Corporate Law Update: 30 March - 5 April 2024

05 April 2024

This week:

Registrar of Companies gains new powers to issue financial penalties

The Registrar of Companies has been given new powers to impose financial penalties for certain offences under the Companies Act 2006.

On receiving notice from Companies House that a penalty has been imposed, a person will have 28 days to make representations. If the Registrar remains satisfied beyond reasonable doubt that an offence has been committed, the financial penalty will stand (although the recipient will be entitled to challenge the penalty through judicial review).

A penalty cannot exceed the maximum fine for the offence in question and cannot exceed £10,000 for any offence.

The Registrar’s new powers extend to most offences in the Companies Act 2006, other than specific offences, including (most notably) offences relating to audits of company accounts.

A financial penalty is an alternative to prosecution. Once a penalty has been imposed, criminal proceedings cannot be commenced. Conversely, if criminal proceedings have begun, the Registrar has no power to levy a financial penalty instead.

The new powers come into force on 2 May 2024.

Access the Economic Crime and Corporate Transparency Act 2023 (Financial Penalty) Regulations 2024

Government extends and expands invoice payment practice reporting regime

Regulations have been made to extend the UK’s payment practices reporting regime.

Under the regime, large UK companies and limited liability partnerships (LLPs) must publish a half-yearly report setting out their practice for paying supplier invoices, as well as statistics for their actual performance in paying invoices over the preceding year.

The regime was due to expire on 6 April 2024, but the regulations extend it to 6 April 2031.

They also expand the regime to require in-scope entities to report, for each reporting period (and in addition to existing metrics):

  • the sum total of payments made within specified 30-day periods;
  • the sum total of payments not made within the required payment period; and
  • the percentage of payments that were not made during the required payment period as a result of a dispute.

The regulations come into effect on 5 April 2024.

Access the Reporting on Payment Practices and Performance (Amendment) Regulations 2024

Government confirms intention to move to T+1 settlement in the UK

The Government has confirmed that it intends to move towards T+1 settlement for securities trades in the UK, in accordance with independent recommendations by the Accelerated Settlement Taskforce.

The confirmation follows a similar announcement by the European Securities and Markets Authority (ESMA) last week, in which it confirmed that it has begun assessing the feasibility of moving towards T+1 settlement within the European Union’s capital markets. (You can read more about the European Union’s proposed move to T+1 settlement in our previous Corporate Law Update.)

Both initiatives follow the decision by the US Securities and Exchange Commission in February 2023 to move settlement in securities on US capital markets to a T+1 basis.

The Government aims to complete the move to T+1 by the end of 2027 and, to this end, has establish a Technical Group to take forward implementation. It also intends to engage with other European jurisdictions – particularly the EU and Switzerland – to explore a coordinated move to T+1.

Read the Accelerated Settlement Taskforce’s report on moving to T+1 settlement (opens PDF)

Read the Government’s announcement on moving to T+1 securities settlement

Read the Accelerated Settlement Technical Group’s terms of reference

New consultation on sandbox for digital and DLT securities

Regulators are consulting on the proposed new Digital Securities Sandbox.

The sandbox will create a modified regulatory framework allowing firms to use developing technology, including distributed ledger technology (DLT), when issuing, trading and settling securities.

The project will be run jointly by the Bank of England (BoE) and the Financial Conduct Authority (FCA). It will be open to central securities depositaries (CSD), which will be able to use the sandbox to carry out notarial and settlement activities. These activities will be monitored by the BoE.

A CSD will also be able to simultaneously operate a trading venue in the sandbox if it is already authorised by the FCA to operate a multilateral trading facility (MTF) or organised trading facility (OTF). (The sandbox will not be available to MTF and OTF operators that do not also operate as CSDs.) These activities will be overseen by the FCA.

The initiative will extend to a wide range of securities, including equity and debt securities, units in funds, certificates of deposit, and emissions allowances. It will not, however, permit settlement in derivatives or unbacked crytoassets (such as Bitcoin).

To join the sandbox, an applicant will need to identify regulatory or legal obstacles to using developing technology that prevent them from operating their optimal business model outside of the sandbox.

Once within the programme, participants will progress through a series of gateways that will permit them to conduct an increasing amount of activity through the sandbox.

The deadline for responding to the consultation is 29 May 2024.

Read the consultation on the new Digital Securities Sandbox