The Office for National Statistics has published the latest edition of its regular analysis of the ownership of UK quoted company shares: see here. The survey considered ownership at the end of 2020, and found that 56.3% of shares by value were held by investors outside of the UK - a record high.
The terms of reference, and a call for evidence, for the recently announced review of the UK listings regime were published today: see, respectively, here and here. The Financial Conduct Authority has recently published a short report explaining the results of a review of a sample of annual reports - for accounting periods ending in 2016, 2017 and 2018 - in respect of corporate governance disclosures: see here (pdf). The FCA has identified several areas where, in its opinion, governance disclosures need improving; it has asked, for example, companies to consider whether their statements of compliance with the UK Corporate Governance Code permit shareholders to evaluate how the Code's Principles have been applied. The FCA also expressed its concern that in "certain cases" the disclosures provided were boilerplate in nature and did not change significantly from year to year.
The new AIM Rules for Companies (March 2018) have been published: see here (marked-up, pdf) or here (clean, pdf). These Rules require companies to 'comply or explain' against a 'recognised' corporate governance code. This requirement takes effect from 28 September 2018, although all new applicants from 30 March will be required to state the code they intend to follow and will have until 28 September 2018 to comply (or explain).
Last month, the London Stock Exchange published a feedback statement (including consultation questions) in respect of the AIM rules discussion paper (here, pdf) published earlier in the year: see here (pdf). It is the LSE's intention that AIM companies should be subject to a 'comply or explain' requirement in respect of a relevant corporate governance code (to be achieved through amendments to Rule 26 of the AIM rules). This would, subject to the outcome of the consultation, take effect from 30 June 2018. At present, Rule 26 does not require AIM companies to adopt a particular governance code (where no code has been adopted this should be stated and the company's governance arrangements disclosed).
The most recent paper published by the Department for Business, Innovation and Skills, as part of its research paper series, considers the motivations behind the listing decisions of the UK companies: see here (pdf). The paper's findings are based on a survey of 31 predominantly UK owned and based mid-sized businesses (defined as those with sales turnover of between £25m and £500m), including 17 listing on the London Stock Exchange and 14 unlisted. Chapter five of the report considers corporate governance.
The Quoted Companies Alliance yesterday published an updated edition of its Corporate Governance Code for Small and Mid-Size Quoted Companies: see here. The Code, which is endorsed by the Financial Reporting Council, is intended for companies not subject to the UK Corporate Governance Code, including standard listed companies and those on AIM and the ICAP Securities and Derivatives Exchange. A copy of the Code is not available to view free of charge.
The London Stock Exchange has published a new guide titled Corporate Governance for Main Market and AIM Companies: see here (pdf). The guide is wide-ranging in its reach, with chapters on the UK regulatory framework, structuring an effective board, managing directors' conflicts and board evaluation. Several chapters, either wholly or in part, compare the UK framework with that in other jurisdictions.
The FTSE Group is undertaking a consultation on the minimum free float requirements for UK incorporated companies in the FTSE UK Index Series: see here. It is proposed that the current minimum of 15% should be increased to 25% for companies seeking inclusion in the FTSE UK Index Series.
Changes to the Listing Regime come into effect today, with the creation of two segments: premium and standard. For further information see here. The revised Listing Rules are available here. Overseas companies with a premium listing of equity shares will be required to 'comply or explain' against the UK's Combined Code on Corporate Governance. The Financial Services Authority has published a policy statement marking the end of its three year review of the listing regime: see here (pdf). The statement contains final rules which will restructure the regime into two listing segments: standard (based on EU minimum standards) and premium (denoting more stringent super-equivalent requirements). Further information about the review is available here. An updated edition of the AIM Rules for Companies has been published, following a consultation last year: see here (pdf). A copy of the Rules, with the changes highlighted, is available here (pdf). The new Rules require the disclosure of directors' remuneration in the annual accounts (for financial years ending on and after 31 March 2010) and also provide for the electronic communication of annual reports and accounts (with immediate effect).The ICAEW's Audit Firm Governance Working Group has today published a governance code for firms auditing public interest entities: see here. The following firms, which between them audit approximately 95% of companies listed on the main market of the London Stock Exchange, will be subject to the code: Baker Tilly, BDO, Deloitte, Ernst & Young, Grant Thornton, KPMG, PKF and PricewaterhouseCoopers.... provide a formal benchmark of good governance practice against which firms which audit listed companies can report for the benefit of shareholders in such companies".
A firm should appoint independent non-executives who through their involvement collectively enhance shareholder confidence in the public interest aspects of the firm’s decision making, stakeholder dialogue and management of reputational risks including those in the firm’s businesses that are not otherwise effectively addressed by regulation".
The London Stock Exchange has published its submission to the FRC's review of the Combined Code on Corporate Governance: see here. In preparing its submission, the LSE sought feedback from a sample of companies (the sample size is not disclosed) and this found "no substantive evidence for wholesale changes to the Code". The LSE nevertheless states that there are some areas which demand further attention, including:Shareholder engagement. Measures to encourage increased and direct engagement by major shareholders beyond the annual general meeting period would be welcomed. Engagement of such investors with the non-executive directors in particular should be encouraged.
Risk management. In light of challenging economic conditions, boards seem to be adapting their approach to risk management. Operational risks are extensively reviewed, but the financial crisis has highlighted the need to consider contingency planning for ‘high impact/very low probability’ macro risks, which may warrant further guidance.
Non-executive directors. Given the additional focus on the non-executive director role, the FRC might consider reviewing the determination of independence within the Code as a way to help expand the associated non-executive director recruitment pool and to allow more flexibility for companies with widely differing business models to balance the need for independence with the need for sector expertise. An example raised included potentially reviewing the nine-year threshold when determining whether or not a non-executive was ‘independent’. Additionally, there would seem to be merit in creating guidance as to the qualities needed for an effective non-executive chairman capable of challenging the executive directors. Lastly, given the strategic role played by non-executive directors, the need for companies to ensure that they are properly informed in a timely fashion was reinforced, although mandating a separate company secretariat was not supported, which would be expensive and unwieldy for smaller companies particularly.
Positioning of the Code. There is a need to reassert the Code’s authority in light of certain third party interpretations, publications and commentary which have introduced confusion to the corporate governance debate.
