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'Director know how' is a monthly article which highlights key rule changes, proposed changes and market updates so that you know what is coming down the track.

BIS publishes consultation on draft narrative reporting regulations

The Department for Business, Innovation and Skills (BIS) has published its draft regulations that will amend the requirements for what needs to be included in annual reports and how the report should be laid out. The draft Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 are currently available for consultation until 15 November, proposing changes to the Companies Act 2006 and secondary legislation. 

BIS publishes consultation on employee owner status

BIS has published a consultation on the 'shares for rights' proposal announced by the Chancellor at the Conservative Party Conference. The consultation document mainly looks at the employment issues associated with employees giving up some of their rights in exchange for not paying capital gains tax on a limited number of shares, noting that the tax implications will be explored in a separate consultation, but that employee owners will have to pay income tax and NICs in the normal way on the benefit of receiving the shares.

Revised UK Corporate Governance and Stewardship Codes published

The Financial Reporting Council (FRC) published revisions to the UK Corporate Governance Code and its Guidance on Audit Committees and the Stewardship Code in September. The new editions of the Code and Guidance will apply to reporting periods beginning on or after 1 October 2012.

Short Selling Regulations come into effect on 1 November

The EU's Short Selling Regulations will come into effect in the UK from 1 November, which could have an effect on the liquidity of some small and mid-size quoted company shares. The primary purpose of this regulation is to harmonise the various short selling restrictions that were implemented in the wake of the financial crisis and to provide powers for national regulators to intervene to prevent short selling during extreme market conditions. The key concern for small and mid-size quoted companies is the introduction of a more stringent buying-in regime for centrally cleared securities than that which has been in force in the UK – incorporating daily fines, a cash-in option, and an administration charge – which would hit market makers in small and mid-sized quoted company shares hardest. This could lead to market inefficiencies in a number of ways:

  • An increase in transaction costs for investors through wider bid/offer price spreads;
  • A decrease in capital commitment because market makers decide to make prices in smaller quantities than hitherto; and
  • A resulting fall in trading turnover.

Companies may wish to review volumes of trading in your shares over a reasonable period of time, to assess whether there has been any adverse impact on liquidity. If you have any issues arising from the introduction of this regulation please let us know as we would like to collate them for discussion with the relevant market operators, policymakers and regulators.

Serious Fraud Office publishes revised policies on business expenditures and facilitation payments

The Serious Fraud Office (SFO) has published revised policies on business expenditures and facilitation payments in relation to the Bribery Act. The SFO confirms that facilitation payments are bribes and are illegal under the Bribery Act 2010 (irrespective of their size or frequency) and that bribes can be disguised as hospitality. It has outlined the progress it will undertake in these circumstances to determine whether or not the SFO will prosecute.

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