FRC publishes AGM best practice report

The Financial Reporting Council (FRC) has published a report, AGMs: An Opportunity for Change, which reviews how listed companies conducted their AGMs this year against the backdrop of the Covid-19 pandemic. The report also sets out best practice guidance as to how listed companies could conduct their AGMs in 2021.

The FRC reviewed AGMs held between March and August 2020 and described the approaches adopted by companies by reference to three broad categories:

  • “Closed” meetings with a quorum in attendance – All shareholders were requested to vote in advance of the AGM by proxy. There was either no opportunity for shareholders to ask questions before or during the meeting, or if shareholders were invited to ask questions, responses were posted on the company’s website following the AGM.
  • Meetings with some shareholder engagement – All shareholders were requested to vote in advance of the AGM by proxy. Board members gave presentations on the day of the AGM, typically by webcast, and responded to a selection of questions submitted prior to the date of the AGM. Responses to other questions were posted on the company’s website.
  • Meetings with more shareholder engagement – Shareholders could vote and ask questions at the AGM through an online platform and were also able to engage virtually with the board on the day of the AGM.

The FRC encourages companies to move away from the traditional form of AGM and to conduct AGMs in a way that enables the maximum number of shareholders to engage if they choose to do so. It recognises, however, that companies’ approaches will differ according to their size and shareholder base.

The report sets out a number of best practice recommendations as to how to conduct future AGMs including:

  • Preparation – If a company is looking to use technology to facilitate engagement, consider what the articles of association permit, or whether they should be amended to permit alternative meeting arrangements such as hybrid meetings (that is, a meeting held at a physical place with the option for shareholders to participate online).
  • Engagement – All shareholders should have the ability to hear from the board before voting on resolutions. Therefore it is best practice for companies to make every effort to ensure that shareholders can vote following presentations from the board.
  • Questions – These should be facilitated in real-time at the meeting and there should be enough time for shareholders to submit questions ahead of the AGM. Transcripts of the Q&A should be uploaded to the company’s website following the AGM.

The FRC says that it intends to work with the government to consider what measures may be needed to ensure that AGMs in 2021 can take place either as a virtual meeting (that is, a meeting held exclusively online) or as a hybrid meeting. It also proposes to establish a stakeholder group comprising government, companies and investors to consider recommendations for legislative change in relation to AGMs.

The FRC’s Financial Reporting Lab has published a report on Video in corporate reporting, which looks at how companies currently use video in corporate reporting and shareholding meetings.

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Gareth Sykes
Gareth Sykes
+44 20 7466 7631

Stephen Wilkinson
Stephen Wilkinson
+44 20 7466 2038

Covid-19 – shareholder meeting relaxations extended

The government has made regulations that extend the relaxations to the company meeting requirements in the Companies Act, which were introduced as a result of the Covid-19 pandemic, to 30 December 2020.

Under the relaxations, which are set out in the Corporate Insolvency and Governance Act 2020 (see our earlier post on this issue), shareholder meetings can take place by electronic or any other means, notwithstanding the provisions contained in the Companies Act 2006 or a company’s articles of association. The participants need not be in the same place and shareholders do not have a right to attend in person.

The regulations also extend certain other temporary measures under the Corporate Insolvency and Governance Act, including the restrictions on issuing statutory demands and winding up petitions, which have been extended to 31 December 2020.

 

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Caroline Rae
Caroline Rae
+44 20 7466 2916

Gareth Sykes
Gareth Sykes
+44 20 7466 7631

Covid-19 – latest developments for corporate practitioners

Further guidance for companies has been published in light of the Covid-19 pandemic.

Company meetings

  • Shareholder meetings – Relaxations to the company meeting requirements contained in the Companies Act 2006 (as well as the meeting requirements for certain other entities) came into force on 26 June 2020. Under the relaxations, which were made by the Corporate Insolvency and Governance Act 2020, shareholder meetings can take place by electronic or any other means, notwithstanding the provisions contained in the Companies Act 2006 and the company’s articles of association. The participants need not be in the same place and shareholders do not have a right to attend in person. The relaxations apply to company meetings held between 26 March and 30 September 2020. ICSA: The Chartered Governance Institute and the City of London Law Society have published guidance on holding meetings under the Act. The guidance is available to members on The Chartered Governance Institute’s website.

