Corporate Law Update

• The BVCA publishes the full results of its 2019 performance measurement survey
• The Financial Services Bill is published, with potential changes to the UK’s insider dealing and market abuse regimes
• ESMA further updates its list of national thresholds above which an issuer must publish a prospectus
• The European Commission publishes a proposal for an initiative on sustainable corporate governance

Covid-19 is affecting the way people conduct their business, retain their staff, engage with clients, comply with regulations and the list goes on. Read our thoughts on these issues and many others on our dedicated Covid-19 page.

BVCA publishes full 2019 performance measurement survey report

The British Private Equity and Venture Capital Association (BVCA) has published the full report of its 2019 performance measurement survey. The survey covered the performance of “independent” UK VC and PE funds, defined as funds raised from external investors and managed from the UK.

This year’s survey saw 117 responses out of 154 eligible GPs (a 76% response rate). The report covers 813 UK funds managed by BVCA members, including UK and non-UK VC and PE investments. The results are stated net of fees and costs, including provision for carried interest where appropriate.

Key points arising from the report include the following:

• Since-inception return. Since 2008, all vintages have generated a since-inception internal rate of return (IRR) above 14% p.a., with the best performing fund vintage since 2008 achieving 28.7% p.a. in 2014.
• Performance vs market. Post-1996 vintage returns outperformed returns on the FTSE All-Share, 100 and 350 over three-year, five-year and ten-year period. Over five years the average post-1996 vintage return was 20.1% p.a., compared with a FTSE 100 return of 7.1% p.a.
• Venture capital. Post-2002 VC funds showed returns of 14.6%, 15.1% and 13.2% p.a. on three-year, five-year and ten-year periods.
• Private equity. The report breaks down IRR for PE funds over the same time periods according to fund size. Small funds generated returns of 13.7%, 18.3% and 14.9% p.a. respectively. Medium fund IRR was 13.4%, 14.3% and 12.8% respectively. Large funds returned 21.1%, 22.9% and 14.8% respectively.
• Tech vs non-tech. The report shows tech funds outperforming non-tech funds, with three-, five- and ten-year IRRs of 23.4%, 23.4% and 17.6% p.a. respectively for tech funds versus 17.5%, 19.6% and 13.8% for non-tech funds over the same periods.

Legislation published for post-EU framework for insider dealing and market abuse regimes

The Financial Services Bill 2019-2021 has been published, along with an accompanying explanatory memorandum. The Bill proposes to make changes to various pieces of UK legislation to adapt financial services regulation in the UK following EU law ceasing to apply from the end of the year.

The Bill deals with a number of issues, including prudential standards for regulated firms, the transition away from LIBOR, marketing overseas investment funds in the UK, the Debt Respite Scheme and the Help-to-Save Scheme. You can read more about these proposals in our more in-depth post.

If enacted, the Bill would also make amendments to the UK’s market abuse and insider dealing regimes as follows.

• Insider lists. The Bill would clarify that both an issuer and anyone acting on behalf of an issuer would be required to keep an insider list. In other words, an issuer would no longer be able to “delegate” the task of keeping an insider list to its professional advisers.
• Transactions by managers. Currently, where a person discharging managerial responsibilities (a “PDMR”) or a person closely associated with them transacts in an issuer’s securities, they must notify the issuer and the issuer must notify the market within three business days of the transaction itself. The Bill would amend this period to two working days of the date on which the issuer is notified of the transaction, alleviating the burden on issuers slightly.
• Criminal insider dealing. The maximum penalty for the criminal offence of insider dealing (under the Criminal Justice Act 1993) would be increased from seven years’ to ten years’ imprisonment.
• Misleading impressions. Likewise, the maximum penalty for the criminal offence of making a misleading statement or giving a misleading impression in relation to investments (under the Financial Services Act 2012) would be increased from seven years’ to ten years’ imprisonment.

Also this week…

• ESMA updates list of prospectus thresholds again. Following its update last week, the European Securities and Markets Authority (ESMA) has published a further updated version of its list of national thresholds in different EEA member states below which a prospectus is not required to offer securities to the public. The updated list contains an amended entry for Greece. The list continues to include the UK for the time being, as (at the time of publication) the UK remains subject to EU law. 
• EU publishes proposals for sustainable corporate governance. The European Commission has published a proposal for an initiative for sustainable corporate governance. The paper seeks views on a range of ESG matters, with a particular focus on the interests of, and a company’s impact on, stakeholders other than shareholders, enhancing sustainability expertise and oversight and due diligence on environmental and human rights impacts. Any proposals would not affect the UK directly but may well be relevant for businesses with operations in the EU.