LexisNexis Corporate A LexisNexis mini-mag helping corporate lawyers stay up to date Autumn 2014

Lexis®PSL Corporate This month’s highlights

Lexis®Market Tracker Deal summaries and trend analysis on the latest corporate transactions

Takeover Code changes do not present major reform Adam Bogdanor,

Lexis®PSL Corporate Practice Note: Financial assistance – a quick guide

Lexis®Calculate: Clear days calculator

Company Secretary’s Review: The proposed company register of people with significant control From the Editor Contents

Welcome to our LexisNexis Corporate mini magazine, which LexisPSL Corporate and Market Tracker includes a selection of content for corporate lawyers from LexisPSL Corporate, the Lexis Corporate blog and other LexisNexis 3 An introduction to our online practical guidance for corporate lawyers publications.

From LexisPSL Corporate, which provides practical guidance LexisPSL Corporate team for corporate lawyers, we have a recent news analysis piece, an extract from the monthly highlights round-up for September 2014, details of our LexisCalculate Clear Days Calculator, a Practice Note 4 Meet the team and illustrative diagram on financial assistance, a flowchart on how to amend the articles of association and a selection of our handy Corporate Blog checklists. You will also find details of our unique Market Tracker service. 6 News & Views: LexisNexis Free Content The magazine also includes content from other LexisNexis publications and services, including an article from the fortnightly 7 Takeover Code changes do not present major reform journal Company Secretary’s Review on the proposals for a new In this news article for LexisPSL Corporate, Adam Bogdanor, Partner PSC company register, details of Corporate sources available within at Berwin Leighton Paisner, explores the recently proposed changes LexisLibrary and, finally, information on some forthcoming Lexis to the Takeover Code Webinars which you might find useful.

We hope you enjoy the magazine, LexisPSL Corporate

Best wishes 8 This month’s highlights - September 2014 Nicola Green and Head of LexisPSL Corporate 10 LexisCalculate – Clear days calculator [email protected] 12 Practice Note: Financial assistance—a quick guide The prohibition under the CA 2006 What is financial assistance? Exceptions to the prohibition Consequences of breaching the prohibition Financial assistance under the CA 1985

14 LexisPSL Corporate checklists Two LexisPSL Corporate easy-reference checklists on shareholder resolutions

16 Takeover offers v schemes of arrangement—key advantages and disadvantages—comparative table Produced in partnership with Julian Henwood of Wragge & Co

18 Amending the articles of association —flowchart Editorial

Editor: Nicola Green 19 LexisPSL Corporate Topic Tree Production Editor: Rachel Buchanan Design: LexisNexis Creative Solutions Company Secretary’s Review Offices: Lexis House, 30 Farringdon Street, , EC4A 4HH Tel: 020 7400 2500 20 Persons with significant control Reproduction, copying or extracting by any means of the whole or An article from Company Secretary’s Review on the proposals for a part of this publication must not be undertaken without the written new company register permission of the publishers.

This publication is intended to be a general guide and cannot be a substitute for professional advice. Neither the authors nor LexisLibrary the publisher accept any responsibility for loss occasioned to any person acting or refraining from acting as a result of material 22 Information on our comprehensive collection of corporate titles contained in this publication. And there’s more...

23 LexisNexis Webinars

2 LexisPSL Corporate and Market Tracker

With LexisPSL Corporate you’ll find the answers you need in clear, concise practice notes written by experts who’ve been there before – with direct links1 to the relevant legislation, cases, regulatory rules and other primary sources. Our news, commentary and all-important market updates make it easy for you to stay on top of the latest developments. LexisPSL LexisPSL Corporate provides a range of practice notes, flowcharts, Lexis Market Tracker provides deal summaries, a tool for comparing diagrams and checklists to provide you with the answers that you features of recent deals, authoritative reports analysing market trends need – quickly and efficiently. Links are included from practice notes and drafting examples (and associated analysis) illustrating evolving to relevant case law, legislation and commentary in LexisLibrary to market practice. facilitate deeper research.