Company filings

  • Temporary extension to filing deadlines The Companies etc. (Filing Requirements) (Temporary Modifications) Regulations 2020, which were made under the Corporate Insolvency and Governance Act 2020, temporarily extend various filing deadlines under the Companies Act 2006 and other legislation for companies and other entities, including:
    • Accounts: extended by three months, to 12 months for a private company and nine months for a public company. The extension, which is automatic, applies to the original filing deadline. It will not be added to any filing extension already granted by Companies House;
    • Confirmation statement: extended from 14 days to 42 days;
    • Events-driven filings (such as changes in details of directors): extended from 14 days to 42 days; and
    • Charges: extended from 21 days to 31 days.

The longer filing periods apply to filing deadlines that fall between 27 June 2020 and 5 April 2021 (inclusive). Companies House Guidance notes that the revised filing dates can be checked via the Companies House Service.

  • Extension of Companies House upload service – Companies House has extended its temporary upload service (see our corporate update 2020/13) to enable companies to file articles of association and related forms and resolutions online, rather than in paper format. The list of documents and forms which can now be uploaded using this service is available here.

Insolvency regime and directors’ duties

As well as relaxing the requirements for company meetings and allowing extensions to the filing deadlines for certain documents, as discussed above, the Corporate Insolvency and Governance Act 2020 has also made changes to the insolvency regime in the UK. The changes include:

  • Suspension of wrongful trading – When determining what contribution, if any, a director should make to a company’s assets following a finding of wrongful trading, the court must assume that a director is not responsible for any worsening of a company’s financial position between 1 March 2020 and 30 September 2020.
  • Ipso facto (termination) clauses – Contractual clauses permitting a supplier of most goods or services to terminate supply as a result of the customer’s entry into an insolvency procedure will cease to have effect.
  • Winding up petitions – Winding up petitions cannot be presented if based on statutory demands dated 1 March 2020 to 30 September 2020. Creditors will also be prevented from winding up a company unless the creditor has reasonable grounds to believe that Covid-19 has not had a financial effect on the company.
  • New company moratorium – A new moratorium is available for companies, which will give a company up to 40 business days of protection from creditors, without court or creditor approval. The moratorium prevents legal processes against the company, including commencing insolvency proceedings and crystallising a floating charge.
  • Restructuring plan – This new form of restructuring, similar to a scheme of arrangement, allows the court to impose a compromise on a company’s creditors and shareholders, including a cross-class cram-down.

We have previously published briefings on the impact for supply chains, landlords, banks and pension scheme trustees.

Other relevant materials

  • ESG – Corporate purpose and environmental, social and governance (ESG) issues dominated headlines in the months leading up to the Covid-19 outbreak. The intense public scrutiny of corporate conduct, governance and investment behaviours during the pandemic has served to accelerate the conversation around ESG issues. To help make sense of this new paradigm, we have published a guide in which we set out some of the ways in which Covid-19 is impacting the key ESG considerations confronting businesses, asset managers, asset owners and lenders.
  • Investment and acquisition opportunities – We expect the crisis to operate as a catalyst for change. As we transition to a new normal, there will be opportunities for those with access to capital and a desire to invest or participate in industry consolidation. In our latest guide we look at possible options and issues for those looking to invest.
  • Land Registry and electronic signatures – The Land Registry has issued draft practice guidance setting out the basis on which it will accept electronic signatures. The consultation closes on 18 July 2020 and the final practice note will be issued in the “next few weeks”.
  • Service of proceedings – The High Court has set aside default judgment obtained against a defendant Council where the claim form and particulars were posted to its offices shortly after the start of the Covid-19 lockdown. For further information, see our Litigation Notes blog post.

For further Covid-19 related publications, see our COVID-19 Hub.

Mark Bardell
Mark Bardell
+44 20 7466 2575

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Antonia Kirkby
Antonia Kirkby
+44 20 7466 2700

Covid-19 – latest developments for corporate practitioners

Further additional guidance for companies has been published in light of the Covid-19 pandemic.

Company meetings

  • FRC and BEIS Q&A on company meetings – The Financial Reporting Council (FRC) and Department of Business, Energy and Industrial Strategy (BEIS) have published updated Q&A and best practice guidance on AGMs and other general meetings, pending the Corporate Governance and Insolvency Bill coming into force. The guidance says that, where it is not possible to hold an AGM as usual, companies should consider whether there is scope to convene a physical meeting with a representative cross-section of members. If such a meeting is possible, companies should ensure that shareholders can ask questions before any voting takes place. If a physical meeting is not possible, companies should explore how members might actively participate in a meeting by virtual means. It is currently expected that the Corporate Governance and Insolvency Bill, which will give companies additional flexibility in relation to shareholder meetings, will come into force by the end of the month.

