence should be applied to all investments but on a risk-based approach, with the level of due diligence being proportionate to the investment and the perceived likelihood of the risk of bribery;
- in many cases the necessary information for due diligence may not be accessible, such as acquisitions of public companies, hostile take-overs, auctions or minority investments. This does not obviate the need for anti-bribery due diligence, but has an effect on the timing as it may need to be undertaken post-closure; and
- a good practice approach characterises ethical and responsible businesses, but is also the most effective means for companies to manage bribery risks across multiple jurisdictions and in a changing legal and enforcement environment.
The guidance consists of the following:
- Section 1 - Introduction: This considers the changing legal environment, characterised by an increase in M&A activity and private equity investments in emerging markets where corruption is known to be prevalent. It sets out what to look for in anti-bribery due diligence, as well as challenges of anti-bribery due diligence. It also advises companies to proceed cautiously should due diligence identify evidence of past or current bribery.
- Section 2: Investment risk and the role of anti-bribery due diligence: This examines the types of investment risks (financial, legal, reputational and ethical) arising as a result of bribery risks in relation to target companies during transactions. It examines the additional benefits of conducting anti-bribery due diligence, as well as the potential consequences of bribery in a target company.
- Section 3: The due diligence process: This section sets out how anti-bribery due diligence can be integrated into standard due diligence procedures during mergers and acquisitions or investment activity, outlining six stages of the due diligence process. The guidance points out that anti-bribery due diligence is most effective when the purchaser itself has in place an anti-bribery programme of which due diligence is a part.
Annex 1 to the guidance contains a 59-point checklist of indicators of areas to be considered during due diligence, as well as an overview of the legal context.
(Transparency International UK, Guidance for anti-bribery due diligence in mergers, acquisitions and investments, 01.06.12)
Back to top
European Commission: Draft delegated regulation amending Prospectus Regulation (809/2004)
On 4 June 2012, the European Commission published a draft delegated regulation amending Regulation (EC) No 809/2004 (Prospectus Regulation) as regards information on the consent to the use of a prospectus, information on underlying indexes and the requirement for a report prepared by independent accountants or auditors. The draft delegated regulation aims to make amendments to the Prospectus Regulation following the publication of the Amending Directive(2010/73/EU) in the Official Journal of the European Union in December 2010. The Amending Directive introduced amendments to the Prospectus Directive (2003/71/EC) and the Transparency Directive (2004/109/EC) and requires amendments to the Prospectus Regulation to be made through a delegated regulation. The draft delegated regulation takes into consideration the final version of Part II of the technical advice from the European Securities and Markets Authority on possible delegated acts concerning the Prospectus Directive, which was published in March 2012.
The draft delegated regulation makes the following changes to the Prospectus Regulation:
Consent to use a prospectus in a retail cascade and the disclosure requirements relating to such consent
Article 3(2) of the amended Prospectus Directive specifies that no new prospectus is required in the case of a subsequent resale or final placement of securities through financial intermediaries as long as a valid prospectus is available in accordance with Article 9 and the issuer or the person responsible for drawing up such prospectus consents to its use by means of a written agreement. The draft delegated regulation introduces a new Article 20a and Annex XXX to the Prospectus Regulation setting out the information that needs to be disclosed in a prospectus. It requires the publication of the consent in the prospectus while allowing some flexibility in cases where financial intermediaries are appointed only after the beginning of the offer or are not appointed at all and so are unknown to the issuer or the person responsible for drawing up the prospectus. In these cases, a general consent from the issuer to use the prospectus will be included in the prospectus, subject to certain conditions. The draft delegated regulation also envisages the possibility of an issuer or a person responsible for drawing up a prospectus restricting its consent to individual financial intermediaries, based on an individual bilateral written agreement between the parties.
Review and clarification of certain technical requirements in the Prospectus Regulation
The draft delegated regulation clarifies that the description of proprietary indices should be disclosed in the base prospectus, so as to ensure that such information is set out in the most objective and transparent way to investors as it may play a defining role in their investment decisions. The draft delegated regulation also clarifies that a prospectus must contain a description of proprietary indices composed by an entity belonging to the same group as the issuer.
The independent accountants or auditors' report on profit forecasts and estimates
The draft delegated regulation maintains the requirement that profit estimates be accompanied by a report prepared by independent accountants or auditors stating that in their opinion, the forecast or estimate has been properly compiled on the basis stated and that the basis of accounting used is consistent with the accounting policies of the issuer. However, it amends certain annexes of the Prospectus Regulation to clarify that this report is not required for certain financial information if specific conditions are complied with.
The draft delegated regulation is scheduled to come into force on 1 July 2012. It will now be passed to the European Parliament and the Council of the European Union for consideration. It is subject to the right of the European Parliament and of the Council of the European Union to express objections, in accordance with Article 290(2) of the Treaty on the Functioning of the European Union and Article 24c of the amended Prospectus Directive within a specified period. If on the expiry of that period no objections have arisen, it will be published in the Official Journal and come into force on the proposed date.
(European Commission, Draft delegated regulation amending Prospectus Regulation (809/2004), 04.06.12)
Back to top