Access our suite of Corporate topics corporate calculators, include Company which are designed to save incorporation, you time in completing Corporate governance, everyday tasks. The suite Share capital, Private includes date-to-date and M&A, Public company clear days calculators, a takeovers, Equity currency converter and capital markets and calculators for inflation Private equity and VAT.

The LexisPSL Corporate LexisPSL Corporate calendar includes key news - telling corporate corporate Webinars, lawyers all they need to conferences and legal know about the latest updates for corporate developments in law lawyers and market practice LexisPSL Corporate multimedia includes videos presented by market-leading specialists on the latest talking points and key market developments in corporate law

Market Tracker is a unique service for corporate lawyers offering:

• News and analysis of key corporate deals and activity • Market practice clauses (and analysis) for inclusion in listed company deal documents • Detailed, searchable summaries of listed company deals and AGMs • A tool for comparing features of deals summarised • In-depth analysis of recent trends in corporate practice and deal documents

To find out more about LexisPSL Corporate, or to have a free trial, visit lexisnexis.co.uk/CorporateMag/PSL

3 1. Accessing information held in LexisLibrary requires an active subscription for the relevant menus in LexisLibrary. LexisPSL Corporate: Meet the team

LexisPSL Corporate has an in-house team with many years of practical first-hand experience gained in private practice, dedicated to producing content specifically for corporate lawyers. Their experience, combined with hundreds of customer interviews, has shaped the ultra-practical guidance on corporate issues within LexisPSL Corporate. We also commission leading and barristers to write for us. Their extensive corporate knowledge brings an additional level of legal expertise and market practice knowledge to our content. Our recognised contributors and members of our expert Consulting Editorial Board are corporate law specialists and thought-leaders in the corporate arena today. Lexis PSL

Nicola Green Kavita Bassan Nicola started her career as a corporate lawyer at Slaughter Kavita trained at Simons, Muirhead & Burton and qualified and May and has more than 20 years’ City experience, in 2006 in their Corporate department where she acted including as a partner at Gibson Dunn and then at Squire on private M&A transactions. Before joining LexisNexis as Sanders. Nicola has extensive experience of international a Corporate PSL, she worked (as a fee-earning solicitor) in and domestic corporate transactions , focusing on public the Corporate team at King & Wood Mallesons (legacy and private M&A, equity capital markets, joint ventures and Mallesons Stephen Jaques) for a number of years where private equity and, more generally, on corporate she advised and acted on a broad range of corporate governance and regulatory matters. matters, including private M&A, private equity transactions, regulatory and general corporate matters. Anne-Marie Claydon Anne-Marie is a corporate law specialist with experience James Hayden encompassing private mergers and acquisitions, James has a broad spectrum of corporate law reorganisations, takeovers, IPOs and general corporate experience across a variety of business sectors, having matters. Anne-Marie qualified at Norton Rose, where she worked as a general corporate practitioner at worked for a number of years as both an associate and as Eversheds, Morgan Lewis and (now a Corporate PSL. She later moved to Charles Russell as a ). He has experience in cross-border and Corporate PSL. Her PSL experience includes creating and private company acquisitions, reorganisations, public maintaining practice notes and precedents, producing company takeovers and joint ventures. He has also internal and client briefings and delivering legal training. advised on a variety of general corporate matters for domestic and international AIM-listed and private companies and high net worth individuals. Tara Hogg Tara is a corporate lawyer with over 10 years’ Eleanor Kelly experience, having qualified and worked as an associate Eleanor qualified as a corporate associate at Nabarro LLP, at SNR Denton before becoming a Corporate PSL at where she advised on a wide range of corporate . She has also worked in-house on transactions and general company law matters. She also secondment to a bank and a large international gained in-house experience on client secondments. corporation. Tara has advised on domestic and Specific experience includes advising on reductions of international transactions, including private mergers capital, striking-off and dissolution, public company and acquisitions, joint ventures, reorganisations, takeovers, general meetings of listed, unlisted and private takeovers and IPOs and also has broad experience of companies, group reorganisations, share buybacks and company constitutional and contractual matters. private company share and asset sales and acquisitions. Jane Mayfield Mohammed Saleem Tariq Jane is a corporate lawyer with over 15 years’ experience. She has advised on equity capital markets, Saleem is a paralegal in the LexisPSL Corporate team. He public company takeovers, private M&A and private studied law at the University of Liverpool and completed equity transactions as well as corporate restructurings the LLM in International Commercial Law at the University and general corporate matters. Jane qualified at of Nottingham. He was called to the Bar in 2013 and PwCLegal where she worked for a number of years, qualified as an ARDg US & UK Civil and Commercial before moving in-house as assistant general counsel at Mediator in 2011 and 2013 respectively. Previous roles Sodexho. Prior to joining LexisNexis, Jane was a include commercial paralegal at Enno Co & Solicitors and corporate associate at Rosenblatt. Senior Editor for Atkin’s Court Forms.

