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EQ Bulletin – September 2021

02 September 2021

Welcome to our monthly bulletin of what’s happening within the regulatory environment that impacts the share registration and employee share plans space.

Paul Matthews Circle Paul Matthews CEO - EQ Boardroom

We hope you have all been able to enjoy a well-earned break over the summer period. September is set to be busy with some great virtual events lined up, including our AGM Discussion Forum and the Equivalence Forum. If you would like any more information on these events, please speak to your Client Relationship Lead.

In this month’s bulletin, we report on the FCA's consultation paper on diversity disclosure on listed company boards and the CGIs report on exclusion in the boardroom.

Other areas of interest include draft legislation around stamp duty reform, and the FRC has published its annual audit quality reports into the seven largest UK audit firms.

As always, if you have any questions on the content of this month's bulletin, please contact your Client Relationship Lead.

Articles In This Edition

Dates For Your Diary:

The EQuivalence Forum

The EQuivalence Forum, chaired by Simon Maynard, Client Director at Prism Cosec, discusses the latest Corporate Governance updates impacting Company Secretaries in 2021.

Date: 15 September 2021
Time: 9:00am (BST)

Register here

Kathy Cong Circle Kathy Cong Managing Director, Prism Cosec

An Insight From Prism Cosec

The advent of summer has resulted in a slowing down of announcements and consultations being issued by various bodies. However, the consultation issued by the FCA on the disclosure of diversity on listed company boards is an area which if implemented could well result in a change in focus on how new board members are recruited. The subject of board composition was also the focus of the third report on Boardroom Dynamics issued by the Chartered Governance Institute. HMRC are also considering establishing a working group to modernise Stamp Duty. Finally, we consider a case which has recently been reported which focussed in part on directors’ duties under sections 171 and 172 of the Companies Act 2006.

Consultation On The Disclosure Of Diversity On Listed Company Boards

On the 28 July 2021 the FCA issued a consultation paper, CP21/24, relating to proposed changes to the Listing Rules to require UK and overseas companies on the premium and standard segment of the Official List to publish annually:

  • A ‘comply or explain statement’ on whether they have achieved certain proposed targets for gender and ethnic minority representation on their boards. The targets are:
    1. that at least 40% of the board are women (or self-identify as women),
    2. at least one of the Chair, Chief Executive, Senior Independent Director or Chief Financial Officer is a woman (or self identifies as such) and at least one member of the board is from an non-white ethnic minority background based on ONS categories for ethnicity, and
  • As part of the same annual disclosure obligation, data in a tabular format on the make-up of their board and most senior level of executive management in terms of gender and ethnicity.

Open ended investment companies, special purpose acquisition companies, issuers of debt securities, securitised derivatives and miscellaneous securities will be exempt from the disclosure requirements. Investment trusts will however need to make disclosures.

The FCA is also proposing changes to the Disclosure Guidance and Transparency Rules to require companies to ensure any existing disclosure on diversity policies addresses key board committees (Audit, Remuneration and Nomination) and considers broader aspects of diversity. This could include, for example, considerations of ethnicity, sexual orientation, disability, lower socio-economic background and other diversity characteristics. The FCA is also encouraging companies to provide further data on the result of their diversity policies considering these wider aspects where possible. In providing additional information companies will need to be aware of the requirements of and consider the implications of UK GDPR and the Data Protection Act 2018 as details of ethnicity/sexual orientation are special category data.

It is estimated that around 1,100 listed companies will be affected by the proposed changes and the move will bring the UK into line with other jurisdictions including the European Union and the US in setting diversity targets for listed companies.

The consultation closes on 20 October 2021 and it is anticipated that changes to the rules will be made in late 2021 to be effective for years beginning on or after 1 January 2022 with the first annual reports containing the required disclosures being issued in the first quarter of 2023.

Further details can be found in the consultation paper which is available at CP21/24: Diversity and inclusion on company boards (

The CGI’s Third Report On Boardroom Dynamics

The Chartered Governance Institute has published its third and final report on exclusion in the boardroom. The first report published in May dealt with the board agenda, the second report in June looked at board dynamics. The final report focussed on Board composition.

The report found there was resistance to selecting qualified candidates who had a different profile from existing board or executive committee members in terms of both lived experience and expertise. The impact of this for governance arrangements is:

  • 74% of boards and executive committees that embrace refreshment, create accountability, and cultivate the pipeline (Mindful Movers) are confident that their boardroom composition is ideal for governance versus 25% of those that fail to even embrace refreshment (Bubble Bound).
  • The Bubble Bound appear to be caught up in a mindless cycle of power-driven behaviour that results in a static, singular narrative of who is most ‘impressive’ when it comes to adding value. Impressive candidates were those who most closely resembled those already sitting on boards.
  • The Mindful Movers appear more concerned with purpose than power, resulting in a more dynamic, flexible narrative of what it means to be ‘impressive’ that embraces the diversity required to select an optimal team.

