Key items on the agenda for businesses this month include assessing the government’s proposals on corporate governance reform, continuing to prepare for the GDPR and several changes to intellectual property legislation.
Corporate governance reform
At the end of August, the Department for Business, Energy & Industrial Strategy published the government’s response to the Green Paper consultation on corporate governance reform. The government intends to bring forward several proposals.
The government plans to introduce secondary legislation to require quoted companies to:
- Report annually in their remuneration report on the ratio of CEO pay to the average pay of their UK workforce.
- Provide a clearer explanation in remuneration policies of the range of potential outcomes from complex, share-based incentive schemes.
It will also introduce secondary legislation to require all companies of a significant size (private as well as public) to explain how their directors comply with the requirements of section 172 of the Companies Act 2006 to have regard to employee interests and to fostering relationships with suppliers, customers and others.
UK Corporate Governance Code
The government will invite the Financial Reporting Council (FRC) to revise the UK Corporate Governance Code to set out the steps companies should take when they encounter significant shareholder opposition to executive pay.
It also invites the FRC to consult on revising the Code and its supporting guidance to:
- Give remuneration committees greater responsibility for demonstrating how pay and incentives align across the company.
- Explain to the workforce each year how decisions on executive pay reflect wider pay policy.
The government plans to invite the FRC to consult on the development of a new principle in the Code establishing the importance of strengthening the voice of employees and other stakeholder interests at board level as an important element of running a sustainable business.
Corporate governance in large private businesses
The government plans to invite the FRC to work with various industry bodies and others to develop a voluntary set of corporate governance principles for large private companies under the chairmanship of a business figure with relevant experience.
The current intention is to bring the reforms into effect by June 2018, to apply to company reporting years commencing on or after that date.
The Business, Energy and Industrial Strategy Committee has also recently published the government’s response to its report on corporate governance, which was published in April.
Continuing to prepare for the GDPR
The Data Protection Bill had its first reading in the House of Lords on 13 September. The Bill supplements the General Data Protection Regulation ((EU) 2016/679) (GDPR), which becomes directly applicable in member states on 25 May 2018. When the UK leaves the EU, the Bill allows for the continued application of GDPR standards and the GDPR will be incorporated into the UK’s domestic law under the European Union (Withdrawal) Bill currently before parliament.
In a recent Practical Law survey on GDPR compliance, 79% of respondents thought the GDPR would require significant changes to some of their organisation’s operations. However, 13% had not even started preparing and nearly a quarter were not confident that their organisations would meet the compliance deadline.
For those organisations that have yet to start their preparations, Practical Law has published a number of materials to help kick off the process, including:
- A UK board memo to brief senior management and get buy-in.
- Data processing clauses to benchmark provisions in contracts.
- A video outlining the main responsibilities imposed on data processors by the GDPR.
- An explanation of employee “consent” under the GDPR.
We are also working with several organisations on a series of case studies to help troubleshoot key issues in specific sectors. For example, retailers and customer-facing businesses will be interested in how Tesco is preparing for GDPR compliance.
Changes to intellectual property legislation
Several changes to intellectual property legislation come into force on 1 October, including:
- Changes to the current regime regarding unjustified threats to bring proceedings for infringement of patents, trade marks and designs.
- The maximum custodial penalty for online copyright infringement (and for infringing a performer’s making available right in a recording) will increase from two to ten years.
- It will become possible to give notice of registered design rights by marking products with a website address at which the details of the registration would be published.
- A consolidated EU Trade Mark Regulation becomes applicable, replacing the existing EU Trade Trade Mark Regulation, which was substantially amended in 2016.
- New EU regulations relating to EU trade marks and EUIPO become applicable to make law and practice consistent with changes to the EU Trade Mark Regulation.
Pre-Action Protocol for Debt Claims comes into force
The Pre-Action Protocol for Debt Claims will come into force on 1 October. The protocol will apply to any business claiming payment of a debt from an individual (including a sole trader). Among other things, the Protocol aims to promote early communication between the parties, including early exchange of information about the debt to assist with identifying the issues in dispute.
Practical Law has published a Letter before claim: debt claim (under the Pre-Action Protocol for Debt Claims), which is compliant with the Protocol.
Work expected to begin in Business and Property Courts
Following information provided by the legal adviser and private secretary to the Chancellor of the High Court, it is understood that work in the new Business and Property Court lists will start from 2 October.
Market Abuse Regulation: one year on
Practical Law has recently published the results of a poll conducted by GC100 among its members to find out how their companies have dealt with some of the requirements of the Market Abuse Regulation (MAR) over the last year.
Key findings from the results of the poll include that, since MAR came into effect:
- 54% have increased their use of brokers in determining whether inside information exists.
- 65% have delayed disclosure of inside information.
- 71% have not labelled any financial/results information as containing inside information.
Consultations coming to a close
Consultations on the following matters come to a close in October:
- 6 October. Remedies for breach of contract.
- 8 October. Retail regulation.
- 13 October. Premium listing for sovereign controlled companies.
- 24 October. Strategic report guidance.
- 31 October. Prospective financial information.