PLC QTRLY - Q2 2023

This is our regular quarterly update to help our listed company clients and other market participants keep up to date with key developments relevant to issuers on the Main Market and AIM market of the London Stock Exchange.

RPC advises Ceres on Main Market listing

RPC’s Public Companies team advised Ceres Power Holdings plc (Ceres), a global leader in fuel cell and electrochemical technology, on its transfer from AIM to the premium segment of the Main Market of the London Stock Exchange on 29 June 2023.

Having been admitted to AIM in 2004 following its spin out from Imperial College London, Ceres has grown to become a world-leading developer of electrochemical technologies: fuel cells for power generation, electrolysis for the creation of green hydrogen and energy storage, developing IP for systems and products that look to address the challenges of climate change through power generation and storage for applications in transportation, industry, data centres and everyday living.

The RPC team was led by Public Companies Partner Connor Cahalane and Head of Corporate Karen Hendy. Ceres' in-house legal team was led by General Counsel and Company Secretary Deborah Grimason.

Listing Regime: FCA proposes significant reforms to Listing Rules 

On 3 May 2023, the FCA published a consultation paper seeking views on its proposal to replace the current standard and premium listing share categories with a single listing category for commercial company issuers of equity shares. In comparison to the existing premium listing rules, this would involve:

• Removing the eligibility requirement for a three-year financial and revenue earning track record as a condition for listing, and no longer requiring a 'clean' working capital statement.
• Simplified eligibility and ongoing rules which currently require premium segment companies to have an independent business and operational control over their main activities, to create a more permissive approach to accommodate a range of business models and corporate structures. 
• Modified rules requiring listed companies to conclude a relationship agreement with a controlling shareholder to ensure flexibility by moving to a comply or explain and disclosure-based approach. 
• A more permissive approach to dual class share structures. 
• The removal of compulsory shareholder votes and shareholder circulars for significant transactions and related party transactions (RPTs). 
• A single set of Listing Principles and related provisions.

The FCA intends to retain:

• A modified sponsor regime to support companies at admission stage and for certain disclosure or reporting obligations. 
• Other controls on RPTs in the existing regime, including the requirement for a fair and reasonable opinion for larger RPTs. 
• Rules controlling the discount at which further shares can be offered where they are not offered pre-emptively to shareholders and rules relating to share buybacks. 
• Rules protecting shareholders from the cancellation of a listing without a takeover offer or approval by a super-majority of shareholders. 
• Separate listing categories and rules for equity shares issued by investment vehicles, including CEIFs, OEICs, SPACs and potentially for other types of investment companies. 
• Separate listing categories and rules that currently exist for non-equity securities including other share types such as preference shares and deferred shares that are currently eligible to list under the standard listing shares category.

The FCA's proposals are aimed at improving the competitiveness of the UK equity markets by creating a more attractive and compelling option for companies considering a share listing in the UK. The initial consultation closed on 28 June 2023. Details of the proposed rule changes that will be needed for the regime change will be the subject of a separate, follow-on consultation in autumn 2023.

ISSB sustainability disclosure standards issued

On 26 June 2023, the International Sustainability Standards Board (ISSB) issued its inaugural global sustainability disclosure standards, IFRS S1 and IFRS S2. The new standards will become effective starting January 2024.

IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate to investors about the sustainability-related risks and opportunities they face over the short, medium and long term. IFRS S2 sets out specific climate-related disclosures and is designed to be used with IFRS S1. Both fully incorporate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

The new standards are designed to provide a global baseline for sustainability-related disclosures in capital markets worldwide, creating a common language for disclosing the effect of climate-related risks and opportunities on a company's prospects and helping to improve trust and confidence in company disclosures about sustainability to inform investment decisions.

Now that IFRS S1 and IFRS S2 are issued, the ISSB will work with jurisdictions and companies to support adoption. The first steps will be creating a Transition Implementation Group to support companies that apply the Standards and launching capacity-building initiatives to support effective implementation.

Non-financial reporting: Department for Business and Trade launches consultation

The Department for Business and Trade (DBT) is working with the Financial Reporting Council (FRC) to review the non-financial reporting requirements UK companies need to comply with to produce their annual report and to meet the broader requirements that sit outside of the Companies Act. 

The DBT notes that the demand for non-financial information has grown as stakeholders seek information to support more sophisticated decision-making not only focused on financial return, but that the UK's framework for non-financial information needs to balance responding to this demand with companies being able to produce information that is focused, comparable and concise.

