Following an increase in shareholder and investor activism beyond pure executive remuneration issues in the United Kingdom (UK) in 2013, with some 25 companies targeted for public campaigns, this post provides a summary of certain principles of English law and UK and European regulation applicable to UK listed public companies and their shareholders that are relevant to the expected further increase in activism in 2014. This post covers (i) stake-building; (ii) shareholders’ rights to require companies to hold general meetings; (iii) shareholders’ rights to propose resolutions at annual general meetings; and (iv) recent developments in these and related areas through raising and answering a number of relevant questions.
Posts Tagged ‘Jeffery Roberts’
The UK Court of Appeal recently held in the Belfairs Management case  that a warranty in a sale and purchase agreement should be interpreted with regard to all of the background knowledge reasonably available to the parties at the time the agreement was entered into. The decision highlights the growing trend of the UK courts to adopt a more purposive, rather than a literal, approach to the interpretation of contracts under English law in order to give effect to the commercial intentions of the parties where the facts underlying the dispute clearly support such an interpretation and where those commercial intentions are clear. This post provides a short summary of the facts of the Belfairs Management case, as well as a discussion of the potential implications of the decision for buyers, sellers and their advisers.
This post provides a brief summary of recent updates to the UK’s City Code on Takeovers and Mergers (the “Code”), the primary rule book governing the regulation of takeovers in the UK, and in particular those relating to the categories of companies that are subject to the Code, as well as certain issues affecting the trustees of offeree companies’ defined-benefit pension schemes.
On April 22, 2013, the Code Committee of the UK Takeover Panel (the “Code Committee”) published its Response Statement to its consultation paper on certain pension scheme issues. This was followed by a Response Statement to its consultation paper on the type of companies that fall within the jurisdiction of the Code, which was published on May 15, 2013.  The amendments to the Code to be introduced in relation to those proposals relating to offeree company pension schemes will come into force on May 20, 2013 and an amended version of the Code will be published on that date. The amendments to the Code in relation to those companies and offers that are subject to the Code will take effect on September 30, 2013 (so as to allow any companies that may be affected to make any changes to their constitutional documents and/or operational procedures they feel are appropriate in light of those changes), although the updated Code will apply to any transactions that straddle that date.
Since April 2010, companies looking to list in the UK have had a wider choice for listing their shares on the main market for listed securities (the “Main Market”) of the London Stock Exchange plc (the “LSE”). The Main Market is the LSE’s principal market for listed companies from the UK and overseas. There is a choice between a “premium” and a “standard” listing on the UKLA’s Official List. Alternately, there is the option to list on the Alternative Investment Market (“AIM”), on which many smaller and growth companies are traded. 
On 27 March 2013, the LSE launched the new High Growth Segment (the “HGS”) of its Main Market and published the final version of the HGS Rulebook.  The HGS has been designed for high growth issuers that are seeking a listing on the Main Market due to their size and stage of development. There are some parallels with the US’s relaxation of certain regulatory requirements under the Jumpstart Our Business Startups (JOBS) Act to encourage “emerging growth companies” to list in the US. The HGS is intended to provide issuers with a transitional route to the UKLA’s Official List and, as such, should help issuers prepare for admission to the UK’s listed premium market over time and the obligations that accompany it. Indeed, HGS issuers must “clearly set out their intention” to eventually join the Main Market (if and when they become eligible).
This post provides a summary of certain principles of English law and UK and European regulation applicable to UK-listed public companies and their shareholders that may affect shareholder activism, namely (i) stake-building, (ii) shareholders’ rights to require companies to hold general meetings, (iii) shareholders’ rights to propose resolutions at annual general meetings and (iv) recent developments in these and related areas.
I Own or Am Intending to Acquire Shares; Do I Need To Make Any Disclosures?
The UK’s disclosure obligations (under the UK Listing Authority’s Disclosure and Transparency Rules (the “DTRs”)) apply once a person (or persons acting in concert) has (or together have) a holding of 3 per cent. or more of a listed company’s total voting rights and capital in issue (either as a shareholder or through a direct or indirect holding of relevant financial instruments) unless the relevant listed public company enters an “offer period” (as to which, see below). Thereafter, any changes to that holding that cause the size of the holding to reach, exceed or fall below every 1 per cent. above the 3 per cent. threshold (i.e. reaching, exceeding or falling below 4, 5, 6 per cent. etc.) must be disclosed by the relevant shareholder(s) to the listed company and the listed company is then obliged to announce those disclosures to the market. In addition, the disclosure obligations extend to the disclosure of voting rights held by a person as an indirect holder of shares, such as where a person is entitled to acquire, dispose of or exercise the voting rights attaching to shares (for example, via synthetic holdings or contract(s) for difference). It is important to note that any indirect holdings must be aggregated and separately identified in the relevant notification(s).
