Corporate Law Update

This week:

• The BVCA issues a report on female representation in the private equity sector and confirms a similar review for venture capital
• A new committee has been created to examine the effectiveness of the Bribery Act 2010 almost seven years after it came into force
• The European Commission proposes to relax inside information and insider list requirements for SME Growth Market issuers

BVCA examines role of women in private equity and venture capital

The British Private Equity and Venture Capital Association (BVCA) has published a report on Women in Private Equity, available to members and non-members.

The report was produced in collaboration with Level 20, an organisation that promotes gender diversity within the private equity (PE) sector. The first of its kind in the UK, the report examines the number of women working in the PE industry. It is based on data from 179 PE firms with a presence in the UK, who together have a combined total of around 5,000 employees.

The report shows that women comprise just over a quarter (29%) of the PE workforce, a low proportion compared with the overall UK workforce, where 48% are women.

It also shows that only 14% of PE investment team members and only 6% of senior PE investment professionals are women. The proportion of junior and mid-ranking female team members is slightly higher, at 27% and 15% respectively.

On the whole, the larger the PE firm, the smaller the proportion of female employees.

The report also provides general statistics on PE firm sizes, assets under management (AUM), average team sizes and female representation in the broader financial services sector.

The BVCA has also announced that it is working with Diversity VC and the British Business Bank (BBB) on an initiative to build the first clear picture of women and diversity in UK venture capital (VC) firms. The BBB’s press release can be found here.

Bribery Committee created to examine Bribery Act 2010

The House of Lords has appointed a new select committee, known as the Bribery Committee. The Committee’s role will be to examine how the Bribery Act 2010 is working in practice.

The Bribery Act came into force in the UK on 1 July 2011. It created new statutory offences of bribing someone and being bribed to replace previous common-law offences. However, most significantly, it created a new “corporate offence” of failing to prevent an associated person from bribing.

The Committee will consider whether the Bribery Act has led to stricter prosecution of corrupt conduct, a higher conviction rate and a reduction in corruption. It will also look to raise awareness of the Bribery Act among small and medium sized enterprises (SMEs).

The Committee will be made up of 10 Lords and two Baronesses, including two Lords who were involved in drafting the original Bill that became the Bribery Act.

It says it will publish a call for evidence in June 2018 and will welcome submissions from anyone with experience of the Bribery Act.

Commission proposes market abuse, prospectus changes for SMEs

The European Commission has published a proposal to amend the Market Abuse Regulation (“MAR”) and the Prospectus Regulation to promote the use of SME Growth Markets.

An SME Growth Market is an EU securities exchange that has been specially designated to foster small and medium-sized enterprises. SME Growth Markets benefit from certain limited derogations from regulations that apply to other securities exchanges.

In the UK, the London Stock Exchange’s AIM market and the NEX Exchange Growth Market are both designated SME Growth Markets.

Insofar as they would affect the UK, the Commission’s proposals to amend MAR include the following:

• Disclosing inside information. AIM and NEX Growth issuers would not need to document their reasons for delaying the public disclosure of inside information, unless the Financial Conduct Authority (FCA) asks them to.
  
  This is unlikely to change much in practice. The UK has already opted into an exception under MAR which allows issuers to provide written reasons for delaying disclosure only if the FCA requests. In any event, it is relatively standard for issuers to document their reasons for delaying disclosure anyway in case the FCA makes a request, and in order to be able to demonstrate they have complied with the conditions for delaying disclosure.
  
  
• Insider lists. Currently, AIM and NEX Growth issuers do not need to keep insider lists for specific inside information, provided they can ensure the information remains confidential and produce an insider list to the FCA on demand. In practice, to comply with the second requirement, as well as for internal governance reasons, most issuers will draw up insider lists anyway.
  
  Under the Commission’s proposals, these issuers would need to keep a list of “permanent insiders”, but not a separate insider list for each piece of inside information. This would certainly reduce the practical burden on AIM and NEX Growth issuers by allowing them to dispense with case-by-case insider lists and instead to keep a single on-going insider list.
  
  
• Dealings by PDMRs. Currently, a person discharging managerial responsibilities (PDMR) of an issuer, and his closely associated persons (PCAs), must notify the issuer within three business days of dealing in the issuer’s financial instruments. The issuer must also notify the public within three business days of the dealing (i.e. by the same deadline). This can impose a tough burden on an issuer, which may need to publish the dealing on the same day it becomes aware of it.
  
  The Commission is proposing to relax this requirement for AIM and NEX Growth issuers. Instead, they would need to notify the public within two business days after receiving the notification from the PDMR or PCA.

As with all EU legislative proposals, it is not yet clear whether these changes will be implemented in the UK. This will depend on when the legislation amending MAR comes into force and, if that happens after the UK leaves the EU, whether the UK decides to adopt it into UK law.