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Directors' Knowhow is a monthly article which highlights changes and updates of relevance to small and mid-size quoted companies.

Reports, guides and regulation


This section features some of the key legislative/regulatory developments and changes, as well as any new reports or guidance issued by industry bodies or regulators, over the last month.

ICSA updated guidance about directors’ duties


On 25 August, the Chartered Governance Institute published updated practical guidance for directors of companies about their general duties under the Companies Act 2006. This includes an additional section on the new section 172 reporting requirement.


The guidance covers the key elements of the provisions under the Act and offers practical guidance for directors relating to these provisions. This includes:

  • Section 171: Duty to act within powers
  • Section 172: Duty to promote the success of the company
  • Section 173: Duty to exercise independent judgment
  • Section 174: Duty to exercise reasonable care, skill and diligence
  • Section 175: Duty to avoid conflicts of interest
  • Section 176: Duty not to accept benefits from third parties
  • Section 177: Duty to declare an interest in a proposed transaction or arrangement
  • Section 182: Declaration of interest in existing transaction or arrangement.

If you wish to view the guidance, please click here.

FCA statement on accounting lease modifications


The FCA has announced temporary relief for issuers who choose to use the amended IFRS 16 during the current coronavirus pandemic. In May, the International Accounting Standards Board (IASB) made an amendment to IFRS 16 (Covid-19-related rent concessions), which provides practical relief to lessees in accounting for rent concessions. The amendment is effective for reporting periods beginning on or after 1 June 2020 in relation to Covid-19-related rent concessions that reduce lease payments due on or before 30 June 2021.


However, the amendment is yet to be formally adopted in line with the necessary EU endorsement procedure, and as such, not available for use by any issuers required by the Transparency Directive to use EU-adopted IFRS.


Despite this, the FCA has confirmed that they will permit issuers to use the modified IFRS 16 rather than the IFRS 16 as currently adopted by the EU on the following two conditions:

·       Issuers must apply the accounting treatment to those transactions as foreseen in the IFRS 16 amendment.

·       Issuers must disclose their use of the amendment as issued by the IASB in the notes to the financial statements.


The relief applies to all listed companies that are required to comply with DTR 4.1 and DTR 4.2 and that are required to prepare their accounts in accordance with EU-adopted IFRS. This does not include issuers with their securities admitted to AIM or AQSE.


To read the announcement, please click here.

FRC statement on accounting for lease modifications


In addition to the FCA’s announcement as outlined above, the FRC has confirmed that they will not pursue regulatory action where issuers take advantage of the provisions contained in the accounting for lease modifications before they are adopted by the EU. The FRC stated that they support the statement released by the FCA and will similarly not pursue any regulatory action in respect of both annual and interim accounts.


To read the statement, please click here.

Inside AIM article


On 19 August 2020, the London Stock Exchange published an Inside AIM newsletter setting out temporary relief for AIM companies who choose to use IFRS 16 Leases as modified by the IASB in May 2020 before it is formally adopted by the EU.


The LSE acknowledges the practical difficulties AIM companies could face in applying the existing IFRS 16 lease modification requirements. As such, the Exchange states that, for the purpose of the financial reporting requirements under the AIM Rules for Companies (AIM Rule 18 and 19), it will deem compliance with the AIM Rules where a company takes advantage of amended IFRS 16 as set out in the FRC statement.


To view the newsletter, please click here.

FCA Primary Market Bulletin


On 19 August 2020, the FCA published their 30th edition of its Primary Markets Bulletin. This edition issues a reminder of the importance of the Persons Discharging Managerial Responsibility (PDMR) regime under the Market Abuse Regulation (MAR), provides an update on recent changes to the Prospectus Regulation, and gives an update on the FCA’s technical and procedural notes to reflect the EU Prospectus Regulation.


Firstly, the FCA wants to remind PDMRs and persons closely associated (PCA) with them of their obligations under Article 19 of MAR to notify issuers and the FCA of relevant transactions in a timely way following fines recently issued for failure to notify trades.


Secondly, the FCA explains the exemptions from the requirement to prepare a prospectus for the offer of securities to the public. These exemptions relate to securities offered in connection with a takeover by means of an exchange offer and securities offered, allotted or to be allotted in connection with a merger or division, provided that a document is made available to the public containing information describing the transaction and its impact on the issuer.


Also included within the PMB is an explanation of the changes to the prospectus annexes in relations to the format, content, scrutiny and approval of prospectuses. The FCA also clarify that their approach to Global Depository Receipt facility remains unchanged.


If you wish to view the PMB, you may do so here.

Study on directors’ duties and sustainable corporate governance


At the end of July, the European Commission released the final report of their study on directors’ duties and sustainable corporate governance. The objective of the study was to assess the root causes of short-termism in corporate governance, current market practices and regulatory frameworks in order to identify potential solutions. These solutions would hopefully contribute to the realisation of the UN Sustainable Development Goals and the Paris Agreement on climate change. This would serve to increase the long-term economic, environmental and social sustainability of businesses across Europe.


The study focusses on a number of issues contributing to short-termism in company law and corporate governance. These include, amongst other things, directors’ duties and their enforcement, board remuneration and composition, sustainability in the business strategy, and stakeholder involvement. The study suggests that there is a need to pursue the objective of fostering more sustainable corporate governance and contributing more to accountability for companies’ sustainable value creation.


If you wish to read the report, please click here.



This section provides an update of any recently submitted QCA consultation responses, as well as the consultation responses the QCA is currently drafting.

QCA policy consultation responses


On 10 August 2020, the QCA’s Share Schemes Expert Group and Tax Expert Group contributed to the response to the Office of Tax Simplification’s call for evidence on the principles of Capital Gains Tax.

To view the response, please click here.


The QCA is seeking views on the below consultations:

If you have any comments you wish to contribute on either of these consultations, please get in touch with Jack Marshall, Policy Adviser,


This section provides information on any upcoming events the QCA may be holding or relevant events that members may be interested in.

FRC and IASB outreach event


The FRC and the IASB are jointly holding an outreach event on 7 September 2020, 2.00pm – 4.00pm, to discuss the IASB’s Request for Information: Comprehensive Review of the IFRS for SMEs Standard.


Amongst other things, the review is considering some of the recently issued IFRS Standards that have not yet been reflected in FRS 102. The event will explore the following key topics:

  • The IASB’s approach to its Review
  • Aligning the IFRS for SMEs Standard with IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases
  • Possible future development of FRS 102

The discussion will be held on Microsoft Teams and will consist of an expert panel of:

  • Darrel Scott, IASB Board Member
  • Francoise Flores, IASB Board Member
  • Jenny Carter, FRC Acting Director, Accounting and Reporting Policy

If you would like to attend this event, please contact


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