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

Look out for upcoming QCA surveys

In the coming weeks and months, we will be sending a series of questionnaires to our members, as we seek to gain more intelligence to support our campaigning activities. Your help in completing any, or all, of these surveys will be greatly appreciated:

  • QCA Small and Mid-Cap Sentiment Index: This biannual survey – which has been running since 2011 – will ask quoted company directors, their advisers and investors a range of questions regarding on the general economic outlook in the UK, and the impact of MiFID II.
  • Employee share schemes: This mini-survey will identify which, if any, employee share schemes that small and mid-size quoted companies are choosing to operate and their reasons for doing so (or not).
  • The Market Abuse Regulation (MAR): This survey will seek to understand the practical burdens that have been placed on small and mid-size quoted companies by MAR since it came into force in 2016.

Please look out for these in your inbox. Although note that not every QCA member will recieve every survey as we will try to invite only those for whom the respective questions are most relevant.

London Stock Exchange publishes AIM Disciplinary Procedures and Appeals Handbook

London Stock Exchange has finalised the revised AIM Disciplinary Procedures and Appeals Handbook, which came into effect on 1 October 2018.

The revised handbook seeks to enhance the efficiency and transparency of the Exchange’s disciplinary and non-disciplinary procedures.

You can read the Feedback Statement contained within AIM Notice 54 here.

You can also find the following documents:

FRC’s Financial Reporting Lab publishes implementation study on business model reporting

The FRC’s Financial Reporting Lab has published a report on business model reporting, and risk and viability reporting.

Overall, the Lab's report found that while there have been good developments in reporting, there is still plenty companies can do to increase the value of disclosures regarding business model reporting, and risk and viability for investors.

For example, investors have continued to emphasise the need for consistent reporting and for that reporting to be clearly linked throughout the annual report.

Regarding business model reporting, the report found that investors:

  • Seek information that is both broad enough for them to understand the business overall, while also being sufficiently detailed to provide evidence on the performance and position of the company in the context of its business model;
  • Do not always expect information to be contained within the business model disclosure but do want clear disclosure that builds understanding either directly, or through cross-referencing and coherent, meaningful linkage; and
  • Believe that, despite being the biggest indicator of success, business model disclosures generally fail to as a guide for the content of the rest of the annual report.

Regarding risk reporting, the report found that:

  • Certain areas, such as mitigation actions and links to the business model and key performance indicators, continue to lack detail; and
  • Investors expect more detail on companies' level of preparedness for Brexit. This includes their current stage of implementation of mitigating activities and numerical breakdowns. As Brexit arrangements become clearer, companies will need to provide more detailed disclosures.

Regarding viability reporting, the report found that:

  • There are promising developments with companies separating the viability statement into an assessment of prospects and then an assessment of viability, providing more disclosure on both. This two-stage disclosure works best where each element is supported by sufficient detail and linkage to the rest of the report;
  • Investors seek more disclosure on scenario and sensitivity analysis that supports the statement, and reasoning behind the period selected; and
  • Companies need to continue focussing on the quality of disclosure for the viability statement to become universally useful.

Government seeks views on ethnicity pay reporting

The Department for Business, Energy and Industrial Strategy (BEIS) has published a consultation on ethnicity pay reporting.

Specifically, it is seeking views from employers on what ethnicity pay information should be reported by employers to allow for meaningful action, as well as which type of companies should be expected to report such information.

Potential options suggested include:

  • One pay gap figure comparing average hourly earnings of ethnic minority employees as a percentage of white employees;
  • Several pay gap figures comparing average hourly earnings of different groups of ethnic minority employees as a percentage of white employees;
  • Ethnicity pay information showing the proportion of employees from different ethnic groups by £20,000 pay bands; and
  • Ethnicity pay information showing the proportion of employees from different ethnic groups by pay quartile.

Although the government suggests that any reporting requirements could be limited to companies employing more than 250 people – as with gender pay gap reporting – it nonetheless seeks employers’ views.

The consultation comes after the government, in partnership with Business in the Community, published the Race at Work 2018 Scorecard in July 2018, which assessed the progress made one after the publication of Baroness McGregor-Smith’s Race in the workplace review.

The Quoted Companies Alliance Corporate Governance Expert Group is currently considering its response to this consultation paper. If you have any comments on how we should respond, please email Callum Anderson at

OTS issues call for evidence as part of its Business Lifecycle Review

The Office of Tax Simplification (OTS) has published an online survey and a call for evidence to seek views on tax as it impacts on business. 

The OTS is particularly interested in the everyday experience of business owners and managers as they engage with tax throughout the lifecycle, from start-up and registration, through calculating and paying tax, to business closure and transfer.

You can complete the survey here – the submission deadline is Friday 7 December 2018.

European Commission invites companies to share information regarding the scale and cost of EU financial regulations

The European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) has asked ICF and the Centre for European Policy Studies to conduct a study into the costs of compliance with key EU financial regulations including, but not limited to, MiFID II, CSDR, the Market Abuse Regulation and the Prospectus Directive.

As part of the study, small and mid-size quoted companies and their advisers are to share any quantitative and/or qualitative information on the nature and scale of costs associated with regulatory compliance with the regulations mentioned above.

You can complete the survey here – the deadline for completion is Friday 9 November 2018.

UK government publishes technical notice on accounting and audit in the case of a ‘’no deal” Brexit

The UK government has published a technical notice on audit and accounting for the event where no deal is negotiated between the UK and the European Union.

The main points are:

  • Accounting and corporate reporting: The corporate reporting regime will be unchanged in many respects; however, certain changes are necessary to reflect that the UK is no longer an EU Member State.
  • Audit: The rules relating to audits of UK companies operating solely within the UK will be unchanged, but there will be additional requirements relating to the audits of UK companies operating cross-border, and to the provision of audit services cross-border. However, the UK will unilaterally provide a transitional period in the field of audit until the end of December 2020. During this time, individuals will be able to continue to apply for their EU audit qualifications to be recognised in the UK and EU auditor registrations will continue to be recognised in the UK. Additionally, EU audit firms will continue to count towards the majority of appropriately qualified persons test for owning UK audit firms.

With respect to how businesses should prepare for this scenario, the government advises subsidiaries and parents of EU companies established in the UK to familiarise themselves with the exemptions in the Companies Act 2006 relating to accounting and reporting requirements that will no longer be extended to UK companies with parents or subsidiaries incorporated in the EU.

It also notes that branches of EU companies established in the UK will become subject to additional requirements under the overseas companies regime, and after exit will be subject to the same accounting and reporting requirements as non-EU companies that have a branch in the UK. Therefore, the management teams of these branches should familiarise themselves with the additional reporting requirements that will be applicable to them.

The government suggests that UK businesses may wish to make themselves aware of the specific accounting and reporting requirements of any of the EU Member States in which they operate.

FRC publishes 2017/18 Annual Report

The Financial Reporting Council (FRC) has published its 2017/18 Annual Report.

The review highlights the FRC’s main achievements over the course of the last 12 months including:

  • Publishing the revised UK Corporate Governance Code;
  • Completing its triennial review of the FRS 102 financial reporting standard applicable in the UK and Ireland; and
  • Implementing a new audit firm monitoring and supervisory approach as part of its role as the UK’s National Competent Authority for statutory audit.
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