CORPORATE GOVERNANCE UPDATE - JTC Group
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CORPORATE GOVERNANCE UPDATE
J T C ( U K ) L I M I T E D
February 2021
1 of 9
CONTENTS
W HA T T O E XP E C T I N 2 0 2 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
HIGHLIGHTS ......................................................................................................................................................................................3
CORPORATE GOVERNANCE HIGHLIGHTS .....................................................................................................................................4
FINANCIAL AND NARRATIVE REPORTING ......................................................................................................................................5
AUDIT COMMITTEES: POTENTIAL REFORMS .................................................................................................................................6
CORPORATE TRANSPARENCY AND REFORM OF THE REGISTER ..............................................................................................6
LISTING REGIME ...............................................................................................................................................................................7
COVID-19 ......................................................................................................................... 8
CIGA 2020: COMPANY MEETINGS AND WRONGFUL TRADING LIABILITY ....................................................................................8
TEMPORARY EXTENSIONS TO FILING DEADLINES .......................................................................................................................8
2 of 9WHAT TO EXPECT IN 2021
H I G H L I G H T S
A number of reforms are on the agenda for 2021. The Financial Conduct Authority (FCA) plans to convene a stakeholder
group to consider how to introduce more flexibility to Annual General Meetings (AGMs). Responses are pending to the
Financial Reporting Council’s (FRC) discussion paper on its proposed new model for corporate reporting, with further
developments likely to follow. The Business, Energy and Industrial Strategy (BEIS) Committee is expected to map out a
path for implementing reforms to the audit industry, and to publish comprehensive proposals on how it will effect reforms
that will enhance the role of Companies House and increase the transparency of UK corporate entities. Meanwhile HM
Treasury will be carrying out reviews of the listing regime, the post-EU financial services regulatory framework and the
future of financial services in the UK.
Moves to require companies to make climate-related disclosures will continue. Changes to the Listing Rules mean that, for
accounting periods beginning on or after 1 January 2021, premium listed companies will be required to include a statement
in their annual financial report which sets out whether their disclosures are consistent with the recommendations of the
Taskforce on Climate-related Financial Disclosures (TCFD). Work will be done in 2021 to extend the scope of the rule to
more listed issuers and to move towards mandatory disclosure. Meanwhile, BEIS is planning to introduce amendments to
the Companies Act (CA) 2006 that will require UK-registered companies, including very large private companies, to make
TCFD-aligned disclosures in the strategic report of their annual report and accounts. Under the proposed timetable,
regulations may be made by mid-2021, and possibly come into force in 2022.
COVID-19 restrictions are continuing into 2021 and certain temporary reliefs granted to companies to help them meet their
obligations will extend until spring. These include the relaxation of some of the rules relating to company meetings, a
suspension of wrongful trading liability and changes to filing deadlines.
The post-Brexit transition period ended at 11.00 pm (UK time) on 31 December 2020. During the transitional period the
UK was treated for most purposes as if it were still an EU member state, and most EU law continued to apply to the UK.
Those arrangements having now ended and various changes have occurred. The remaining withdrawal agreement
provisions have come into operation and the legal changes associated with the UK’s withdrawal from the EU and from the
EU’s international agreements have taken effect. As a result, the European Union (Withdrawal) Act 2018 (EUWA)
introduced the ‘Retained EU law’, this is essentially a snapshot of the EU law as it applied in the UK on 31 December 2020.
Furthermore, the Brexit Statutory Instruments (SIs) deferred from exit day have also come into force by reference to the
end of the transition period. Among the changes now introduced to provide for the end of the transition period are
amendments to the Listing Rules, prospectus regime, Disclosure Guidance and Transparency Rules (DTRs), market abuse
regime and the Alternative Investment Market (AIM) Rules.
3 of 9C O R P O R A T E G O V E R N A N C E H I G H L I G H T S
CHANGES TO AGMS
The FRC proposed to convene a stakeholder group to consider recommendations for introducing more flexibility
to AGMs by way of both legislative change and alternative means. This follows the review published in October
2020, of the different ways in which companies held AGMs in the first half of 2020 as a result of the COVID-19
pandemic.
REPLACEMENT OF THE FRC BY ARGA
The government announced in its July 2020 response to the BEIS Committee recommendations to prevent future
corporate collapse that it intends to bring forward legislation to create the Audit, Reporting and Governance
Authority (ARGA) as soon as Parliamentary time allows.