Corporate reporting

  • AIM – The London Stock Exchange has announced, in the latest edition of Inside AIM, that AIM companies can have an additional month to finalise their half-yearly reports if needed (normally an AIM company must notify its half-yearly report within three months from the end of the period to which it relates). This extension is temporary while the UK faces the disruption resulting from the coronavirus pandemic.

Contract issues

  • Force majeure – As a result of the Covid-19 pandemic, many commercial parties have been reviewing their contractual arrangements to consider whether there are grounds for excusing non-performance or suspending or terminating their contracts. We have developed a new interactive tool which is designed to assist parties in evaluating the availability of force majeure relief under English law, either in respect of a party’s own contractual obligations or those of its counterparty. Click here to access the tool.

Other relevant materials

For further Covid-19 related publications, see our COVID-19 Hub.

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Antonia Kirkby
Antonia Kirkby
+44 20 7466 2700

Roddy Martin
Roddy Martin
+44 20 7466 2255

COVID-19 – latest developments for corporate practitioners

Further guidance for companies has been published in light of the COVID-19 pandemic.

Company meetings and other corporate actions

  • Shareholder meetings – The Government has published the Corporate Insolvency and Governance Bill (together with Explanatory Notes) which contains relaxations to the company meeting requirements contained in the Companies Act 2006 (as well as the meeting requirements for certain other entities).

The Bill would allow shareholder meetings to take place by electronic or any other means notwithstanding the provisions contained in the Companies Act 2006 and the company’s articles of association. The participants would not need to be in the same place and shareholders would not have a right to attend in person. The Bill would apply to company meetings held between 26 March and 30 September 2020 and if the deadline for a company to hold a shareholder meeting falls within this period, that deadline is extended to 30 September 2020. The Bill would also give the Secretary of State power to make secondary legislation in relation to notices and other documents relating to shareholder meetings. The second reading of the Bill is scheduled for 3 June 2020.

The provisions in the Bill largely reflect the guidance published by ICSA: The Chartered Governance Institute pursuant to which companies have been holding meetings with only the quorum physically present and other shareholders unable to attend. The main impact of the Bill would be to allow the quorum to meet virtually (for example, by a telephone call) rather than physically at a prescribed venue.

The Bill also contains major reforms to UK insolvency law (see below) and would give the Secretary of State the power to extend the periods for filing certain documents at Companies House.

Separately, the Financial Conduct Authority (FCA) has published a Primary Market Bulletin (PMB No. 28). The focus of PMB No. 28 is half-yearly financial reports (see below) but it also contains commentary on shareholder engagement and company meetings. The FCA encourages issuers to look at ways to allow shareholders to ask questions of management and exercise their voting rights effectively when making alternative arrangements to physical general meetings. The FCA also says that it is supportive of virtual general meetings.

  • Government support – The Government has announced that companies accessing the Bank of England’s Coronavirus Corporate Financing Fund (CCFF) and companies borrowing more than £50 million through the Coronavirus Large Business Interruption Loan Scheme (CLBILS) will be subject to restrictions on distributions to shareholders and executive pay. In relation to distributions, companies will be unable to make dividend payments or undertake share buybacks. In relation to executive pay, companies will be unable to pay any cash bonuses, or award any pay rises to senior management. For companies accessing the CCFF, these restrictions will apply to participants that wish to borrow beyond 19 May 2021 and for companies borrowing under the CLBILS, they apply until the facility has been repaid in full.