4 Omar Sheikh Michael Urie Omar studied at Kingston University and completed the Michael studied law at the University of Surrey and GDL and LPC at London’s College of Law. He has worked currently works on Market Tracker, with a focus on AGMs as a paralegal for various law firms and has undertaken and trends in deal activity. He has previously worked as a pro-bono work for the Advice Services Alliance and the paralegal at a US-based and also at a corporate PR University of the Arts, London. Omar currently works on and investor relations firm in the City of London. Market Tracker, with a focus on public M&A, and monitors trends in deal activity.

Jenisa Altink-Thumbadoo Francesca Briscoe-Wilson PSL Lexis Jenisa works on Market Tracker, analysing corporate deal Francesca studied English at University College London activity and market trends. She studied law at QMUL and and completed the GDL and LPC at London’s BPP Law Leiden University before completing the LPC at the School. She joined LexisNexis as a freelance author for College of Law. Jenisa has over 8 years’ experience LexisPSL and currently works on Market Tracker, with a researching and reporting on legal market developments. focus on equity capital markets and analysing trends in Previous roles include content developer for Lexis®PSL, deal activity. Prior to joining LexisNexis, Francesca worked Legal Podcaster at Informa and Research Editor at in the EU Dispute Resolution Team at Freshfields Practical Law Company where she specialised in Bruckhaus Deringer LLP, assisting with first and second cross-border corporate and commercial developments line document review. in the firm’s NY office.

Consulting Editorial Board Berwin Leighton Paisner LLP Dentons Wedlake Bell LLP Alexander Keepin Richard Barham Chris Randall Edward Craft Clifford Chance LLP Freshfields Bruckhaus Deringer LLP LLP James Herbert Patrick Sarch Mark Austin Louise Wolfson Davis Polk & Wardwell LLP Kemp Little LLP Simon Witty Glafkos Tombolis Chris Hale

Contributing Authors CMS Cameron McKenna LLP Kemp Little LLP Independent Authors Farrer & Co LLP Glafkos Tombolis Jonathan Edgelow Mark Cardale James Thorne Nabarro LLP Lydia Sadler Forward Legal Training Laura Allum Wragge Lawrence Graham & Co Ed Davies Graham Muir Julian Henwood

5 News & Views: LexisNexis Free Content

The LexisPSL Corporate team’s blog hosts our free Market Tracker trend reports and our Talking Points videos, which discuss the latest legal developments in corporate law and practice. We include news and case analysis to keep our readers up to speed. We write in-house with comments, interviews and guest posts from leading practitioners.

