Corporate Law Update: 9 - 15 September 2023

15 September 2023

This week:

Government publishes exemptions from new financial promotions permission regime

HM Treasury has published regulations that set out circumstances in which a person who wishes to approve financial promotions will not need to obtain specific authorisation to do so.

Under UK law, it is unlawful to make a financial promotion unless the promotion has been approved by an appropriately authorised person or an exemption applies. An offer of shares in a UK company is a type of financial promotion, although many offers fall within one or more exemptions.

Following changes made by the Financial Services and Markets Act 2023, a person who wishes to approve a financial promotion must first obtain specific authorisation from the Financial Conduct Authority (FCA) to approve financial promotions. Previously, any FCA-regulated firm was able to approve a financial promotion.

The new regulations will allow an FCA-regulated firm to approve a financial promotion, even if it is not specifically authorised to approve financial promotions, if:

  • the firm itself, or another undertaking in its group, has prepared the financial promotion; or
  • the firm is approving a financial promotion prepared by one of its appointed representatives in relation to an activity for which the firm (as the representative’s principal) has accepted responsibility.

Alongside the new regulations, the Financial Conduct Authority (FCA) has published a policy statement, which sets out its final position following its earlier consultation on introducing a gateway for firms that approve financial promotions.

The new regime is expected to come into force on 7 February 2024, with the FCA accepting applications for authorisation from 6 November 2023.

Read the Financial Services and Markets Act 2000 (Exemptions from Financial Promotion General Requirement) Regulations 2023

Read FCA Policy Statement 23/13 on introducing a gateway for financial promotion approvals

Companies House provides more information on deregistering an overseas entity

Last week, we reported that Companies House had updated its guidance on the UK’s Register of Overseas Entities to explain how an overseas entity can apply to be removed from the register.

If an overseas entity ceases to be the registered proprietor of any land in the UK, it can apply to be removed from the ROE. This will not remove the entity’s records from public view, but it will mean that the entity is no longer required to provide annual updates to Companies House.

Companies House has now confirmed the following additional information.

  • It will reject an application for removal if the overseas entity is still registered as the proprietor of land in the UK.
  • An application for removal costs £400. The fee will not be refunded if the application is rejected.
  • Once the entity has been removed, its ID will no longer be valid and it will not be able to buy, sell, transfer, lease or charge land in the UK.

As before, an entity should email to apply to be removed.

Read the Companies House guidance on the Register of Overseas Entities

EU proposing to raise company size thresholds

The European Commission has published a draft directive which would raise the threshold for different company sizes under European Union law.

Under EU law, as under English law, companies and groups are classified into one of various sizes for each of their financial years depending on their balance sheet total, net turnover and average number of employees during that year.

Size classifications are used principally to determine the nature and extent of a company’s or group’s public financial and non-financial reporting obligations.

The Commission is proposing to raise the two monetary thresholds for all company sizes to reflect inflation within the eurozone. One consequence of this is that many companies that would otherwise have fallen within the EU’s sustainability reporting requirements would no longer do so.

The proposed new thresholds are expressed in euro but would be translated into local currencies within EU member states that have not adopted the euro as their official currency.

The proposals would not affect the company size thresholds within the UK. However, they might affect UK companies that are subject to EU financial and non-financial reporting requirements.

Read the European Commission consultation to raise EU company size thresholds