Corporate reporting and company announcements

  • FCA statement on half-yearly financial reports – The FCA has published a Primary Market Bulletin (PMB No. 28) pursuant to which the period for listed companies to publish their half-yearly reports is effectively extended by one month such that the half-yearly report must be published within four months after the end of the half-year. The FCA also discusses going concern statements. It acknowledges the difficulties that companies may face in relation to the going concern assessment in light of the current circumstances and notes that auditors may need to include remarks in their audit opinion in relation to the going concern assessment. The FCA says that it is vital that investors are properly informed of the impact of COVID-19 and encourages users of financial statements to take into account the current circumstances when assessing their response to going concern disclosures. There is also discussion of shareholder engagement by listed companies (see above) and a statement that issuers could consider participation by smaller shareholders in capital raisings.
  • ESMA statement on half-yearly financial reports – The European Securities and Markets Authority (ESMA) has issued a public statement on the implications of COVID-19 on half-yearly financial reports. The statement discusses issues including the contents of the interim management report, risks and uncertainties linked to COVID-19 and impairment of non-financial assets.
  • Inside information – The FCA has published Market Watch No. 63 which focuses on inside information issues in light of COVID-19, particularly in the context of capital raisings. The FCA reminds issuers that they should continue to assess carefully what information constitutes inside information as COVID-19 and public policy responses to it may alter the nature of information that is material to a business’s prospects. Issuers should carefully monitor whether any new information is materially different from previous forecasts, guidance, or signals which they have announced publicly and which would now be likely to be misleading to investors. The FCA also reminds issuers that delaying the disclosure of inside information is only permissible when all three of the conditions to delay set out in Article 17(4) of the Market Abuse Regulation are met. Those conditions are that immediate disclosure is likely to prejudice the legitimate interests of the issuer; delay of disclosure is not likely to mislead the public; and the confidentiality of that information can be maintained.
  • Updated FRC guidance – The Financial Reporting Council (FRC) has updated its guidance for companies on corporate reporting during the COVID-19 pandemic by adding new sections on the reporting of exceptional items and alternative performance measures (APMs).

Contract issues

  • Force majeure – Many contracting parties have already been affected by force majeure events arising out of the COVID-19 pandemic and the associated restrictions. As the focus starts to shift toward the gradual easing of lockdown measures, those parties who have claimed force majeure relief will be preparing to resume performance as soon as the impact of the force majeure event comes to an end. However, it is also important for contracting parties to prepare for any second wave force majeure situation.

The force majeure implications of a potential second wave of COVID-19 infections and the resulting re-imposition or tightening of lockdown measures are discussed in a recent blog post and in a new episode of our Navigating COVID-19 podcast series. Our podcasts are available on iTunes, Spotify and SoundCloud and can be accessed on all devices.

  • Practical issues around signing and completion of contracts – Given the current restrictions on interaction which have been imposed by the UK Government and with a large number of people working from home, it is not always possible to adopt the usual methods for signing and completing transactions. In this briefing we summarise some practical points to ensure compliance with the necessary legal formalities whilst these measures remain in place.

Insolvency law

  • Major reforms to insolvency law – The Government has published the Corporate Insolvency and Governance Bill which contains the most far-reaching reforms to UK insolvency law in over 30 years. The Bill has been introduced on an emergency basis in an attempt to ensure that otherwise financially viable companies survive during a period of unprecedented interruption and turmoil. The Bill would introduce new company moratoriums and restructuring plans and would amend the current winding up and wrongful trading regimes. Our Restructuring, Turnaround and Insolvency team has published a briefing on the Bill which is available here.

Other relevant materials

For further COVID-19 related publications, see our COVID-19 Hub.

Caroline Rae
Caroline Rae
+44 20 7466 2916

Gareth Sykes
Gareth Sykes
+44 20 7466 7631

Ben Ward
Ben Ward
+44 20 7466 2093

COVID-19 – latest developments for corporate practitioners

Further guidance for companies has been published in light of the COVID-19 pandemic.

Corporate reporting

  • Interim reports – The Financial Reporting Council (FRC) has updated its guidance for companies on corporate reporting during the COVID-19 pandemic by adding a section on interim results. It says that directors will need to exercise judgment about the nature and extent of the procedures that they apply to assess the going concern assumption at the half-yearly date. If going concern has become a significant issue, the FRC recommends that directors undertake procedures similar to those for annual financial statements and consider whether to engage their auditors to perform an interim review (although there is no legal requirement to do so).

Company meetings

  • AGMs and other general meetings – The Department for Business, Energy and Industrial Strategy (BEIS) and the FRC have published an updated Q&A on the legislation that will be introduced to assist companies where COVID-19 restrictions make it difficult to hold meetings. The Q&A confirms that the legislation will apply retrospectively from 26 March 2020 until 30 September 2020, and that it will apply to general meetings as well as annual general meetings. There is no indication of when the legislation will be published.