And follow us on Twitter: @LexisUK_Corp Corporate Blog Corporate

Sign up to receive our market tracker trend reports via email

To find out more visit Lexisnexis.co.uk/CorporateMag/Blog

6 Takeover Code changes do not present major reform

Will proposed amendments to the Takeover Code reform takeover conduct? Although strengthening certain elements, Adam Bogdanor, partner at Berwin Leighton Paisner Corporate Blog LLP, does not believe the proposed amendments will make a significant difference.

the agreement of the target board, unless the statement was made Original news following a firm offer announcement by a third party, and the third party Takeover Panel proposes wide-ranging Code changes, LNB News offer has not been withdrawn or lapsed. 16/07/2014 158 The Panel proposes that after a third party firm offer announcement, The Code Committee of the Takeover Panel (the Panel) has the restrictions in rule 2.8 (as to not announcing an offer, taking steps in issued a public consultation paper proposing a series of diverse connection with a possible offer etc for a period of six months) will only amendments to the detail of various provisions of the City Code on cease to apply to the potential offeror if the third party offer lapses or Takeovers and Mergers (the Code). Responses to the consultation is withdrawn and the potential offeror and its concert parties have not should be submitted by 12 September 2014. acquired any interest in target shares in the meantime.

What is the background to the proposed changes? Restrictions following a Panel dispensation Takeover activity in the UK has increased over the last few years, but it is The Panel also proposes that for three months from a dispensation from still lower than in the period before the financial crisis (pre-2008). There making an announcement of a potential offer, the relevant party, and were 17 announced transactions in the first half of 2014, only one of any person acting in concert with it, may not actively consider making which was hostile. However, the Panel is neutral as to the level of takeover an offer, making an approach, or acquiring any interests in the target activity. The proposals which it sets out in its public consultation paper, company’s shares. The potential offeror and its concert parties will also ‘Miscellaneous Amendments to the Takeover Code (PCP 2014/1)’ are be restricted from doing any of the things set out in the existing rule merely intended to refine certain elements of the Code. 2.8(A)–(E) within six months from the date of the dispensation.

Are there any themes or trends underpinning the consultation? Irrevocable commitments and letters of intent There are no particular themes running through the consultation. The The Panel has proposed various changes which will lead to earlier proposed changes seek to provide greater certainty as to the applicable disclosure of irrevocable commitments and letters of intent. timetable and impose new restrictions on the acquisitions of interest in shares. Otherwise, the proposals codify existing practice. Are any of these changes likely to have a significant impact on takeover conduct? What are the headline proposed changes? I think it’s unlikely. The main effect of the proposals, should they be enacted, will be to strengthen, albeit slightly, the restrictions that apply Timetable for competing offer or clarification to parties who announce they do not intend to bid and to parties that do Currently, under Rule 2.6 of the Code, when an offeror has announced a not need to make an announcement, as they cease actively to consider firm intention to make an offer, a publicly identified potential competing making an offer (‘pens down’). offeror must clarify its position by a date set by the Panel, on a case-by- case basis (usually day 50). What happens next and when are the changes likely to take The Panel is proposing that the latest time by which a competing offeror effect? must clarify its position is 5.00pm on the fifty-third day following the Comments on the consultation paper are invited by 12 September 2014. publication of the first offeror’s offer document. Once the Code Committee has considered the responses, it will publish a response statement setting out the final text of the amendments to the Code. Setting aside a ‘no-intention to bid’ statement Interviewed by Duncan Wood. Under the Code, a potential offeror’s statement of ‘no intention to The views expressed by our legal analysis interviewees are not bid’, pursuant to rules 2.6 and 2.8, may normally be set aside with necessarily those of the proprietor.

