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EQ Monthly Bulletin January 2024

EQ Monthly Bulletin - March 2024

Friday, 22 March 2024

Keeping you up-to-date with industry changes and news impacting the world of share registration and employee share plans.

Welcome to our March edition of the EQ Bulletin.

The Economic Crime and Corporate Transparency Act 2023 is now beginning to impact companies irrespective of size. The second commencement order for this Act introduced a number of changes to the Companies Act 2006 which has resulted in changes being made to documents such as the annual confirmation statement. Details of the most recent changes are given below.

The Investment Association has written to the Chairs of Remuneration Committees highlighting those issues which are likely to be of concern to members of the Association. Meanwhile the Pension and Lifetime Savings Association has issued their voting guidelines for 2024 Annual General Meetings.

The annual FTSE Women Leaders review has been published detailing the progress of women in leadership roles in FTSE 350 companies and the 50 largest private companies. The Parker Review has also published its annual report focussing on the ethnic diversity of company boards.

Following the introduction of the updated pre-emption principles on 4 November 2022, the Pre-Emption Group has issued a monitoring report on the usage of the principles from their introduction until 31 July 2023.

Finally, the Financial Conduct Authority has published the second tranche of proposed reforms to the UK Listing Rules with the consultation on these changes remaining open until 2 April 2024.

Happy reading and as always, if you have any questions on the content of this month's Bulletin, please contact your Client Relationship Lead.

In This Edition

Economic Crime and Corporate Transparency Act 2023

A number of regulations have been introduced as a consequence of the Economic Crime and Corporate Transparency Act 2023 (ECCTA) coming into force. The latest regulations include:

The Registrar of Companies (Fees) (Amendment) Regulations 2024 – fees payable to Companies House will increase quite substantially with effect from 1 May 2024. The full statutory instrument can be viewed at The Registrar of Companies (Fees) (Amendment) Regulations 2024 (legislation.gov.uk). However full details of the increased fees are more readily available on the Companies House website through the following link Changes to Companies House fees - Changes to UK company law

Economic Crime and Corporate Transparency Act: second commencement regulations – these regulations came into force on 4 March 2024 and enact a number of provisions contained in the ECCTA this includes a requirement for a company to confirm on an annual basis when submitting its confirmation statement that its activities are lawful and there is also now a requirement to provide a registered email address to Companies House when submitting confirmation statements after 4 March 2024. The full text of these regulations can be viewed at The Economic Crime and Corporate Transparency Act 2023 (Commencement No. 2 and Transitional Provision) Regulations 2024 (legislation.gov.uk)

The Principal Office Address (Rectification of Register) Regulations 2024 give the Registrar of Companies power to, either on application or on their own behalf,  change the address registered as the principal office of a relevant person (director, company secretary, and in relation to People with Significant Control registrable relevant legal entity or registrable person) to a default address, where the Registrar is not satisfied that the address is in fact their principal office. The full regulations can be viewed at The Principal Office Address (Rectification of Register) Regulations 2024 (legislation.gov.uk)

The Registered Office Address (Rectification of Register) Regulations 2024 and Service Address (Rectification of Register) Regulations 2024 establish the new processes envisaged by the ECCTA, by which the Registrar of Companies may change the registered addresses relating to a company, its directors, secretaries and registrable PSCs or RLEs to a default address. The regulations can be viewed at The Registered Office Address (Rectification of Register) Regulations 2024 (legislation.gov.uk) and The Service Address (Rectification of Register) Regulations 2024 (legislation.gov.uk)

Companies House have also updated a number of forms with effect from 4 March and issued updated guidance. The updated guidance can be found at Companies House: guidance for limited companies, partnerships and other company types - GOV.UK (www.gov.uk).

Investment Association- Letter to Remuneration Committee Chairs

The Investment Association (IA) has issued an update to Remuneration Committee chairs on the Principles of Remuneration and has highlighted those issues which are likely to a focus of IA members during the 2024 season.

These include:

  • There needs to be clear alignment between pay and performance, especially when proposing higher executive remuneration.
  • Inflation is still relatively high, investors expect companies to remain cautious, being clear on increases in executive remuneration in the context of all employee salary increases, the impact on the total remuneration for executives and executive remuneration in the context of stakeholder experience.
  • Investors will consider any changes in Long Term Incentive Plans on a case-by-case basis, particularly in the context of the company’s performance and rationale provided.

Following feedback from companies during 2023, the IA will undertake a fundamental review of its Principles of Remuneration to be published later this year.

The message in the letter is clear that Remuneration Committees should demonstrate how their remuneration outcomes are appropriate given the company performance during 2023 and how it has set the 2024 targets.