Contract issues

  • Execution of documents – The Law Society has published guidance on virtual execution and e-signatures during the COVID-19 pandemic. It draws attention to its existing practice notes on Executing documents by virtual means (referred to as the Mercury Note) and Executing documents using an electronic signature. It also provides an update on recent relevant advances in the use and acceptability of electronic execution. The Land Registry has confirmed that it will, until further notice, accept email PDFs of deeds signed in accordance with “Option 1” in the Mercury Note.
  • Force majeure – The COVID-19 pandemic has led many commercial parties to review their contractual arrangements and consider whether there are any grounds on which they may seek to delay or avoid performance (or liability for non-performance), or suspend or terminate their contracts. Our new publication, COVID-19: Force majeure: A global perspective, provides a high-level overview of the approach taken to force majeure clauses in key jurisdictions including Australia, China, France, England & Wales, Germany, Japan and the United States.
  • Insurance – The Financial Conduct Authority (FCA) has announced that it intends to obtain a court declaration to resolve contractual uncertainty in business interruption insurance cover. It says that it is not intended to encompass all possible disputes, but to resolve some key contractual uncertainties, in order to assist both insurers and insureds.

Other relevant materials

We have published a guide on Governance of companies in the current environment. Business-as-usual decision making, disclosures and corporate reporting have all been, and are likely to continue to be, disrupted at least in the short term. Companies will need to ensure that robust and effective decision-making processes remain in place and that they fulfil their legal and regulatory obligations to investors and other stakeholders. In the guide, we suggest practical steps that companies should consider, both in the short term and in the months ahead.

For our other guides (on Managing Liquidity, People and Supply Chains) and further COVID-19 related publications, see our COVID-19 Hub.

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Antonia Kirkby
Antonia Kirkby
+44 20 7466 2700

Caroline Rae
Caroline Rae
+44 20 7466 2916

COVID-19 – latest developments for corporate practitioners

Further additional guidance for companies has been published in light of the impact of the COVID-19 pandemic.

Company meetings and other corporate actions

  • Shareholder meetings – The Department for Business, Energy and Industrial Strategy (BEIS) and the Financial Reporting Council (FRC) have published a Q&A document on AGMs and other general meetings. The government announced in March that it would put forward legislation to make it easier for companies to hold shareholder meetings while COVID-19 restrictions are in place and the Q&A discusses the measures that the legislation might cover. Options could include providing companies with the ability to hold “closed” meetings or giving companies the ability to override their articles of association for a short period.
  • Withdrawal or amendment of dividend resolution – ICSA: The Chartered Governance Institute has published guidance on withdrawing or amending a dividend resolution at an AGM. It considers how a company can withdraw or amend its dividend resolution, how proxy votes should be treated if the resolution is being amended to reduce the dividend after proxy votes have been submitted and whether an announcement is required.
  • Executive remuneration – The Investment Association (IA) has published guidance which sets out its expectations on how UK listed companies should reflect the impact of COVID-19 on executive pay. It says that boards must justify levels of executive pay and ensure that executives’ experiences reflect those of shareholders, employees and other stakeholders, especially if a company has sought to raise additional capital from shareholders or has made use of Government support such as the Coronavirus Job Retention Scheme. Where dividend payments have been suspended or cancelled, the IA considers that this should be reflected in executive pay. Our remuneration and incentives team has published an e-bulletin on the guidance, which is available here.
  • FCA letter on fair treatment of corporate customers preparing to raise equity finance – The Financial Conduct Authority (FCA) has published a “Dear CEO” letter commenting on reports of banks failing to treat their corporate clients fairly when negotiating new or existing debt facilities. It says that it has had reports that banks may have used their lending relationship with corporate clients to secure roles on equity mandates. In some cases, these roles may be ‘in name only’, with few or no additional services being provided in exchange for a share of the fee pool. The FCA says that it will be looking into this further and notes that such conduct could be a breach of FCA rules and Principles.
  • Companies House – Companies House has updated its guidance on filing documents while Covid-19 restrictions are in place. It has introduced an emergency filing service for a selection of paper documents that do not have an online option, such as applications to remove material about a director.

