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

Coronavirus-related updates


Throughout July, there have been several additional regulatory/legislative changes in relation to the Covid-19 crisis. The first section of this month’s Directors’ Knowhow includes the relevant policy and market developments and updates relevant to the Coronavirus pandemic.

EU capital markets recovery package


In response to the Coronavirus pandemic, the European Commission has launched a capital markets recovery package to support Europe’s recovery. The package proposes targeted changes to capital market rules to encourage greater levels of investment in order to allow for the rapid re-capitalisation of companies.


As part of this package of measures, the European Commission adopted a legislative proposal to amend the Prospectus Regulation with the aim of facilitating the recapitalisation of companies. The proposed amendments include:

  • The introduction of a new short-form prospectus that will be available to secondary issuances of shares by issuers that are already admitted to trading on a regulated market or SME Growth Market for at least 18 months.
  • The EU Recovery prospectus must be a single document that does not exceed 30 pages and should focus on the essential information required to make an informed investment decision.
  • An amendment to Article 23(2) to increase from two to three days the deadline by which investors must exercise their withdrawal rights when a supplementary prospectus is published.
  • An amendment to Article 23(3) to extend to one working day (rather than the same day) the time period during which financial intermediaries are required to contact investors regarding the publication of a supplementary prospectus.
  • A temporary increase to the prospectus exemption threshold in relation to certain non-equity securities.

To read the amendments to the Prospectus Regulation, please click here.


In addition to the above changes to the Prospectus Regulation, the European Commission has also made amendments to MiFID II in order to help the recovery from the coronavirus pandemic. In particular, the amendments are concerned with information requirements, product governance and position limits. The amendments to the information requirements include:

  • A phase-out of the paper-based default method for communication.
  • The introduction of an exemption for eligible counterparties and professional clients from the cost and charges information.
  • Allowing for a delayed transmission of cost information when using distance communication channels.
  • A relaxation of the rules requiring ex-post statements to clients concerning the services they have received.
  • Allowing professional clients to opt in to cost benefit analysis of switching investments.
  • The suspension of the requirement to publish best execution reports.

Furthermore, the Commission has also amended the regime for research on small and mid-cap issuers. When research is exclusively on small and mid-cap issuers, investment firms will be able to choose not to apply the current requirement to set up a research payment account or pay for research with its own resources. This is available to small and mid-cap issuers who do not exceed a market capitalisation of €1 billion over a 12-month period. There is also an exemption from the current research unbundling requirement if execution services and the provision of research relate to small and mid-cap issuers. This exemption allows investment firms to pay jointly for the execution services and the provision of research.


To read the amendments to MiFID II, please click here.

ICSA guidance on shareholder meetings

The Chartered Governance Institute, together with the City of London Law Society Company Law Committee, has released new guidance on holding shareholder meetings following the Corporate Insolvency and Governance Act 2020. The new guidance, which has received the support of GC100, the Investment Association and the QCA, and endorsed by BEIS and the FRC, seeks to outline the temporary flexibilities available for companies contained within the Act.

The guidance answers the following questions:

  • How are companies able to hold shareholder meetings under the Act?
  • Are companies able to limit attendance at shareholder meetings?
  • What if a company’s articles of association say something different to the Act?
  • Can a company which has already issued its notice of meeting change the format of its meeting to one allowed under the Act?
  • Companies have already been holding meetings on an adapted basis during the coronavirus lockdown. What difference does the Act make?
  • Do companies that have already held their meetings on an adapted basis during the coronavirus lockdown need to do anything?
  • Can companies hold a physical meeting to be attended by shareholders generally?
  • Does the Act change a company’s AGM deadline?

To view the guidance, please click here.

FRC on need for high quality disclosures


On 21 July, the FRC released its first thematic review of company reporting since the beginning of the Covid-19 pandemic. On balance, the review found that most companies had provided sufficient information to enable users to understand the impact of Covid-19 on their performance, position and future prospects. However, it also found that some interim reports could have benefited from more extensive disclosure.


In addition, the FRC have provided a list of areas in which improvement is needed. This includes:

  • Going concern disclosures in both interim and annual financial statements – these should clearly explain the key assumptions and judgements taken in determining whether a company is able to operate as a going concern.
  • Assumptions used in determining whether the company is a going concern should be compatible with assumptions used in other areas of the financial statements.
  • Details of a range of possible outcomes should be provided for areas subject to significant estimation uncertainty.
  • The FRC discourages the splitting of items such as impairment charges between Covid-19 and non-Covid-19 financial statement captions.

To see the review, please click here.

QCA publications and policy updates

This section of the Directors’ Knowhow features all of the publications produced by the QCA and any relevant updates that have occurred over the last month.

Share Schemes note


In July, the QCA’s Share Schemes Expert Group issued an updated note in order to help you navigate the coronavirus pandemic in relation to all-employee share schemes, which explained the range of possibilities available to companies operating Company Share Option Plans (CSOP), Enterprise Management Incentive (EMI), Save As You Earn plans (SAYE) and Share Incentive Plans (SIP).

HMRC have since released an additional Employment Related Securities Bulletin (ERS Bulletin), which provides further updates on EMI and SAYE. The note has been amended to incorporate this additional information.


