PLC QTRLY - Q3 2022

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.

Annual reports: FCA guidance on climate-related disclosure requirements

On 29 July 2022, the FCA published its review of climate-related disclosures in the annual reports of premium listed companies. The review was carried out with the FRC to determine the extent to which premium listed companies had complied with the recently introduced Listing Rule requirements for disclosures consistent with the recommendations of the Task Force on Climate-related Disclosures (TCFD).

The report provides useful guidance on how to comply with TCFD recommendations and with the new Listing Rules, which now apply to both premium and standard listed companies.

The FCA has made five key suggestions as to how companies could improve the quality of their reporting:

• Disclosures should be more granular and specific, explaining the risks and opportunities across the company in relation to different businesses, sectors and geographies.
• Discussion of climate-related risks and opportunities should be balanced and dependencies on the development of new technologies should be addressed when describing climate-related opportunities.
• TCFD disclosures should be better integrated with other elements of narrative reporting, including explaining how the company's assessment of climate-related risks compares to its assessment of other risks.
• Companies should clearly state how they have complied with TCFD guidance, including justifying the basis of any omissions (whether related to materiality or other factors).
• Climate-related risks and opportunities identified in TCFD reporting should be clearly linked to disclosures in the financial statements.

Annual reports: Structured digital reporting and XBRL tagging under the DTRs

On 23 September 2022, FRC Lab published a review of the first year of mandatory use of a structured digital format to produce annual financial reports, as is now required by the Disclosure Guidance and Transparency Rules (DTR 4.1.14R) for premium and standard listed companies.

The review highlights areas for improvement and better practice, including:

• Naming and structure of the files submitted to the National Storage Mechanism, as this was the cause of many rejected filings.
• Review and governance processes - more engagement and education is needed, including at management and board level.
• The usability of the report, by making a validated report available on the company’s website with an inline viewer.
• The timing of the report given that the deadline is reverting to 4 months after year-end, which means many companies may need to speed up the process from this year.
• Selection of tags, including by focusing on the accounting meaning of disclosures, avoiding unnecessary extensions and improving the selection of anchors for extensions.

AGMs: FRC's Good Practice Guidance for Company Meetings

On 21 July 2022, the FRC published guidance for listed companies to enhance effective shareholder participation when planning and conducting AGMs. The guidance sets out actions companies can take to achieve the following seven key principles:

• Information disseminated prior to the general meeting must offer clear instructions on how to attend the meeting and participate, in order to enable effective shareholder engagement.
• Whether meetings are physical, hybrid or virtual (should the legal position be clarified), shareholders should, as far as practicable, be able to engage in the business of the meeting.
• The board should provide an update at the AGM on matters raised by stakeholder groups that are considered by the board to materially affect the company’s strategy, performance, and culture.
• Companies should seek the broadest access to and participation in general meetings by a diverse range of shareholders. Whether attending virtually or in person, shareholders should have the opportunity to raise questions pertinent to the meeting agenda.
• Shareholders should be able to cast their vote in real-time, or submit a voting instruction in advance via the appointment of a proxy, depending on the format of a meeting. Appropriate technology should be used by companies to ensure that shareholders have the ability to appoint proxies and send instructions to proxies prior to the meeting.
• Companies should be as transparent as possible with shareholders in relation to matters discussed and raised by shareholders at the general meeting.
• Effective and transparent shareholder engagement should not be limited to an annual event. Opportunities to update shareholders on company matters should be offered throughout the year, with an emphasis on ensuring all shareholders have access to similar information.

HM Treasury begins work on digitisation of shares

On 19 July 2022, the Government launched a Digitisation Taskforce to modernise the UK’s shareholding framework. Modernising the UK’s shareholding framework was an important element of the Secondary Capital Raising Review, as reforms to complete the digitisation of shareholdings would enhance the efficiency of capital markets, ensure investors are able to properly exercise their rights, and support innovation in UK capital markets.

The Taskforce has been asked to:

• Identify immediate and longer term means of improving on the current intermediated system of share ownership.
• Eliminate the use of paper share certificates for traded companies and mandate the use of additional options to cheques for cash remittances.
• Consider whether the arrangements for digitisation can be extended to newly formed private companies and as an optional route for existing UK private companies.

The Taskforce will consider the use of new processes and technologies in achieving these goals, develop a timetable and plan for implementation of changes, support progress, engage with Government and regulators, and advise on any legislative, regulatory or other changes required to support the programme.

LSE announces new Capital Markets Industry Taskforce

On 20 July 2022, the London Stock Exchange (LSE) announced the launch of a new UK Capital Markets Industry Taskforce, convened with participants across the financial markets ecosystem to drive forward the development of the UK’s capital markets.

The Taskforce’s objectives will be to maximise the impact of capital market reforms and stimulate industry engagement to ensure that the UK’s capital markets serve those who seek capital and those who have capital to invest; that they support the UK economy; and strengthen its role as a global financial centre.

Julia Hoggett, CEO of the London Stock Exchange, will chair the new Taskforce. It will comprise CEOs, Chairs and industry leaders representing private and publicly listed companies, asset owners and managers and the advisory services that support their access to capital and investments, representing the full end-to-end ecosystem of the public and private capital markets.