Corporate reporting

  • Modern slavery reporting – The government has launched a new web page to provide guidance for businesses reporting under the Modern Slavery Act during the COVID-19 pandemic. In light of the COVID-19 pandemic, the guidance says that, as well as focusing on the health and safety of their workers, businesses will need to consider how fluctuations in demand and changes in their operating model may lead to new or increased risks of labour exploitation.  It also recognises that businesses may need to delay the publication of their modern slavery statement by up to 6 months and will not penalise those that do so.
  • Alternative Performance Measures (APMs) – The European Securities and Markets Authority (ESMA) has published an updated version of its Q&A on APMs to provide guidance to issuers on the application of its APM Guidelines in the context of the COVID-19 pandemic (an APM is a financial measure of historical/future financial performance, financial position or cash flows which is presented voluntarily by a company to aid understanding of its performance). The new Q&A on COVID-19 encourages issuers to use caution when adjusting APMs and including new APMs to address the impact of COVID-19, and invites issuers to provide information regarding any modifications and assumptions and on measures to address the impact that the outbreak may have on it.

Other relevant materials

We have published two further guides on the impact of COVID-19 on businesses:

  • One focuses on People and explores the measures available to employers, and approaches they may wish to take, during the crisis and in its aftermath to safeguard the health and safety of employees, to preserve jobs, skills and the future viability of businesses, and to protect individual personal data.
  • The other focuses on Supply chain and looks at various ways of managing supply chain difficulties, such as how to maintain the links in the supply chain, competition law issues, product-related issues and the suspension and termination of contracts.

For further information on this and other COVID-19 related issues, see our COVID-19 Hub.

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Antonia Kirkby
Antonia Kirkby
+44 20 7466 2700

Ben Ward
Ben Ward
+44 20 7466 2093

COVID-19 – latest developments for corporate practitioners

In light of the widespread impact of COVID-19, various pieces of guidance have been published which companies should be aware of.

FCA statement on share issuances

The Financial Conduct Authority (FCA) has issued a Statement of Policy to assist companies looking to raise new share capital in response to the COVID-19 crisis.

  • Smaller share issues (<20%) – The FCA confirms that it supports the Pre-Emption Group (PEG) recommendation that investors support issuances by companies of up to 20% of their issued share capital (see our corporate update 2020/7). It also reminds companies to carefully consider the PEG guidance on what companies who are seeking to use this additional flexibility should do.
  • Prospectuses – The FCA highlights the benefits of the simplified prospectus regime under the EU Prospectus Regulation for secondary issuances (though it notes that this option may not be suitable for an offering that has a non-EU component). It also outlines a temporary revision to its approach to unqualified working capital statements. It proposes to permit disclosure of key assumptions underpinning an issuer’s reasonable worst-case scenario in relation to business disruption as a result of the COVID-19 crisis. Further detail can be found in this Technical Supplement published by the FCA.
  • General meetings required under the Listing Rules – The FCA is also temporarily modifying the requirements for approval of class 1 transactions and related party transactions under LR 10 and LR 11. A company will be able to get a dispensation from the FCA from the requirement to hold a general meeting to approve a class 1 or related party transaction, if it obtains written undertakings from shareholders eligible to vote on the transaction that they approve it and would vote in favour of it. A circular will still be required. Further detail is set out in this Technical Supplement.
  • Market Abuse Regulation – The FCA reiterates its previous guidance that the Market Abuse Regulation continues to apply to issuers, and that companies and advisers should carefully assess what constitutes inside information at this time.

Institutional investor views

The Investment Association (IA) has sent a letter to FTSE 350 chairs setting out its views on various issues affecting listed companies in light of COVID-19.

Topics covered in the letter include:

  • Filing accounts – The IA recommends that companies use the additional two months allowed by the FCA to finalise their annual report and accounts if needed;
  • AGMs and share issuances – The IA endorses the recent guidance from ICSA: The Chartered Governance Institute in relation to AGMs and the recent Pre-Emption Group statement on new share issuances; and
  • Dividends and executive remuneration – The IA says that shareholders agree that companies should be considering the suitability and sustainability of dividend payments in light of the current uncertainties and that, if changes to dividend payments are proposed, companies should also consider their approach to executive pay.

The letter also discusses shareholder engagement and communication generally.

Guide to managing liquidity

The consequences of the pandemic, and the associated public health measures aimed at slowing the transmission and spread of the disease, pose serious threats to the supply and demand sides of many businesses. In turn, this is putting cash flows under pressure, meaning that companies are having to consider available options to avoid a liquidity crisis. We have launched a new Guide in which we explore different means of managing liquidity and, for each option, suggest practical steps to consider, both immediately and further ahead, as well as giving regional insights.

COVID-19 Hub and webinar series

For further information on these and other COVID-19 related issues, see our COVID-19 Hub and sign up for our Global Webinar Series.