The report concludes that meaningful progress in terms of improving boardroom diversity can only be achieved if boards and executive committee members are willing to address ‘compulsive homogeneity’ and prioritise purpose over power.

The report is available from: cgi-mindful-exclusion-part-iii-composition.pdf

Stamp Duty Reform

HM Treasury and HMRC has published draft legislation for the Finance Bill 2022.  While part of the legislation relates to measures to combat the promoters of tax avoidance, HMRC has also announced the establishment of a working group to develop proposals for the modernisation of stamp taxes on shares. The proposals being considered include:

  • The replacement of stamp duty and stamp duty reserve tax with a single tax for listed and unlisted securities which is self-assessed and digitised.
  • The reduction in time between transaction completion and updating share registers using same day processing or the use or a unique transaction reference number.
  • Extension of stamp duty reliefs to stamp duty reserve tax e.g. reliefs under section 42 Finance Act 1930 as amended.

Full details of the consultation are available from: Modernisation of the Stamp Taxes on Shares Framework: summary of responses - GOV.UK (

Annual Audit Quality Reports Into The Seven Largest Audit Firms Published

The FRC has published its annual audit quality reports into the seven largest UK audit firms. The main finding of the 103 audits reviewed was that 29% required improvement or significant improvement (33% for 2019/20). 71% were assessed to be of good standard or required only limited improvement (67% in 2019/20). Quality across the individual firms was more mixed than in 2019/20 and the FRC has published measures that individual firms will be required to implement in response to individual inspection findings. The FRC had recurring findings in relation to the audit of revenue, impairment of assets and group audit oversight. The FRC had mixed findings in relation to the effective challenge of management of audited entities, with some examples of good practice but not on a consistent basis.

The report noted that although there was an improvement on the results for the previous year this was marginal and significant change is needed to improve audit quality. The report did however acknowledge that the review focussed on Public Interest Entities and high risks sectors and as such the findings of the reports into each firm may not be representative of the firms entire portfolio.

The reports on each of the audit firms can be viewed here: News I Financial Reporting Council (

The Future Of Corporate Reporting

The FRC has issued a feedback statement following publication of its thought leadership paper on the Future of Corporate Reporting. There were over 75 responses to the consultation with most respondents welcoming the FRC’s initiative.

There was consensus from the respondents that the annual report needs reconsideration and there was a need for concise reporting with the current regulatory system being considered complex and fragmented. 

There was support for:

  • A model accommodating the interests of investors and other stakeholders although there were differing views on how this could be achieved.
  • The concept of a reporting network but recognition that the idea would need further development before it is practicable
  • A model that puts digital first but also ensuring that there is access to printed copies of annual reports.
  • Standardisation of non-financial reporting

In addition respondents encouraged the FRC to align any UK developments with those internationally.

The FRC will take forward the feedback via different workstreams - policy development, influencing, thought leadership and transformation although no time frame was specified in the feedback statement other than short, medium and long term objectives.

The statement can be viewed at Feedback Statement - A Matter of Principles -The Future of Corporate Reporting 2021 (

Directors Breaches Of Fiduciary Duty

The case of TMO Renewables Limited (in liquidation) v Yeo (2021) considered the actions of four directors of a private limited company in connection with an attempt to remove them from office at a requisitioned Extraordinary General Meeting (“EGM”). It was found that the directors had committed several breaches of their fiduciary duties. The company had been in financial difficulties and the liquidators brought proceedings in the name of the company against the former Chief Executive, Chair and two non-Executive Directors for alleged breach of duty.

In reaching her decision Mrs Justice Joanna Smith DBE held that:

  • By issuing shares after the date of the requisition but before the EGM, including to a new cornerstone investor on terms that allowed for payment for the shares to be deferred for up to two years but nevertheless enabled (and required) that investor to vote against the requisitioners' resolutions, the directors had breached their duties under sections 171 and 172 of the Companies Act 2006.
  • The Chief Executive and Chair, in separate conversations with shareholders prior to the EGM, had made representations about the arrangements with the cornerstone investor which they knew to be untrue, specifically as regards payment of the subscription monies (£3 million). This involved them in further breaches of the section 172 duty. As the Chair’s representation had been authorised by the other directors, all the directors were in breach.
  • The Chair had also breached the section 172 duty at the EGM when he made a knowingly false implied representation that the £3 million had been received.
  • By withholding the details of the cornerstone investor's subscription from shareholders at the EGM, all the directors had breached the section 172 duty by failing to disclose their wrongdoing in entering that subscription.
  • In the month after the EGM the directors had acted in breach of the section 172 duty when they rejected the offer of a standing loan facility from a 10% shareholder.

However, since the company's case on causation failed (the company would have gone into administration anyway), all the claims were dismissed.

Further details of the case can be found at High Court Judgment Template (

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