The letter can be accessed via this link: Remuneration Committee Chair letter - Final.pdf (theia.org)

Pension and Lifetime Savings Association Stewardship and voting guidelines 2024.

The PLSA has published its voting guidelines for investors for the 2024 Annual General Meeting season. The guidelines are divided into sections that reflect the 2024 UK Corporate Governance Code and include separate sections on climate change and sustainability, social factors and workforce, and capital and allocation structure.

New issues included in the 2024 guidelines:

  • ESG – guidance on social factors – investors should only vote against a company on these issues where all other avenues of engagement have been exhausted.
  • AI – investors should consider voting against the re-election of a director if there is evidence of egregious conduct in relation to the development or deployment of AI.
  • Cyber security – Recommendations for investors where companies make poor disclosures in this area or do not adequately manage risks.
  • Dual class share structures – guidelines state that companies should remove these structures as soon as possible following an Initial Public Offering.

The summary guidelines can be accessed via this link: Stewardship and Voting Guidelines 2023 (plsa.co.uk)

The full guidelines can be accessed here: Stewardship and Voting Guidelines 2023 (plsa.co.uk)

Please note that although the links state that the guidelines are for 2023 the links do open the guidelines for 2024.

FTSE Women Leaders Review- Achieving Gender Balance

The review is the successor of the Hampton-Alexander Review and the Davies Review focusing on gender diversity and board and senior leadership level.

Key findings of the review:

  • 6% of FTSE 100 board positions were held by women.
  • 8% of FTSE 250 board positions were held by women.
  • 1% of FTSE 350 board positions were held by women, with 53 women chairs (16 in the FTSE 100), 162 SIDs (48 in the FTSE 100) and 21 CEOs (39 in the FTSE 100).
  • 15% of executive directors in the FTSE 350 were women.
  • There were no all-male boards in the FTSE 350.

The individual company rankings can be viewed here: Company Rankings - FTSE Women Leaders

The full report can be viewed here: FTSE Women Leaders

Parker Review- Ethnic Diversity on Boards

The Parker Review Committee has published its 2024 report on the ethnic diversity of boards and senior management of FTSE 350 companies and 50 of the UK’s largest private companies titled “Improving the Ethnic Diversity of UK Business”.

The findings of the report as at December 2023 included:

  • 96% of FTSE 100 companies, 70% of FTSE 250 companies and 44% of private companies had at least one ethnic minority director
  • 19% of FTSE 100 companies, 13.5% of FTSE 250 companies and 11% of private companies directors were represented by ethnic minorities.

The full report can be viewed at The-Parker-Review-March-2024.pdf (parkerreview.co.uk)

Pre-Emption Group – Annual Monitoring Report

The Pre-Emption Group has published a report which monitors the use of the revised statement of principles for the disapplication of pre-emption rights for UK listed companies which were introduced in November 2022. The report examines the use of the principles by FTSE 100 and FTSE 250 companies during the period 4 November 2022 to 31 July 2023. The report found that there was wide-spread adoption of the principles and that shareholders were broadly supportive of resolutions relating to the disapplication of pre-emption rights. Among the findings of the report were:

  • 7% of FTSE 350 companies with an AGM during the study period sought enhanced disapplication authority allowed under the new Principles.
  • 7% requested authority for a specified capital investment, in addition to general corporate purposes.
  • 3% had all disapplication resolutions passed by shareholders, with only a small number seeing significant dissent.

The full report can be downloaded from Annual Monitoring Report (frc.org.uk)

Listing Rules- Draft UK Listing Rule changes

The Financial Conduct Authority (FCA) has published the second tranche of proposed changes to the UK Listing Rules. The consultation period for the proposed changes closes on 2 April 2024. The proposed changes in the second tranche include the following which specifically apply to commercial companies:

  • Transitional provisions in respect of in-flight listing applications (UKLR TP1) and mid-flight transactions (UKLR TP6).
  • Dispensations for commercial companies with a sovereign controlling shareholder in relation to admission to listing (UKLR 5), continuing obligations (UKLR 6) and related party transactions (UKLR 8).

For all listed securities the second tranche includes:

  • Rules for dealing with the FCA and publishing information (UKLR 1).
  • Listing principles that apply to all listed issuers (UKLR 2).
  • The process for admission to listing, together with rules relating to suspension, cancellation, restoration and transfer between listing categories (UKLR 20 and 21).

Full details can be found at CP23/31: Primary Markets Effectiveness Review: Feedback to CP23/10 and detailed proposals for listing rules reforms | FCA and UK Listing Rules Instrument 2024 (fca.org.uk).

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