Key themes and developments on the agenda for businesses in June include the EU referendum, responding to announcements made at the anti-corruption summit, changes to company filing requirements and starting preparations for the introduction of the General Data Protection Regulation.
EU Referendum in the UK
The EU referendum takes place on 23 June and will decide whether the UK remains a member of the EU. Practical Law has published a series of articles highlighting the potential implications for businesses of leaving the EU.
Responding to announcements made at the anti-corruption summit
In-house counsel may have struggled to get anti-bribery and compliance on the corporate agenda in the past but, thanks to the Panama papers and the recent international anti-corruption summit, it is now centre-stage. Recent research by Eversheds even suggests that business can use this opportunity to take the lead in the fight against bribery and corruption.
Before the anti-corruption summit began, David Cameron announced the introduction of a new corporate offence for executives who fail to prevent fraud or money laundering inside their companies. By extending a corporate failure-to-prevent clause to fraud and money laundering, the government intends to expand corporate criminal liability. If an employee or agent is charged with money laundering, the company will be deemed liable if it cannot show that it had put adequate procedures in place to prevent money laundering and fraud.
The Criminal Finances Bill, which will introduce a corporate criminal offence of failing to prevent staff facilitating tax evasion, was included in the Queen’s Speech. A consultation on the measure was launched in April and comes to a close on 10 July. The new offence aims to criminalise corporate bodies that fail to prevent an associated person from facilitating the fraudulent evasion of tax, either in the UK or overseas.
Changes to company filing requirements
Several changes to company filing requirements come into force on 30 June, including:
- The option for private companies to keep certain information (including the PSC register) on the public register only, instead of statutory registers.
- Changes to the requirements for a statement of capital.
- The requirement to file an annual confirmation statement, in place of an annual return.
Shareholder challenges to executive pay
Executive remuneration continues to be a hot topic for listed companies following the revolt over executive pay at BP, where 59% of shareholders voted against its remuneration report featuring a 2015 pay award worth almost $20m for CEO Bob Dudley. Shareholders have since voted against the pay policies of several multinationals including Deutsche Bank, Goldman Sachs, Citigroup, Renault, Shire and Anglo American.
Advisers of listed companies will be interested in a report by the Executive Remuneration Working Group, which is critical of the current trend for listed companies to adopt a long-term incentive plan simply because this is standard market practice. In a similar vein, Dan Cable and Freek Vermeulen of London Business School, argue that a review of the research on incentives and motivation shows that executive pay should be fixed rather than linked to performance.
New Regulation on statutory audit of public-interest entities will apply
From 17 June, Regulation (EU) No 537/2014 regarding the statutory audit of public-interest entities will apply in member states. (The Article 16(6) prohibition on “Big Four only” clauses will apply from 17 June 2017).
The Regulation aims to address the weaknesses highlighted in the European audit system following the 2008 financial crisis. For example, it introduces more stringent rules for the audit sector, aimed at strengthening the independence of auditors and creating greater diversity in the highly-concentrated audit market.
Existing patent box regime closes to new entrants
The patent box is an optional 10% UK corporation tax rate for profits attributable to patents and similar intellectual property (IP). From 30 June, the existing regime will close to new entrants and will be abolished by 30 June 2021.
From 1 July 2021, all IP tax regimes, including the UK’s patent box, must conform with the “modified nexus approach”, developed by the OECD. Under this approach, for a business to benefit from preferential rates on IP profits, it must have carried out the activities that generated those profits. In the UK, research and development expenditure will be used as a proxy for these activities.
Preparing for the General Data Protection Regulation
Companies should now be starting to prepare for the introduction of the General Data Protection Regulation (GPDR), which will apply in all member states from 25 May 2018, two years after its entry into force on 24 May 2016.
Practical Law has published a note by Bridget Treacy, Hunton & Williams, which highlights the key provisions of the GDPR and explains what businesses should be doing now to prepare for its implementation.
Cyber security directive expected to enter into force in August
Cyber security continues to move up the corporate agenda, with the government recently announcing that a new National Cyber Security Centre will launch in autumn 2016.
The Council of the EU has also adopted the cybersecurity directive, which lays down security obligations for operators of essential services such as energy, transport, health and finance, and for digital service providers. The directive must now be adopted by the European Parliament and is expected to enter into force in August 2016.
Continued ICO crack down on companies involved in nuisance marketing
Companies that use electronic direct marketing should review and assess their current direct marketing practices in the light of the continuing increase in fines that the Information Commissioner’s Office (ICO) has issued against companies making nuisance marketing calls or sending unsolicited marketing text or emails.
Since the change in the law making it easier to impose monetary penalties for serious breaches of the electronic direct marketing rules, the ICO has issued fines totalling more than £2 million compared with just £360,000 during the previous 12 months.
Last orders: consultations closing in June
Consultations on the anti-money laundering supervisory regime, protection for micro businesses when purchasing goods and services, tax deductions for corporate contributions to grassroots sport and the transparency of tips, gratuities, cover and service charges.