PLC QTRLY - Q4 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.

Reform of UK listing regime: FCA's detailed proposals

On 20 December 2023, the FCA published a consultation paper setting out details of its proposed reforms to the UK listing regime designed to create a simpler UK listing regime that is attractive to a wider range of companies.

The reforms broadly follow the approach set out in the FCA's May 2023 consultation (as described in PLC QTRLY Q2 2023), with the key proposed changes being:

• The current premium and standard listing segments will be replaced by a single listing segment for equity shares in commercial companies, with reduced eligibility criteria (compared to current premium listing requirements).
• Commercial companies will no longer need shareholder approval to carry out significant transactions or related party transactions.

Within the consultation paper, the FCA has published a draft of the first tranche of the new UK Listing Rules sourcebook. Comments on both this first tranche and the second tranche to be published later in Q1 2024 are required by 22 March 2024.

The FCA aims to publish the final UK Listing Rules in a policy statement at the start of H2 2024, with a two week period anticipated between publication and implementation.

Reform of prospectus regime: latest developments

On 27 November 2023, the draft Public Offers and Admissions to Trading Regulations 2023 were laid before Parliament, together with a draft explanatory memorandum. The draft statutory instrument mirrors the near-final version published in Q3 (and described in PLC QTRLY Q3 2023) and is intended to replace the retained EU law relating to prospectuses and create a new regulatory framework designed to give companies the flexibility to raise larger sums from investors more quickly.

The new framework sets out a general prohibition on public offers of securities, which is then subject to a series of exemptions. The FCA is given powers to make rules in a number of areas relating to those exemptions (including those relating to regulated markets, primary multilateral trading facilities and public offer platforms).

The FCA is continuing to develop detailed policy proposals to support the new regime and is considering carrying out follow-up engagement on key topics. The FCA aims to consult on proposals in summer 2024, which will include draft rules.

Draft Companies (Strategic Report and Directors' Report) (Amendment) Regulations 2023 withdrawn

On 16 October 2023, the Department of Business and Trade announced that the government has withdrawn the draft Companies (Strategic Report and Directors' Report) (Amendment) Regulations 2023 after consultation with companies raised concerns about imposing additional reporting requirements.

As reported in PLC QTRLY Q3 2023, the draft regulations would have created new corporate reporting requirements for companies with 750 employees or more and an annual turnover of £750 million or more, including an annual resilience statement, distributable profits figure and material fraud statement and a triennial audit and assurance policy statement.

The government now intends to pursue options to reform the wider framework to reduce the burden of red tape on businesses.

FRC recommendations on corporate reporting

FRC Annual Review of Corporate Reporting: 2022/23

The FRC has published its annual review of corporate reporting for 2022/23, summarising its monitoring activities and outcomes and outlining its findings for the review period. It also sets out its key disclosure expectations for 2023/24, namely that companies:

• Ensure disclosures about uncertainty are sufficient to meet the relevant requirements and for users to understand the positions taken in the financial statements.
• Give a clear description in the strategic report of risks facing the business.
• Provide transparent disclosure of the nature and extent of material risks arising from financial instruments.
• Provide a clear statement of consistency with Task Force on Climate-Related Financial Disclosures recommendations.
• Perform sufficient critical review of the annual report and accounts.

FRC Lab suggestions on materiality

On 12 October 2023, the FRC Lab published a set of suggestions for companies on applying a materiality mindset in connection with their annual report and accounts, encouraging companies to thoroughly review, rank, and remove any information that is not relevant, thereby strengthening the value of their reporting.

The report contains a toolkit to help companies to apply a materiality mindset to reporting by:

• Thinking about investor needs and decision making
• Taking a holistic approach to materiality
• Embedding a materiality mindset   

FRC Lab report on structured digital reporting of annual financial reports

On 7 December 2023, the FRC Lab published a report on annual financial reports in structured digital format.

The report sets out some areas of focus for companies and suggestions to optimise reporting to meet the needs of investors and other users, such as making sure that custom tags (extensions) are created only when necessary and that the accounting meaning of the tags they apply corresponds to the facts reported.

The report also notes that:

• During 2023, 90% of tagged report rejections in their submission system were due to basic errors, including an incorrect file format, naming and structure.
• The human-readable layer of most reports is produced by converting PDFs to XHTML. However, companies may want to consider using a "native XHTML" approach instead, to achieve a more accessible and responsive design.
• Companies are responsible for the quality of the report even when the tagging process is outsourced.

Climate transition plans: TPT publishes final disclosure framework and launches sector guidance

On 9 October 2023, the Transition Plan Taskforce (TPT) published its final disclosure framework for use by private sector businesses when preparing their organisations' plans for transitioning to a low carbon economy.

The final framework is based on the TPT's November 2022 consultation draft (discussed in more detail in PLC QTRLY Q4 2022) and recommends disclosures in 19 areas, grouped under the broad headings of foundation, implementation strategy, engagement strategy, metrics and targets, and governance. It is designed to be consistent with and to build on the International Sustainability Standard Board (ISSB)'s climate-related disclosure standard (IFRS S2) published in June 2023.

In November 2023, the TPT then published seven sector-specific deep dives including specific guidance for asset managers, asset owners, banks, electric utilities and power generators, the food and beverage sector, the metals and mining sector and the oil and gas sector. The deep dives were open for consultation until 29 December 2023 and final versions are expected in February 2024.

The FCA plans to consult in 2024 on rules and guidance for listed companies to disclose in line with ISSB standards and the TPT framework.