To find out more visit Lexisnexis.co.uk/CorporateMag/Blog

7 This month’s highlights - September 2014

Each month, LexisPSL Corporate publishes ‘This month’s highlights’ which provides all the key dates for your diary in the coming month and highlights recently published new content, news and journal articles. An extract from September’s This month’s highlights is included below: September 2014 will see the close of the FCA’s consultation on the removal of the requirement to produce interim management statements, the close of a Panel consultation on technical changes to the Takeover Code and the end of the BIS consultation on the European Commission proposals for EU merger reform. LexisPSL

Horizon Scanning In its Consultation Paper PCP 2014/1 the Code Committee proposes a For a summary of all the key legal developments expected to impact number of diverse amendments to the detail of various provisions of the corporate lawyers during 2014 and beyond, see: Corporate horizon Takeover Code, including: scanning – 2014 and beyond on the LexisPSL Corporate homepage. • imposing a firm deadline (the 53rd day after publication of the offer document, or the 7th day before scheme shareholder meetings) Close of FCA consultation on removal of DTR 4.3R – Last date for for a potential competing bidder to clarify its position, replacing the responses 4 September 2014 current flexibility of a date set by the Panel The Transparency Directive Amending Directive (TDAD) has removed • where a potential competing bidder has made a ‘no intention to the requirement in Article 6 of the Transparency Directive for issuers to bid’ statement, it will forfeit the ability to set this aside even if the publish interim management statements (ie quarterly financial reports). target board agrees Full implementation of the TDAD is required by November 2015. • changes to the disclosure requirements for irrevocable In its consultation paper CP14/12 Removing the Transparency Directive’s commitments, letters of intent and interests in relevant securities requirement to publish interim management statements, the Financial • changes to the rules relating to ‘no increase’ or ‘no extension’ Conduct Authority (FCA) proposed the abolition of mandatory quarterly statements, and reporting for UK issuers a full year earlier than required. The FCA • a new Appendix 8, introducing a modified form of the existing intends to delete DTR 4.3 in its entirety, along with other consequential default auction procedure to resolve competitive situations provisions, with effect from ‘Autumn 2014’, to support the Government’s • The amendments are unlikely to have a significant impact on commitment to reduce administrative burdens on listed companies. takeover conduct. Issuers will still be able to continue to report quarterly if they wish (the most likely reason being to continue to meet investor expectations). EU Merger Regulation - Last date for comments to BIS 12 September 2014 Close of Consultation on Takeover Code changes - Last date for BIS has invited comments on the EC’s White Paper on reform of the responses 12 September 2014 EU competition regime - Towards more effective EU merger control.