CHARTERED GOVERNANCE INSTITUTE (CGI) (ICSA): REVIEW OF THE EFFECTIVENESS OF
INDEPENDENT BOARD EVALUATION IN THE UK LISTED SECTOR
The CGI has published its review on the quality and effectiveness of independent board evaluation together with
a voluntary code of practice for independent board reviewers and voluntary good practice principles for UK listed
companies. The review was carried out at the request of BEIS. In conducting the review, consideration was given
not only to the available evidence on the current state of the market for independent board evaluations in the
listed sector, but also the potential impact of the actions taken by the FRC in 2018 to strengthen the UK Corporate
Governance Code.
CGI concluded notwithstanding the actions already taken by the FRC, there is scope for broader adoption of good
practice and greater transparency on the part of both board reviewers and companies using their services. These
objectives should be pursued through voluntary initiatives in the first instance, with appropriate encouragement
from BEIS and the FRC.
CGI also published a draft Code of Practice for board reviewers which includes guidance on the competence and
capacity of reviewers, terms of engagement and how to ensure independence and integrity. CGI said all
organisations conducting external board performance reviews for FTSE350 companies should be encouraged to
become signatories to the code. It said BEIS should either issue the code itself or nominate a suitable organisation
to become its “owner” and maintain a public register of signatories.
4 of 9F I N A N C I A L A N D N A R R A T I V E R E P O R T I N G
CLIMATE-RELATED DISCLOSURES BY UK PREMIUM LISTED COMPANIES
The Listing Rules have been amended to require premium listed companies to include a statement in their annual
financial report which sets out whether their disclosures are consistent with the recommendations of the TCFD,
and to explain if they have not done so.
The rule will apply for accounting periods beginning on or after 1 January 2021, meaning the first annual financial
reports subject to the rule will be published in spring 2022.
It is planned during 2021 to extend the scope of the rule to more listed issuers and to move towards mandatory
disclosure.
UK TCFD TASKFORCE: PROPOSED MANDATORY DISCLOSURES
BEIS is planning to introduce amendments to the CA 2006 that will require companies registered in the UK, to
make TCFD aligned disclosures in the strategic report of their annual report and accounts. A consultation on
detailed policy proposals is expected in early 2021, with regulations to be made in mid-2021, with a view of coming
into force in 2022.
PROPOSED NEW MODEL FOR CORPORATE REPORTING
The FRC is planning a new model of corporate reporting, in which the annual report would be replaced with a
network of interconnected reports. The FRC notes that many of the aspects of its proposals are in the spirit of
encouraging improvements to the quality of reporting and can be achieved within the existing framework.
However, fully implementing the proposed model will require regulatory change.
VOLUNTARY FILING OF STATEMENTS IN EUROPEAN SINGLE ELECTRONIC FORMAT (ESEF)
The FCA has pushed back by one year the requirement for issuers to publish their annual financial reports in the
ESEF. These requirements will now only be mandatory for financial years starting on or after 1 January 2021.
However, issuers will still be able to publish and file their financial reports in ESEF voluntarily for financial years
commending on or after 1 January 2020, if they choose to do so.
JTC is looking at a partnering solution with a print and design provider to enable the tagging to take place
in a cost effective and efficient manner. Further details on this will follow shortly.
CORPORATE DISCLOSURES ON STAKEHOLDERS: FRC PROJECT
FRC’s Financial Reporting Lab is carrying out a project that aims to evaluate how useful investors find disclosures
about stakeholders across a range of reporting formats. The Lab expects to publish a range of outputs in the last
quarter of 2020 and first half of 2021.
5 of 9 INTERIM FINANCIAL REPORTING: AMENDMENTS TO FRS104
Published amendments to FRS104 (interim financial reporting) have introduced an explicit requirement for
management to assess an entity’s ability to continue as a going concern and disclose any related material
uncertainties when preparing interim financial reports in accordance with FRS104. The amendments apply to
interim periods beginning on or after 1 January 2021.
A U D I T C O M M I T T E E S : P O T E N T I A L R E F O R M S
The FRC has indicted that it will consider introducing standards for audit committees as part of its work on reforming the
audit sector, no timeframe has been given.
C O R P O R A T E T R A N S P A R E N C Y A N D R E F O R M O F T H E
R E G I S T E R
It is expected that the government will publish comprehensive proposals on how it intends to implement reforms that will
enhance the role of Companies House and increase the transparency of UK corporate entities.
It is envisaged that an identity and access management system will be implemented to allow the creation of individual user
accounts.
The government wants to obtain greater assurance over the identity information of those setting up and running entities
(including directors, PSCs and those filing information (presenters)), to combat the use of UK corporate entities by
international criminal elements, who provide false information. It also believes that such identity verification would have the
additional benefit of enabling Companies House better to link the records of people with multiple roles across different
companies.
