Sell, sell, sell! OTS’s recommendations on the current CGT scheme
Following a request by the Department of Business, Energy and Industrial Strategy (“BEIS”) ICSA has prepared a report assessing the effectiveness of the independent board evaluation process introduced in the 2018 update of the UK Corporate Governance Code (the “UK Code”). ICSA has concluded that the evidence does not suggest widespread market failure in this area, and indeed that in some areas there are signs that the update to the UK Code is having a positive effect, but that there is room for improvement. In particular it believes there is scope for broader adoption of good practices and greater transparency by both companies under review and reviewers. To this end, it has made a number of recommendations. These include introducing a voluntary code of practice and register for board reviewers, a set of voluntary good practice principles for companies and guidance for listed companies on how to report on their board performance reviews in line with the UK Code.
ICSA recommended that a voluntary code of practice should be introduced for organisations undertaking external board performance reviews. This is initially to be focused on organisations which are performing those reviews for FTSE 350 companies, or aspire to do so, but it is clear that ICSA would like to see the code adopted more widely.
A proposed code, which adopts the approach of having high level principles accompanied by guidance on application, is included in their report, and covers areas such as competence and capacity; independence and integrity; client engagements and client disclosure. In alignment with ICSA’s overall approach reviewers who commit to the code will do so on a “apply and explain” basis. The overall thinking is that the transparency produced by compliance should mean that companies and stakeholders are able to understand the approach and qualifications of reviewers, and make an informed assessment of who is the best reviewer for them.
This code of practice is to be supported by the introduction of a public register of board reviewers. Initially the requirements for registration will be light touch, being limited to disclosure of the basis on which the applicant has “applied and explained” the code, but it is anticipated that this will be kept under review and more onerous conditions will be introduced later.
Subject to an appropriate “owner“ of the register being identified by BEIS, ICSA’s recommendation is that it should go live by the end of the year, with details of how registration will take place being announced as soon as practicable to give reviewers a chance to adjust their practices and update their disclosures before it does.
ICSA notes that the UK Code already has extensive provisions dealing with conduct of board evaluations and the appointment of external reviewers, but concluded that there would be value in setting out voluntary good practice principles to which companies could commit and which go further than the UK Code’s “comply or explain” obligations. Again a proposed set of principles is annexed to the report, and are designed to mirror the code of practice for board reviewers.
The principles cover areas such as selection of reviewers, conflicts of interest, agreeing a scope of works, appropriate access and reporting processes, and disclosure of compliance. They also require the reviewer’s agreement be given to certain information about the review to be disclosed in the company’s annual report.
Adoption of these principles is not limited to FTSE 350 companies. Indeed ICSA’s view is that they could be adopted by any entity which undertakes board evaluations.
The final core element of ICSA’s recommendations is the publication of additional guidance about disclosures listed companies (not just FTSE 350 companies) should make in relation to their internal and external board review processes. As before suggested guidance is set out in the report.
This suggested guidance focuses on three areas of disclosure in addition to those required by the UK Code:
Again the intention here is to ensure transparency and allow stakeholders to form judgements about the process followed. For example, it is considered that having a reviewer selected by only one person within the company or without a formal process involving at least two candidates would raise a red flag.
ICSA has also concluded that as a matter of good practice reviewers should be given the opportunity to ensure they are comfortable with the disclosures being made in the company’s annual report in relation to the description of the review process and any comments which purport to represent the reviewer’s opinion. Companies complying with the guidance are required to confirm that they have agreed the relevant statements with the reviewer.
In wrapping up its recommendations ICSA recommend that the Financial Reporting Council should review practice and reporting on board evaluations as part of its regular monitoring of the UK Code and report on its conclusions, and also that BEIS should conduct a formal review of the impact of ICSA’s proposed measures three years after the register of review providers goes live. BEIS’s review should consider whether the proposed measures should move from a voluntary to a mandatory basis, whether additional oversight of the board reviewer’s code of practice is required and generally if any changes are needed to the content of the reviewer’s code of practice, the principles for companies or the disclosure guidance.
Board evaluation is clearly an evolving area of regulation. It seems very likely that ICSA’s recommendations will be implemented in the short term, but listed companies and board reviewers can expect further changes as the area matures and the recommended reviews take place.
This blog has been drafted and provided by Kingsley Napley LLP. It should be used for informational purposes only. The information is based on current legislation and should not be relied on as an exhaustive explanation of the law or issues involved without seeking legal advice.
KNow Wear Limited has used the investment received to date to further develop the wearable tech product to the extent that it now has a minimum viable product with basic features to introduce to the market. The company has identified a test group of 100 consumers who will test this version of the product and provide feedback. Following the test phase the company will collate the feedback and further develop the product before releasing a final version of the product to the market.
The Government has for some time promised to introduce a register requiring overseas entities holding UK property to identify its beneficial owners, in its effort to increase transparency in UK property ownership and reduce the attraction of the UK’s property market to money launderers. Indeed, we last blogged about the potential overseas entities register in May 2019. With UK-based entities subject to strict information-sharing requirements since 2016 (in the form of the register of People with Significant Control or “PSC Register”), many have been calling for an equivalent overseas entities register to be implemented to provide a way of tracking overseas owners who ultimately own and control UK land.
In an Employment Related Securities (ERS) Bulletin for March 2022 (bulletin 40), HMRC has linked to helpful guidance on what it considers to be a reasonable excuse for failing to meet submission deadlines for annual ERS returns (due on 6th July following the end of the tax year to which they relate) and notification of EMI options (due within 92 days after grant).
