Essential Corporate News – Week ending March 9, 2018

Publication | March 9, 2018

Introduction

Welcome to Essential Corporate News, our weekly news service covering the latest developments in the UK corporate world.

LSE: AIM Notice 50 – Feedback on AIM Notice 49 and confirmation of changes to AIM Rules and Nomad Rules

London Stock Exchange plc (LSE) published AIM Notice 50 on March 8, 2018.  It provides feedback on the consultation it issued in December 2017 pursuant to AIM Notice 49 and confirms the resulting rule changes to the AIM Rules for Companies (AIM Rules) and to the AIM Rules for Nominated Advisers (Nomad Rules). 

The main changes to the AIM Rules relate to the following:

  • Formalising the early notification process – Nomads will be required to provide the LSE with early notification of information on AIM applicants and the LSE confirms that the early notification process will run in a similar manner to the current Schedule One form. If information is not available, a Nomad can state that in the early notification table and update the LSE when the information becomes available. A template for Nomads to use is now available on the LSE’s website.
  • Corporate governance requirements for AIM companies – Respondents supported the new obligation for an AIM company to disclose on its website details of how it complies or explains against a recognised corporate governance code chosen by the board of directors. The LSE remains of the view that it should not prescribe a list of recognised codes as it believes it is preferable for AIM companies to have a range of options to suit their specific stage of development, sector and size. However, AIM Rule 26 has been amended in light of feedback to provide that an AIM company need only review its corporate governance disclosures on its website annually rather than on an ongoing basis.

While the revised AIM Rules and Nomad Rules will come into effect on March 30, 2018, the implementation of the new corporate governance requirements in AIM Rule 26 will take effect from September 28, 2018 so that AIM companies and Nomads have adequate time to prepare for the change. All new applicants to AIM from March 30, 2018 will have to state which corporate governance code they intend to follow but otherwise will have until September 28, 2018 to fully comply with the new requirements in AIM Rule 26.

The LSE takes the opportunity in its Feedback Statement in relation to AIM Notice 49 to remind AIM companies and Nomads that good corporate governance is supported by a meaningful explanation of the company’s practices against the principles of the chosen code, rather than simply identifying areas of non-compliance.

(LSE, AIM Notice 50 and feedback statement, 08.03.18)

(LSE, Mark-up of AIM Rules for Companies, 08.03.18)

(LSE, Mark-up of AIM Rules for Nominated Advisers, 08.03.18)

Pre-Emption Group: Expectations for disapplication thresholds

On March 5, 2018 the Financial Reporting Council (FRC) announced the expectations of the Pre-Emption Group for pre-emption disapplication thresholds.

When the Prospectus Regulation came into force in July 2017, it introduced a new exemption from the obligation to publish a prospectus in relation to issues of securities representing up to twenty per cent of the company’s securities already admitted to trading.

In light of the new threshold, the Pre-Emption Group has confirmed that no change to the flexibility permitted by the 2015 Statement of Principles is expected as a consequence of the Prospectus Regulation. The Pre-Emption Group continues to support the overall limit of ten per cent in the Statement of Principles (the first five per cent being for general corporate purposes and, when applied for, the second five per cent for use only in connection with an acquisition or specified capital investment).

The Pre-Emption Group notes that, whilst decisions about specific placings are a matter for individual shareholders, the Statement of Principles reflects a generally agreed position supported by the Investment Association and the Pensions and Lifetime Savings Association and that companies should be mindful of the expectations included within it.

(Pre-Emption Group, Expectations for disapplication thresholds, 05.03.18)

European Commission: FinTech Action Plan for a more competitive and innovative financial market

On March 8, 2018 the European Commission published an Action Plan on how to harness the opportunities presented by technology-enabled innovation in financial services (FinTech).

The Action Plan envisages enabling the financial sector to make use of the rapid advances in new technologies, such as blockchain, artificial intelligence and cloud services. At the same time, it seeks to make markets safer and easier to access for new players.

The Action Plan is part of the European Commission's efforts to build a Capital Markets Union (CMU) and a true single market for consumer financial services. It is also part of its drive to create a Digital Single Market.

The Action Plan sets out 23 steps to enable innovative business models to scale up, support the uptake of new technologies, increase cybersecurity and the integrity of the financial system, including the following:

  • The European Commission will host an EU FinTech Laboratory where European and national authorities will engage with tech providers in a neutral, non-commercial space;
  • The European Commission has already created an EU Blockchain Observatory and Forum. It will report on the challenges and opportunities of crypto assets later in 2018 and is working on a comprehensive strategy on distributed ledger technology and blockchain addressing all sectors of the economy.
  • The European Commission will consult on how best to promote the digitisation of information published by listed companies in Europe, including by using innovative technologies to interconnect national databases.
  • The European Commission will run workshops to improve information-sharing when it comes to cybersecurity;
  • The European Commission will present a blueprint with best practices on regulatory sandboxes, based on guidance from European Supervisory Authorities. A regulatory sandbox is a framework set up by regulators that allows FinTech startups and other innovators to conduct live experiments in a controlled environment, under a regulator's supervision.

The Action Plan will also make it easier for crowdfunding platforms to offer their services EU-wide and improve access to this innovative form of finance for businesses in need of funding. Once adopted by the European Parliament and the Council, the proposed Regulation will allow platforms to apply for an EU label based on a single set of rules. This will enable them to offer their services across the EU. Investors on crowdfunding platforms will be protected by clear rules on information disclosures, rules on governance and risk management and a coherent approach to supervision.

(European Commission, FinTech Action plan, 08.03.18)

European Commission: Action Plan for a financial system that supports the EU's climate and sustainable development agenda

The European Commission established a High-Level Expert Group on sustainable finance in 2016. The Group published its final report in January 2018 which set out eight priority actions it considered to be the necessary building blocks for any meaningful action regarding sustainable finance. Following that final report, the European Commission, on March 8, 2018, published an EU Action Plan on sustainable finance which includes proposals for strengthening sustainability disclosure and accounting rule-making and fostering sustainable corporate governance.

The Action Plan includes proposals to:

  • Launch a fitness check of EU legislation on public corporate reporting and publish conclusions. This will inform any future legislative action by the European Commission.
  • By Q2 of 2019 the European Commission will revise the guidelines on non-financial information as regards climate-related information to further align them with the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures.
  • Request the European Financial Reporting Advisory Group (EFRAG), where appropriate, to assess the potential impact of new or revised IFRS standards on sustainable investments.
  • Evaluate relevant aspects of the International Accounting Standards Regulation and explore how the adoption process of IFRS can allow for specific adjustments to standards where they are not conducive to the European public good, for example, where the standards could pose an obstacle to long-term investment objectives.
  • Promote corporate governance that is more conducive to sustainable investments by assessing the possible need to (i) require corporate boards to develop and disclose a sustainability strategy, including appropriate due diligence throughout the supply chain, and measurable sustainability targets; and (ii) clarify the rules according to which directors are expected to act in the company's long-term interest.
  • Collect evidence of undue short-term pressure from capital markets on corporations.

The European Commission will report on the implementation of the Action Plan in 2019.

(European Commission, Action Plan: Financing Sustainable Growth, 08.03.18)


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