Corporate Law Update: 5 - 11 March 2022

11 March 2022

In this week’s update: BVCA guidance for VC and PE firms on the UK’s national security screening regime, an FCA reminder on inside information disclosure obligations, the Alison Rose review 2022 report, an updated list of signatories to the UK Stewardship Code and the Treasury publishes a licence to allow the wind-down of transactions with certain Russian entities.

BVCA publishes national security guidance for VC/PE firms

The British Private Equity and Venture Capital Association (BVCA) has published new guidance for private equity (PE) and venture capital (VC) firms on the UK’s new national security screening regime in the National Security and Investment Act 2021.

The guidance provides background to the legislation and its application (including outside the UK), details of notification obligations and the clearance procedure, and sanctions that apply under the Act.

In relation specifically to PE and VC firms and their investments, the guidance notes the following.

  • The regime covers all kinds of transaction, including an exit to a corporate, a special purpose acquisition company (SPAC) or a secondary buyer. It also includes where a founder sets up a new company at an early stage to effect a spin-out.
  • Where a firm makes an investment below the 25% threshold but obtains some other level of control (such as investor veto rights), it will need to consider carefully whether the investment triggers a mandatory notification obligation. The BVCA suggests engaging with the Investment Security Unit (ISU) to obtain guidance on specific vetoes.
  • Where more than one investor in an investment round may be required to notify their acquisition, each will be responsible for its own notification.
  • Investors should undertake due diligence on transactions completed between 12 December 2020 and 4 January 2022 to understand whether a call-in risk arises.

Alongside the guidance, the Centre for the Protection of National Industries (CPNI) and the National Cyber Security Centre (NCSC) have created Secure Innovation, an initiative to provide advice to early-stage investors in emerging technology companies.

FCA reminds issuers of inside information obligations during Ukraine conflict

The Financial Conduct Authority (FCA) has published an update reminding companies with securities admitted to UK trading venues of their obligations under the Market Abuse Regulation (MAR) during the ongoing conflict in Ukraine.

The update is relevant to any companies with securities admitted to trading on:

  • a UK regulated market (such as the London Stock Exchange’s (LSE) Main Market for listed securities, the LSE High Growth Segment, the LSE Specialist Fund Segment or the AQSE Main Market);
  • a multilateral trading facility (MTF) (such as AIM, the AQSE Growth Market or the LSE Professional Securities Market (PSM)); or
  • an organised trading facility (OTF).

The update notes that issuers subject to MAR are still required to disclose inside information as soon as possible unless they have a valid reason under MAR to delay disclosure. Issuers should continue to assess carefully what constitutes inside information and note that events in and relating to Ukraine may alter the nature of information that is material to a business’ assets, operations and prospects.

Issuers should ensure the market is fully informed of any information or changes that are required to be disclosed under MAR.

Finally, the FCA reminds companies that disclosure obligations under MAR continue to apply even when trading of securities has been suspended.

Rose Review publishes update on female entrepreneurship

The Alison Rose Review on Female Entrepreneurship (the Rose Review) has published a report on progress made on the Review’s recommendations.

What is the Rose Review?

The Rose Review, led by now NatWest Group CEO Alison Rose, was formed to carry out a review into the barriers to female entrepreneurship in the UK. The Review concluded in 2019 and delivered its final report, including recommendations, in March 2019.

The Review put forward eight specific recommendations, or “initiatives”.

  1. Promote greater transparency in UK funding allocation.
  2. Launch new investment vehicles to increase funding going to female entrepreneurs.
  3. Encourage UK-based institutional and private investors to further support and invest in female entrepreneurs.
  4. Review existing and create new banking products aimed at entrepreneurs with family care responsibilities.
  5. Improve access to expertise by expanding the entrepreneur and expert in residence programme.
  6. Expand existing mentoring and networking opportunities.
  7. Accelerate development and roll-out of entrepreneurship-related courses to schools and colleges.
  8. Create an entrepreneur digital first-stop shop.

At the same time, the Government published its official response, setting out how it proposed to respond to the Review’s recommendations.

The report sets out the progress that has been made towards each of these initiatives.

What happens now?

In its report, the Review has put forward nine commitments for 2022.

  1. To launch a targeted recruitment campaign for the Investing in Women Code, with a commitment to securing increased coverage across all sectors.
  2. To work even more closely with Code signatories in 2022 to help ensure that their involvement creates real change in policies and investment approach.
  3. To continue to drive industry interest and engagement with the Code through Ministerial meetings and roundtables.
  4. To aspire for 30% of all investment in private companies to go to female founders and co-founders by 2030, in part by building on the work of the UK Enterprise Fund.
  5. To launch an Angel investor campaign via the Women Angel Investment Taskforce to support women to become business angels, giving female founders better access to early-stage investment.
  6. To launch a refreshed Investing in Women Hub to help female entrepreneurs source information, networking opportunities, and access to funding at every stage of their business journey.
  7. To continue to explore solutions to the challenges created by caring responsibilities.
  8. To work in collaboration with organisations across the industry to deploy extra expertise and support, provide mentors and highlight role models.
  9. To track progress against these commitments and communicate clearly and regularly.

Other items

  • FRC publishes updated list of Stewardship Code signatories. The Financial Reporting Council (FRC) has published an updated list of signatories to the UK Stewardship Code. The FRC received 105 applications, of which 74 were successful, taking the number of signatories to 199. The FRC notes that there was an encouraging level of applications from organisations that had previously been unsuccessful, with many addressing feedback from the FRC and providing better quality reporting.
  • Treasury publishes licence to permit wind-downs with certain Russian entities. Last week we reported that the Government had published new restrictions on dealing with securities issued on or after 1 March 2022 by (broadly speaking) Russian entities or entities owned by a person connected with Russia (with a dispensation for trading until 11:59 p.m. on 8 March 2022). The Treasury has now published General Licence INT/2022/1295476, which allows (among other things) dealings between 4 March 2022 and 3 April 2022 in securities issued by certain named Russian entities or their subsidiaries purely for the purpose of winding down any transactions (including closing out any positions) with those entities. For more information on the current restrictions, see our separate explainer.

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