This month, in-house lawyers will be continuing to digest the new version of the UK Corporate Governance Code, which was published in July, together with the Financial Reporting Council’s (FRC) revised version of its Guidance on Board Effectiveness.
New UK Corporate Governance Code
On 16 July 2018 the FRC published a new version of the UK Corporate Governance Code (the Code). Key changes to the consultation draft of the Code relate to the:
- Methods by which companies should engage with their workforce.
- Board’s ability to determine independence (and the independence and tenure of the chair).
- Proposed removal of exemptions for smaller companies.
- Remit of the remuneration committee.
The new Code will apply to accounting periods beginning on or after 1 January 2019, so unless companies decide to adopt all or part of the new Code early, the first reporting will not be until 2020. The FRC will publish updated Guidance on the Strategic Report shortly, and it proposes to consult on a revised UK Stewardship Code later this year.
The FRC also published a revised version of its Guidance on Board Effectiveness, which has been amended to support the changes that have been made to the Code and to reflect the Code’s structure. The Guidance contains suggestions of good practice to support directors and their advisers in applying the Code.
Additional corporate governance changes will be introduced by the Companies (Miscellaneous Reporting) Regulations 2018, which were published on 19 July 2018. The regulations introduce additional corporate governance reporting disclosures that companies must make in relation to:
- Section 172 of the Companies Act 2006.
- Engagement with employees.
- Engagement with suppliers and customers.
- Corporate governance arrangements.
- CEO pay ratio.
- Outcomes from share-based incentive schemes.
The regulations will be effective for financial years beginning on or after 1 January 2019.
Practical Law has also published a video in which Tim Ward of The Quoted Companies Alliance and Will Pomroy of Hermes Investment Management give an overview of the updated QCA Corporate Governance Code.
National security and infrastructure investment review consultation
The Department for Business, Energy & Industrial Strategy (BEIS) has published a White Paper setting out how the government will upgrade its powers to scrutinise investments and address the risks that can arise from hostile parties acquiring ownership of, or control over, businesses or other entities and assets that have national security implications. Under its proposals, the government will encourage businesses and investors to notify it ahead of transactions that might give rise to national security risks.
Consultation responses must be submitted by 16 October 2018.
Draft Registration of Overseas Entities Bill
BEIS has published a draft Registration of Overseas Entities Bill that would require overseas entities desiring to own land in the UK to identify their beneficial owner(s) and to register them. The government’s objective is to help combat money laundering by increasing transparency. As well as imposing criminal penalties for non-compliance, the Bill provides for non-compliant entities to face restrictions in the buying and selling of land in the UK.
Comments are requested by 17 September 2018 and the government anticipates that, following royal assent and the making of secondary legislation, the register will be operational in 2021.
Women on boards: Hampton-Alexander Review progress report
In 2016 the Hampton-Alexander Review published a report which included a recommendation that FTSE 350 companies should aim for a minimum of 33% women’s representation on their boards by 2020. BEIS and the Government Equalities Office (GEO) have published a statement on the progress made on meeting this target.
The statement notes that, if progress matches the same gains made over the last three years, then FTSE 100 companies are on track to meet the 2020 target. However, in relation to FTSE 350 companies, while the number of women on boards has increased to 25.5%, around 40% of all appointments will need to go to women over the next two years for the FTSE 350 to meet the 33% target.
The 2018 Hampton-Alexander Report will be published on 13 November 2018 .
European Parliament issues non-binding resolution directing European Commission to suspend the EU-US Privacy Shield
The European Parliament has issued a non-binding resolution directing the European Commission to suspend the EU-US Privacy Shield by 1 September 2018 unless the US government can demonstrate compliance with its terms. Organisations transferring personal data based on the EU-US Privacy Shield may need to rely on another data transfer mechanism if the European Commission declares the Privacy Shield invalid.
Consultation on reform of the Gender Recognition Act 2004
The GEO has opened a consultation on its proposals to reform the Gender Recognition Act 2004. Its intention is to make it easier for a trans person to obtain a gender recognition certificate and achieve legal recognition.
The consultation closes on 19 October 2018.
New cybercrime, fraud, and economic crime court
A new flagship 18-courtroom legal centre specifically designed to tackle cybercrime, fraud, and economic crime has been given the go ahead. The new centre will be built on the site of Fleetbank House, where the Employment Appeal Tribunal (EAT) currently sits. The EAT will move to the Rolls Building on Fetter Lane.
Dates for the diary
- 1 August 2018. Deadline for responses to the consultation on current exemptions from paying charges to the Information Commissioner’s Office (ICO).
- 2 August 2018. Deadline for responses to consultation on updating guidance on Competition Act investigation procedure .
- 10 August 2018. Operators of essential services must comply with notification requirements under the Network and Information Systems Regulations 2018 before this date.
- 21 August 2018. Closing date for responses to the consultation on personal liability for directors for nuisance calls.
- 24 August 2018. Closing date for comments on the Jackson costs reforms.
- 31 August 2018. Closing date for comments on the draft Finance Bill 2019 legislation.