In our recent blog, we explored why a Framework Agreement structure is typically the most appropriate customer contracting model for IT managed services providers (“MSPs”) and IT consultancies which offer a diverse product and service offering. Whilst our initial blog focussed on the purpose and terms of the Framework Agreement itself, that document is merely the starting point, given that a Work Order is also needed to document specific terms relating to each product or service offered by an MSP or IT consultancy. A typical service offering is a dedicated software support helpdesk, usually provided to support each of the software products offered by the MSP or IT consultancy to its customers. This blog considers a handful of the key issues to bear in mind when documenting the terms of a Work Order relating to the supply of a software support helpdesk service.
Articles are a set of rules which determine how a private company is run and they represent a contract not only between the company and its shareholders but also between the shareholders themselves. Examples of what is covered in a company’s Articles include the liability of shareholders, how shareholders make decisions and how directors operate. The Model Articles are a set of default standard articles which, unless modified or excluded, apply automatically to a private company incorporated on or after 1 October 2009.
Picture Rishi Sunak as a game show host. The spotlight is on the contestant, an employee, and Rishi asks them if they would like to: a) Keep their pay rise; b) give it all to the government; or c) give it all to charity. I expect many of us would say “Keep it please!” but, in certain situations, without some action on the employee’s part the default answer is that none of it is kept and the government enjoys it all. This post briefly discusses one such issue, and offers other suggestions for the tax year end (which are, unfortunately, unlikely to make you a millionaire).
Despite the rumours of a reduction in income tax, you may have expected that the Chancellor would keep this in his back pocket for now...
KNow Wear Limited have identified some overseas talent that they would like to hire to help to expand the business. This candidate does not currently have permission to work in the UK and therefore KNow Wear Limited is considering whether it can apply for a sponsor licence from UK Visas & Immigration (“UKVI”). Obtaining a sponsor licence, will then enable the company to go on and sponsor individuals to apply for immigration permission to work in the UK.
The FCA has published its proposals to strengthen the financial promotion rules for high-risk investments and for authorised firms which communicate and approve financial promotions in its recent Consultation Paper.
Many businesses lack comprehensive in-house IT expertise and resources to fully implement and manage all of their IT infrastructure requirements. IT managed services providers (“MSPs”) and IT consultancies plug the gaps by typically offering a diverse range of IT services and products to lighten the burden on their customers’ in-house IT teams (or to even remove the need to have an in-house IT team).
Having raised £500,000 and, in episode 8, hired a software developer, KNow Wear Limited is starting to flourish. As Ben Franklin wrote when the USA was in its infancy, nothing is certain except death and taxes. Knowledge of the UK tax system is valuable for any UK business owner, start-ups can dramatically improve their chances of success by ensuring they claim the various tax reliefs and incentives available. Episode 4 looked at the valuable tax reliefs a company can offer its investors, your focus today is on the tax relief (or repayment) available to companies carrying out research and development activities.
Social media has revolutionised the way in which we interact with businesses and each other and has shown that it can be a generous friend to business owners and entrepreneurs, helping them to harness a following, build their brand and grow a worldwide customer base.
In our previous blog in our Lifecycle of a tech startup series, KNow Wear Limited secured investment of £500,000. Having completed the raise, you, Sarah and Chris have decided that you need more help in developing and marketing the product. You are looking to create two new roles in the business - the first is a Software Developer to support Sarah’s work and the second is a Head of Marketing.
In Part 1 of our two-part series on the Department for Business, Energy and Industrial Strategy's (BEIS) White Paper on audit and corporate governance reform (Restoring Trust in Audit and Corporate Governance), we focussed on whether the proposals regarding corporate governance are likely to make the UK a more or less attractive destination for investors.
Yesterday the FCA announced new rules, the majority of which come into force today (3 December 2021), which are intended to prevent smaller companies obtaining admissions to the Standard Segment of the Official List.
In its Perimeter Report for 2020/21 the FCA has raised concerns that unauthorised persons are increasingly using, or purporting to use, exemptions from the Financial Promotions Order (FPO) to sell high risk investments and potential scams to ordinary consumers without their rules applying.
Potential reforms to UK data privacy laws will change the way that cookies work on websites - businesses need to prepare now.
AQSE is consulting the market about some changes to its rules relating to SPAC admissions.
Currently SPACs are eligible for admission to the Access segment of the AQSE growth market, as long as they have a minimum capitalisation of £700,000 and a free float of 10%. AQSE is concerned that this can result in a disorderly market and excessive volatility because a lack of liquidity arising from low market capitalisation and limited shareholder numbers.
Having decided in episode 4 of our lifecycle of a tech startup series on targeting angel investors to raise £500,000 investment in the business, the founders of KNow Wear Limited researched various angel investor networks which aimed to connect start-ups like yours with angel investors. You applied to pitch at a couple of events and were invited by one network to interview with them in person. The network was very impressed with the business and invited you to pitch at their next event.
In 2012, as a recently elected MP, Kwasi Kwarteng co-authored “Britannia Unchained: Global Lessons for Growth and Properity”, a political pamphlet which championed risk-taking and innovation in the UK economy, and which ever since has led some to label him a fervent Brexiteer. Appointed as the Business Secretary in January 2021, only a few months later his department (BEIS) published one of the longest and most ambitious government White Papers in recent years.
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