The government therefore proposes to introduce identity verification into the incorporation and filing processes run by
Companies House. This would mean that identity checks would be run not only on incorporation but throughout the lifetime
of a company.
The government proposes that Companies House should focus its attention on incorporations and filings from individuals
and non-anti-money laundering supervised presenters, to avoid duplicating the identity verification checks carried out by
the third-party incorporation agents that many companies use. Such third-party agents are required by the Money
Laundering Regulations to carry out due diligence checks on their customers, which include identity verification. However,
since UK law enforcement has reported that the companies it investigates for money laundering almost always use third
party incorporation agents, the government proposes to require evidence to show that adequate customer due diligence
checks have been carried out, together with details of the identities checked.
The proposed changes to the powers of Companies House will require primary legislation and a major transformation of
every aspect of Companies House's work. They will therefore take some years to deliver.
6 of 9L I S T I N G R E G I M E
HM TREASURY REVIEW OF THE UK LISTING REGIME
In 2021 a review of the listing regime will be carried out by Lord Hill of Oareford, with the aim of proposing
reforms that will attract firms and help companies to access finance.
EQUITY CAPITAL MARKETS AFTER THE BREXIT TRANSITION PERIOD
Changes have been made to the listing, prospectus, disclosure and transparency, market abuse and AIM
regimes at the end of the Brexit transition period.
IMPACT OF BREXIT ON MARKET ABUSE REGIME
No change.
> The Market Abuse Brexit SI retains the same scope of financial instruments admitted to trading or traded
on UK and EU trading venues as EU MAR.
> There are no changes in the Market Abuse Brexit SI to the requirements relating to market soundings
and insider lists or to the prohibitions on unlawful disclosure of inside information, insider dealing and
market manipulation.
> The Market Abuse Brexit SI retains the same exemptions for issuers undertaking buybacks and
stabilisations on UK and EU trading venues as EU MAR. To benefit from the exemptions under the
Market Abuse Brexit SI for shares and securities on EU trading venues, issuers should continue to report
to the EU competent authority of the EU trading venue in accordance with EU MAR.
> The content and format of PDMR transaction notifications remain the same.
7 of 9COVID-19
C I G A 2 0 2 0 : C O M P A N Y M E E T I N G S A N D W R O N G F U L
T R A D I N G L I A B I L I T Y
The period during which certain rules relating to company meetings will be relaxed has been extended to 30 March 2021.
A second suspension of wrongful trading liability will extend to 30 April 2021.
T E M P O R A R Y E X T E N S I O N S T O F I L I N G D E A D L I N E S
The temporary extensions to filing deadlines at Companies House will continue to apply to filing deadlines falling up to
the end of the day of 5 April 2021.
8 of 9R E G U L A T I O N A N D T E R M S O F B U S I N E S S
JTC Group entities that carry on regulated business are (respectively): regulated by the British Virgin Islands Financial
Services Commission; the Cayman Islands Monetary Authority; the Guernsey Financial Services Commission; the
Jersey Financial Services Commission; the Commission de Surveillance du Secteur Financier and the Ordre des
Experts-Comptables (Luxembourg); the Financial Services Commission (Mauritius); De Nederlandsche Bank
(Netherlands), the South African Financial Sector Conduct Authority (FSCA) as an authorised financial services provider;
chartered and regulated to provide trust services by the South Dakota Division of Banking in South Dakota (USA); a
member of l’Association Romande des Intermédiaires Financiers (Switzerland)*; licensed by the Isle of Man Financial
Services Authority; registered with the Dubai Financial Services Authority; authorised by the Department of Justice and
Equality of the Republic of Ireland to operate as trust or company service provider and authorised and regulated by the
Financial Conduct Authority (UK).
* l’Association Romande des Intermédiaires Financiers (ARIF) is a self-regulatory body approved by the Swiss Financial Market Supervisory Authority
(FINMA) for the supervision of financial intermediaries covered by Article 2 para.3 of the Swiss Federal Law on Combating Money Laundering and
Financing of Terrorism in the Financial Sector (LBA). ARIF is also recognized by FINMA as a professional organization for the outlawing of rules of conduct
relating to the exercise of the profession of independent asset manager within the meaning of the Swiss Federal Act on Collective Investment Schemes
(CISA).
For our full website disclaimer, please visit: www.jtcgroup.com/disclaimer. For more information about JTC Group, its
offices and alliances please visit: www.jtcgroup.com. For JTC Group’s full terms of business, please visit:
www.jtcgroup.com/terms-of-business.
J T C G R O U P . C O M
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