To view the note, please click here.

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.

FRC operational separation of audit firms


On 6 July, the FRC announced its principles for operational separation of the audit practices of the Big Four firms. The objectives of the operational separation are to ensure that audit practices are focussed primarily on the delivery of high-quality audits in the public interest, as well as that the audit practices do not rely on cross subsidy from the rest of the firm.


The desired outcomes of the operational separation, include:

  • Audit practice governance prioritises audit quality and protects auditors from influence from the rest of the firm.
  • The total amount of profits distributed to the partners in the audit practice does not persistently exceed the contribution to profits in the audit practice.
  • The culture of the audit practice prioritises high-quality audit by encouraging ethical behaviour, openness, teamwork, challenge and professional scepticism/judgement; and
  • Auditors act in the public interest and work for the benefit of shareholders of audited entities and wider society.

There are 22 principles in total, which have come about as a result of extensive discussions with the audit firms. The FRC is asking the Big 4 firms to agree to the operational separation of their audit practices and to provide a transition timetable to complete implementation by 30 June 2024.


To view the principles, please click here.

FRC publishes annual report


On 17 July 2020, the FRC published its annual report, which sets out the progress it has made to implement the recommendations for the changes to the FRC and the activities it regulates. As part of this, the FRC has brought forward many of the recommendations of Sir John Kingman, the CMA and Sir Donald Brydon into a unified transformation programme.


In some instances, the FRC will bring forward reforms ahead of legislation, particularly when it is in the public interest to do so.


The FRC has begun by conducting a thorough review of its governance and structure and intends to make changes that will streamline operations, clarify accountabilities and improve the effectiveness of decision making.


If you wish to see the annual report, you may do so here.

FRC Lab newsletter


The FRC’s Financial Reporting Lab has released its second newsletter for 2020. This issue of the newsletter provides an update on the Lab’s recently released reports regarding the Reporting in times of uncertainty project, as well as its upcoming reports on Video, Virtual & Augmented Reality and on a range of other activities.


To view the newsletter, please click here.

CFRF guide on climate-related financial risks


At the end of June 2020, the Climate Financial Risk Forum published a guide to help firms approach and address climate-related financial risks. The guide provides practical recommendations to firms of all sizes on disclosure of climate-related financial risks, effective risk management, scenario analysis and opportunities for innovation in the interest of consumers.


To view the guide, please click here.

European Commission response to NFRD consultation


The European Commission has published a response to its consultation on the Non-Financial Reporting Directive. The QCA’s Accounting, Auditing and Financial Reporting Expert Group and Corporate Governance Expert Group fed into the initial consultation (available here).


A summary of the key messages from within the consultation responses included:

  • Problems for users and prepares of non-financial information;
  • Strong support for a requirement on companies to use a common standard;
  • Strong support for simplified standards for SMEs;
  • Strong support for stricter audit requirements;
  • Strong support for digitalisation of non-financial information;
  • Strong support for a requirement on companies to disclose their materiality assessment process;
  • Moderate support for requiring all information to be disclosed in the management report;
  • String support to expand the scope of the NFRD to certain categories of company;
  • Concern about the interaction between different pieces of sustainability reporting; and
  • Strong support to use taxonomy structure for environmental disclosures.

To view the Commission’s response, please click here.

Articles, news and speeches

This section features relevant news, articles and publications for small and mid-size quoted companies that has been published in the last month.

Podcast with Phil Fitz-Gerald (FRC Lab)


Towards the end of June, Phil Fitz-Gerald, Director of the FRC’s Financial Reporting Lab, released a podcast about the Lab’s recent work. In the podcast, the Lab’s two new reports on investor disclosures during the Covid-19 crisis are discussed.


To watch the podcast, please click here.

FRC Lab call for participants on section 172


The FRC’s Financial Reporting Lab has issued a call for participants for their new project: reporting on stakeholders and Section 172 disclosures. The Lab is inviting investors and companies to participate in the project on corporate disclosures. The project will consider the usefulness to investors of the disclosures about stakeholders across a range of reporting formats.


To read more about the project, please click here.


If you are interested in participating in the project, please email

M&A trends for first half of 2020


Thomson Reuters Practical Law have produced a report that provides a summary of some of the key trends, highlights and developments seen in UK public M&A activity in the first half of 2020. The report covers offers announced in the first half of 2020 for target companies traded on the Main Market or AIM, subject to the Takeover Code.


The report finds that the coronavirus pandemic has had a significant impact on public M&A activity over the first half of the year. In the first half of 2020, only 12 firm offers were announced for Main Market or AIM companies (six for Main Market and six for AIM), with two thirds of these offers having been announced in Q1. During the same period in 2019, 33 firm offers were announced.


In addition to deal volume being significantly lower, deal values have also been much lower, with only one bid exceeding £1 billion. This is compared to seven bids with a value of £1 billion or above in the first half of 2019.


If you wish to view 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 15 July 2020, the QCA’s Primary Markets Expert Group and Secondary Markets Expert Group contributed to the response to ESMA’s consultation on the functioning of the regime for SME Growth Markets under the Markets in Financial Instruments Directive and on the amendments to the Market Abuse Regulation for the promotion of use of SME Growth Markets.

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,


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