The review will also consider if current company size thresholds (micro, small, medium and large) that determine certain non-financial reporting requirements, and the preparation and filing of accounts with Companies House, remain fit for purpose.

The review builds on the Smarter regulation to grow the economy policy paper which set out how the government would improve regulation across the board to reduce burdens and drive economic growth now that the UK has left the European Union.

As a first stage of the review process, the DBT has launched a call for evidence which will close on 16 August 2023.

FRC launches public consultation on proposed changes to UK Corporate Governance Code

The FRC has launched a public consultation on its proposed changes to the UK Corporate Governance Code, focused on the legislative and governance reforms the government proposes to support the FRC's transition into the Audit, Reporting and Governance Authority (ARGA).

The main proposed changes concern those parts of the Code which deal with the need for a more robust framework of prudent and effective risk management and internal controls and are aimed at providing a stronger basis for reporting on, and evidencing the effectiveness of, the framework during the reporting period.

The UK Corporate Governance Code was last revised in July 2018. 

Responses to the consultation are requested by 13 September 2023. The FRC intends that the revised Code will apply to accounting years commencing on or after 1 January 2025 to allow sufficient time for implementation.

For further details, please see our blog: What does the FRC's proposed corporate governance overhaul mean for D&O exposures?

FRC publishes minimum standard for audit committees

The FRC has published a minimum standard for audit committees of FTSE 350 companies in relation to external audit, following a consultation on a draft proposal launched last November. 

In the government's May 2022 response to its White Paper 'Restoring Trust in Audit and Corporate Governance', the government stated that it intends to grant statutory powers to the Audit, Reporting and Governance Authority (ARGA), the replacement body for the FRC, to mandate minimum standards for audit committees of FTSE 350 companies. The current standard will operate on a comply or explain basis until ARGA is created.

The new minimum standard focuses on the following audit committee responsibilities: 

• Requiring that the company manages its non-audit relationships with audit firms to ensure that it has a fair choice of suitable external auditors at the next tender. 
• Conducting the tender process and making recommendations to the board about the appointment, reappointment and removal of the external auditor, and approving the remuneration and terms of engagement of the external auditor. 
• Engaging with shareholders on the scope of the external audit, where appropriate. 
• Ensuring that the external auditor has full access to company staff and records. 
• Inviting challenge by the external auditor, giving due consideration to points raised and making changes to financial statements in response, where appropriate. 
• Reviewing and monitoring the external auditor’s independence and objectivity. 
• Reviewing the effectiveness of the external audit process, taking into consideration relevant UK professional and regulatory requirements. 
• Developing and implementing policy on the engagement of the external auditor to supply non-audit services, ensuring there is prior approval of non-audit services, considering the impact this may have on independence, taking into account the relevant regulations and ethical guidance in this regard, and reporting to the board on any improvement or action required. 
• Reporting to the board and the members of the company on how it has discharged its responsibilities with respect to the external audit. 

UK prospectus regime: FCA engagement papers

On 18 May 2023, the FCA published a series of engagement papers on:

• Admission to trading on a regulated market
• Further issuances of equity on regulated markets
• Protected forward-looking statements
• Non-equity securities

These papers relate to the new regime for public offers and admissions to trading which will replace the UK prospectus regime and follow the publication in December 2022 of a draft statutory instrument setting out the government's proposed changes to the existing regime. 

They form part of a process of engagement and dialogue which the FCA has launched to seek views on areas including:

• Whether or how to set prospectus requirements for companies seeking admission of their securities to trading on regulated markets.
• Whether or not to set prospectus requirements on issuers raising further capital on UK regulated markets.
• How issuers may include forward-looking information in prospectuses.
• How the FCA may approach setting prospectus requirements for issuers seeking to admit securities to junior markets.
• What rules the FCA should set for firms that choose to operate a ‘public offer platform’ to allow companies to raise capital from investors without being admitted to a public market.

Insider dealing: order supplementing Criminal Justice Act 1993

On 26 May 2023, the Insider Dealing (Securities and Regulated Markets) Order 2023 was published. 

The order supplements the Criminal Justice Act 1993 (CJA) to align the securities and markets on which the criminal offence of insider dealing can be committed under Part 5 of the CJA with those to which the UK Market Abuse Regulation (MAR) applies. The list of securities within scope of Part 5 of the CJA was previously narrower that the list of securities covered by the civil insider dealing offences in MAR.