Mike Flockhart
Mike Flockhart
+44 20 7466 2507

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Gareth Sykes
Gareth Sykes
+44 20 7466 7631

COVID-19 – latest developments for corporate practitioners

In light of the widespread impact of COVID-19, various pieces of guidance have been published which companies should be aware of.

Company meetings and other corporate actions

  • Dividends – The London Stock Exchange (LSE) has published guidance in Market Notice N07/20 on payment dates under the 2020 Dividend Procedure Timetable. The Dividend Procedure Timetable says that issuers should pay cash dividends within 30 business days of the record date. However, from 25 March 2020, the LSE will permit a deferral period of up to 30 business days for payment of a dividend, but to no more than 60 business days after the record date. An issuer must notify the LSE of any deferral of a dividend payment without delay. After the deferral period has expired, the dividend must either be paid or cancelled. Issues to consider around the payment of dividends are also discussed in the FRC guidance referred to in the corporate reporting section below.
  • Company meetings – The Government has announced that it will introduce legislation to ensure that companies required by law to hold annual general meetings (AGMs) will be able to do so in light of the restrictions on movement and gatherings. It says that companies will be given greater flexibility to hold AGMs online or to postpone the meetings but the detailed provisions are not yet available. ICSA: The Chartered Governance Institute has published an updated version of its guidance on holding AGMs and guidance on virtual board meetings.
  • Proposed changes to insolvency law – The Government has announced that it will introduce a number of proposed changes to UK insolvency law in response to COVID-19. Whilst the detail of the changes is not yet available, the announcement indicates that they will enable companies undergoing a rescue or restructure process to continue trading, giving them breathing space that could help them avoid insolvency. They will also enable companies to continue buying supplies and will temporarily suspend wrongful trading provisions retrospectively from 1 March 2020. Our restructuring, turnaround and insolvency team has published a briefing on what form the changes may take.
  • Share issues – The Pre-Emption Group has published a statement recommending that investors consider supporting, on a case by case basis, issuances by companies of up to 20% of their issued share capital (rather than the usual 5% for general corporate purposes, plus an additional 5% for acquisitions, that it usually recommends). The statement indicates that this is only a temporary relaxation and sets out steps for companies seeking to take advantage of this flexibility. For further information, see this briefing published by our ECM team.
  • Stock transfer forms – HM Revenue & Customs (HMRC) has published details of a new process for stock transfer forms and payment of stamp duty, in light of COVID-19. Stock transfer forms should no longer be posted to HMRC but instead an electronic copy (e.g. a scanned PDF) of the stock transfer form, or in the case of purchase of own shares of Form SH03, should be emailed to HMRC. HMRC also says that it will accept e-signatures while COVID-19 measures are in place and that stamp duty must be paid before HMRC can process the form.

Corporate reporting

  • Listed company annual report and accounts – The Financial Conduct Authority (FCA) has published a statement which, in effect, gives listed companies an additional two months to finalise their annual report and accounts as the FCA says that it will not suspend the listing of companies if they publish financial statements within six months of their year-end. The Q&A to accompany the FCA statement confirms that the FCA statement does not currently extend to half yearly financial reports. The FCA has published an updated version of its Primary Market Bulletin No. 27 to reflect this (see our blog post for more information on PMB No. 27).
  • AIM company accounts – The LSE has said that AIM companies can apply for a three-month extension to the deadline for publication of their annual accounts.
  • Filing accounts at Companies House – Companies House has said that it will grant a three month extension for companies to file their accounts. Companies must apply for the extension but those citing issues around COVID-19 will be automatically and immediately granted an extension.
  • FRC guidance for companies preparing financial statements – The Financial Reporting Council (FRC) has published guidance for companies preparing financial statements. It highlights some key areas for boards in maintaining strong corporate governance as well as providing high-level guidance on preparation of annual reports and other corporate reporting matters.
  • Gender pay gap reporting – The Government has suspended enforcement of the gender pay gap deadlines for this reporting year (2019/20) and there will be no expectation on employers to report their data.
  • Preliminary results announcements – The FCA has asked listed companies to delay announcement of their preliminary results for a period of two weeks. Further details on the moratorium, which is voluntary, can be found in a Q&A published alongside the FCA statement.

For further information, see this post on our Corporate Notes blog.

Other relevant developments

  • Managing liquidity – As both economic production and consumption contract rapidly, many businesses are facing cash flow difficulties. We have published a briefing in which we consider options open to companies to help manage liquidity.
  • Job retention scheme – HMRC has published more details on the Coronavirus Job Retention Scheme. Our employment team has published a briefing on the new guidance.