The Financial Services Act 2012 (the “Act”), which comes into force on 1 April 2013, contains the UK government’s reforms of the UK financial services regulatory structure and will create a new regulatory framework for the supervision and management of the UK’s banking and financial services industry. The Act gives the Bank of England macro-prudential responsibility for oversight of the financial system and day-to-day prudential supervision of financial services firms managing significant balance-sheet risk. Three new bodies will be formed under the Act: the Financial Policy Committee (“FPC”), the Prudential Regulatory Authority (“PRA”) and the Financial Conduct Authority (“FCA”). While the Act mainly contains the core provisions for the UK government’s structural reforms and will therefore make extensive changes to Financial Services and Markets Act 2000 (“FSMA”), as well as to the Bank of England Act 1998 and the Banking Act 2009, it also includes freestanding provisions in Part 3 (“mutual societies”), Part 4 (“collaboration between Treasury and Bank of England, FCA or PRA”), Part 5 (“inquiries and investigations”), Part 6 (“investigation of complaints against regulators”) and Part 7 (“offences relating to financial services”). With respect to the last of these, it should be noted that:
The UK Financial Services Authority Publishes Consultation Paper on Implementation of AIFMD
On November 14, 2012, the UK Financial Services Authority (“FSA“) published the first part of its long-awaited consultation paper “CP 12/32 Implementation of the Alternative Investment Fund Managers Directive (“AIFMD“) Part 1″ (“CP 32“). 
This post summarises key points from CP 32 and includes a brief reminder of other key issues arising under AIFMD  (which we have written about in the past  and we assume that you are familiar with these issues). Please note that not all the requirements discussed below apply to all AIFMs and/or AIFs.
The prospectus regime is being amended throughout Europe and this Alert provides (i) a summary of the key provisions of Directive 2010/73/EU (the “Amending Directive”), which amends the Prospectus Directive 2003/71/EC (the “Prospectus Directive”), and (ii) details of the related recently published delegated amending regulations, which amend the Prospectus Regulation 809/2009 (the “Prospectus Regulation”). Some of these changes have already been implemented in the UK and others will come into force on 1 July 2012.
These changes will modify:
- when the Prospectus Directive does not apply;
- when a prospectus which complies with the Prospectus Directive (a “Prospectus”) must be published;
- requirements in relation to the form and content of a Prospectus; and
- certain other aspects of Prospectus regulation.
On March 14, 2012, the UK Government published a consultation paper on its proposals to give shareholders of quoted companies a greater influence over executive pay.
The Government proposes to introduce a binding shareholder vote on executive pay policy (possibly requiring a 65% or 75% super majority), a non-binding shareholder vote on the subsequent application of that pay policy and a binding shareholder vote on exit payments in excess of one year’s basic salary.
The new rules would apply to certain UK quoted companies. The new rules would apply to those companies with either a standard or a premium listing on the London Stock Exchange main market and UK incorporated companies listed on the NYSE, NASDAQ or officially listed in another EEA member state but would not apply to companies trading on AIM or the Plus Growth market. The rules would replace the existing requirement for a non-binding vote on the director’s remuneration report.
Existing Regulation of Executive Pay
Since 2003 UK company law has required that quoted companies produce a directors’ remuneration report (which forms part of their annual report and accounts) and seek an advisory vote on that remuneration report. These reports provide detailed disclosure of the pay and benefits for the financial year in question but contain limited information about the bonus and incentive targets for the following financial year.
It’s not just a numbers game… Since overhauling its financial penalty framework in March 2010, the UK Financial Services Authority (FSA) has gone a long way to dispel views that it has a lacklustre approach towards levying market abuse fines. However, harsher fines are just one feature of its tougher enforcement regime. Recent cases show that the FSA has generally stepped up its enforcement activity, improving the range of resources and evidence available to successfully investigate market abuse. This will particularly be the case due to the introduction of the Zen monitoring system and requirement for firms to tap employee mobile phones.
Ready to take on the “tricky” cases: The regulator has also shown increased willingness to expunge novel/unusual forms of market abuse involving both non-equity securities, and instruments that do not in themselves fall squarely within the ambit of the Financial Services and Markets Act 2000 (the “Act”). The FSA has also levied fines in respect of individuals that live abroad, yet engage in abusive transactions in UK markets. Although in general, the harshest hitting penalties have been issued to high profile individuals, or those involved in very serious cases of market abuse, recent enforcement action has signaled that the FSA has the potential also to come down on firms that do not take appropriate steps to supervise and manage market abusers. It remains to be seen whether this tougher enforcement regime will transfer to the FSA successor agencies once the regulator is abolished.
This alert looks at a few examples of FSA enforcement action in 2011 in the market abuse area and considers how this heralds a more robust enforcement regime.