Corporate Law Update

• Changes to the Takeover Code take effect next week
• Parliament seeks views on Government communication on national security and investment screening
• The Government confirms it will publish guidance on ethnicity pay gap reporting
• The Government is consulting on regulating cryptoassets within the financial services sector
• ESMA updates its Q&A on the EU Prospectus Regulation

Changes to Takeover Code go live next week

A reminder that changes to the Takeover Code will take effect on Monday, 20 February 2023.

The changes affect the presumptions of situations where persons are considered to be “acting in concert” for the purposes of the Code. The concept of “acting in concert” has important implications in numerous parts of the Code, particularly in relation to stakebuilding in a publicly traded company.

For more information on the changes, see our previous Corporate Law Update.

Parliament calls for evidence on national security information sharing

Parliament is seeking views on how effectively the Government communicates with firms on transactions that require national security and investment screening.

To this end, the BEIS Sub-Committee has launched a call for evidence inviting firms to provide their feedback through an online questionnaire. The consultation asks the following questions:

• How, and how effectively, does the Government’s Investment Security Unit (ISU) communicate with the firms involved in transactions? How could this improve?
• What metrics and information should be used to assess the impact and effectiveness of the investment screening systems, and over what time frame?
• What can the UK learn from the way other countries report on the work of their investment screening systems?

The call for evidence is open until 24 February 2023.

Government to publish guidance on ethnicity pay gap reporting

In a response to a question raised by HM Opposition, the Government has confirmed that it intends to publish guidance on ethnicity pay gap reporting in due course.

Currently, employers with more than 250 employees on the so-called “snapshot date” are required to report publicly on the pay gap between female and male employees. This gender pay gap reporting is mandatory, with reports being published on a central government portal.

The Government has previously floated the idea of mandatory ethnicity pay gap reporting. However, it currently has no plans to introduce mandatory reporting and has confirmed that any reporting by ethnicity will be voluntary. It will, however, introduce guidance for those employers that wish to do so.

Treasury consults on regulating cryptoassets

HM Treasury is consulting on a future financial services regime for cryptoassets.

Currently, promotions of certain cryptoassets in the UK are subject to regulation by the Financial Conduct Authority (FCA). However, this depends on the asset and the activity in question falling within defined regulated activities under the current regime.

The Government’s view is that “cryptoassets and the activities underpinning their use should follow the standards expected of other similar financial services activities, commensurate to the risks they pose, while harnessing potential benefits of the technology behind them”.

To this end, the Government is proposing a number of measures designed to regulate cryptoassets within the context of financial services. The consultation does not address the use of cryptoassets outside the financial services sector or of distributed ledger technology (DLT) more generally.

Among other things, the Government is seeking views on which types of cryptoasset and activity should be regulated, whether there should be a dedicated market abuse regime for cryptoassets admitted to cryptoasset trading venues, and the future of decentralised finance (DeFi).

The consultation is open until 30 April 2023.

ESMA updates Q&A on EU Prospectus Regulation

The European Securities and Markets Authority (ESMA) has published an updated version of the Q&A on the EU Prospectus Regulation.

The new version addresses Article 1(4)(d) of the Regulation, which states that a company does not need to publish a prospectus when offering securities to the public if the total price payable for the securities is at least €100,000 per investor.

A new question 15.10 in the Q&A confirms that, for these purposes, two or more people who hold shares jointly will effectively be considered a single person for the purposes of Article 1(4)(d), meaning that the exemption will be available if they acquire securities jointly for at least €100,000.

The EU Prospectus Regulations continues to apply, in modified form, in the UK as the UK Prospectus Regulation. Although ESMA’s Q&A have no legal force in the UK, they are no doubt helpful in interpreting the UK Prospectus Regulation and will, in any event, be relevant to companies looking to offer shares to the public within the European Union.

The UK Government has recently published draft illustrative legislation demonstrating how it intends to reform and remodel the UK’s prospectus regime, effectively doing away with the requirement to publish a prospectus on a public offer of securities and instead prohibited public offers unless they fall within a specific exemption. See our previous in-depth piece for more information.