For further information on these and other COVID-19 related issues, see our COVID-19 Hub and sign up for our Global Webinar Series.

Sarah Hawes
Sarah Hawes
+44 20 7466 2953

Antonia Kirkby
Antonia Kirkby
+44 20 7466 2700

Gavin Williams
Gavin Williams
+44 20 7466 2153

COVID 19 – FCA Primary Market Bulletin, AGMs, accounts, Companies House and M&A

As the COVID-19 outbreak, and its impact, escalates rapidly, various pieces of guidance have been published for companies to consider.

FCA Primary Market Bulletin

The Financial Conduct Authority (FCA) has published a Primary Market Bulletin (PMB No. 27) which discusses a number of issues for listed companies in relation to COVID-19.

  • Market Abuse Regulation – The FCA reminds issuers of their obligations in relation to inside information and that their operational response to COVID-19 may itself meet the requirements for disclosure under MAR. It also reminds issuers to continue to disclose PDMR dealings to the stock market and the FCA.
  • Market volatility and suspension of trading – The FCA says that it intends to continue to maintain open and orderly markets despite the current volatility.
  • Delays in corporate reporting – The FCA notes that there may be logistical issues in connection with the production and finalisation of forthcoming annual reports and accounts. It says that it expects issuers to put in place measures to minimise the potential impact. If an issuer does not believe it is able to meet its continuing obligations it should take appropriate advice and contact the FCA to discuss its situation.
  • Shareholder meetings – The FCA recognises that there may be issues in relation to forthcoming shareholder meetings, and that issuers may want to use virtual meeting methods.
  • Corporate transactions – The FCA will continue to review documentation for corporate transactions in accordance with the principles set out on its website. Issuers are encouraged to speak to their sponsor in relation to urgent transactional issues.

AGMs

We have published a briefing on the impact of COVID-19 on AGMs.

ICSA: The Chartered Governance Institute has also published a guidance note on the conduct of AGMs in light of COVID-19. It sets out the following possible options for companies which are due to hold an AGM in the coming months:

  • adapting the basis on which the company holds the AGM;
  • delaying convening the AGM, if the notice has not yet been issued;
  • postponing the AGM, if permitted under the articles of association;
  • adjourning the AGM; or
  • conducting a “hybrid” AGM, if permitted under the articles.

Annual reports and accounts

The Financial Reporting Council (FRC) has issued guidance for auditors who may face practical difficulties in carrying out audits as a result of COVID-19.

Companies which are unable to file their accounts on time because of COVID-19 may make an application (online or by post) to Companies House to extend the period allowed for filing. Details of how to make such an application are available here. If the company fails to apply for an extension prior to the filing deadline, and  the accounts are not filed on time, an automatic penalty will be imposed.

Companies House

Companies House has now closed its Belfast, Edinburgh and London offices. Paper documents can still be delivered to the Belfast and Edinburgh offices (details available here) but this option is not available for the London office. All hard copy Companies House filings should be sent to the Cardiff office at Crown Way, Cardiff, CF14 3UZ. Most companies and LLPs should be able to make most of their filings online using the WebFiling service. Further details about WebFiling are available here.

All same day services have been suspended until further notice and we understand that incorporations and registrations are currently taking longer than usual.

M&A

The rapidly evolving COVID-19 situation means that we cannot look too far ahead to predict what will happen next in the context of M&A. However, for those already involved in an M&A process or about to embark on one, there are some immediate issues for buyers and sellers to consider. We have published a briefing in which we look at issues for (a) deals that are between signing and closing; (b) deals that are in the course of negotiation; and (c) deal processes that are about to launch. We also make some general observations that apply to all M&A transactions.

Employment

Employers have an obligation to ensure the health and safety of their workforce – in many European countries this is a strict liability duty, rather than a “reasonable efforts” test. Regardless of this legal obligation, employers will of course wish to ensure that they keep their employees safe and healthy. Our employment team has published some practical advice for employers and examples of some of the questions which employers may be facing.

Further information

For further information and publications on COVID-19, see our hub page on navigating the COVID-19 outbreak.

Gavin Davies
Gavin Davies
+44 20 7466 2170

Julie Farley
Julie Farley
+44 20 7466 2109

Gareth Sykes
Gareth Sykes
+44 20 7466 7631