8 Proposals include expanding the EC’s jurisdiction to cover acquisitions • Determining who is a director—an analysis by Elizabeth Wilkinson, of non-controlling minority shareholdings and streamlining the rules for of the Litigation and Dispute Resolution Group at Pannone transferring merger cases from member states to the EC and vice versa. Corporate LLP, of the Court of Appeal case of Smithton v Naggar, which concerned whether the director of a holding company had The Commission’s proposals to streamline referral procedures and become a director of its subsidiary make other procedural simplifications are likely to be welcomed by • 2014 for Corporate Lawyers - Private M&A - George the business community. However, it seems likely that concerns will Swan, corporate partner at Freshfields Bruckhaus Deringer be raised as to the potential burden associated with extending the LLP, discusses recent developments that highlight both EU’s mandatory notification system to acquisitions of non-controlling unpredictability and increased market scrutiny shareholdings, including: • Contrasting US and UK shareholder litigation - Matthew Akers, • transaction parties’ potential difficulty in assessing whether they of Weil, Gotshal & Manges, discusses the differing approaches on LexisPSL are ‘competitors’ – this may lead to the filing of a large number both sides of the Atlantic to shareholders challenging takeover of information notices in respect of transactions involving the deals acquisition of minority shareholdings in competitors or vertically- • All change for statutory audit services? - Frances Murphy, related companies (a ‘competitively significant link’), antitrust and competition partner at Bingham McCutcheon, looks • the lack of a de minimis threshold for the test as to whether a at the implications of the Competition and Market Authority’s vertical relationship is a ‘competitively significant risk’, and lack draft order in relation to the statutory audit services market of clarity from the Commission as to whether the competitive investigation and assesses how the order will change auditors’ significance tests would be applied on a group-wide basis and appointments therefore potentially catch multinationals engaged in a broad range • What do the changes to LLP taxation mean in practice? - George of activities, or venture capital or private equity firms who invest Bull, chair of the professional practices group at Baker Tilly, in a variety of different industries BIS intends to respond to the considers the proposed changes to the taxation of LLPs Commission by the 3 October 2014 deadline. • Cautious optimism among Ukrainian lawyers - Richard Barham, corporate partner at Dentons UKMEA LLP, discusses the current Horizon scanning: Forthcoming FCA consultation on proposed crisis in Ukraine and the consequential caution that is being permanent product intervention rules for CoCos deployed by Western companies when undertaking transactions Contingent convertible instruments (widely known as CoCos) are hybrid involving Russian parties capital securities that absorb losses when the capital of the issuer falls below a certain level. They are risky and highly complex instruments Content highlights likely to be issued in large amounts by financial institutions such as New subtopics: The following subtopics in our ‘Corporate crime for banks and building societies as a result of new prudential requirements corporate lawyers’ topic have been amended and enhanced as follows: being implemented in response to the financial crisis. The FCA has stated that it regards CoCos as posing particular risks of inappropriate • ‘Money laundering and terrorist financing’ – a brand new sub distribution to ordinary retail customers and on 5 August 2014 issued topic for corporate lawyers covering the anti-money laundering temporary product intervention rules imposing restrictions on their regime, counter-terrorist financing etc distribution, to come into effect on 1 October 2014. • ‘Financial services offences’ - another new subtopic focusing on corporate crime and civil offences in relation to financial services, The FCA is expected during September 2014 to publish a consultation including market abuse, insider dealing and misleading statements. on proposed permanent rules on the distribution of CoCos and to to publish a policy statement in Q2 2015, with the final rules taking effect • ‘Bribery and corruption’ – enhanced subtopic specifically tailored on 1 October 2015 (when the temporary rules expire). to the needs of corporate lawyers • ICSA guidance: The guidance notes published by the Institute of Chartered Secretaries and Administrators (ICSA) are now Top news analysis available within Lexis®PSLCorporate. ICSA guidance notes cover LexisPSL Corporate provides daily legal news and analysis on key matters such as: the roles of the chairman, chief executive and changes and developments for corporate lawyers. Alerts can be senior independent director, liabilities of non-executive directors, customised to be delivered daily or weekly straight to your inbox. Some changes resulting from the implementation of the Shareholder of the top news and analysis stories for August 2014 include: Rights Directive, best practice at annual general meetings, electronic communications with shareholders, proxy voting, • Shall indemnify’ holds no magic power - Alexander Keepin, corporate money laundering regulations and political donations. partner at Berwin Leighton Paisner, comments on the recent ruling in Tullow Uganda v Heritage Oil and Gas on how the effectiveness of • Content coming soon: Later this month, a new subtopic - ‘Health indemnity provisions will depend on how they are drafted and safety issues on corporate transactions’ -will be launched as part of our ‘Environmental law for corporate lawyers’ topic.

STOP PRESS Whilst this magazine was going to press, the Code Committee of the Takeover Panel announced a new consultation on post-offer undertakings and intention statements, partly in direct response to high profile debates around public statements made during deals such as Pfizer’s possible bid for AstraZeneca. The Panel is seeking to distinguish between so-called “post-offer undertakings”, which it regards as being formal commitments to a target to take (or not to take) a stated course of action, and mere “intention statements”. In a move designed to drive certainty in the market and good bidder behaviour, the Panel is proposing increased powers to regulate and monitor post-offer undertakings, together with stringent conditions on the making and revoking of these undertakings, which are highly likely to make bidders think twice about giving them in the first place. Comments on the consultation are required by 24 October 2014.

To find out more about LexisPSL Corporate, or to have a free trial, visit Lexisnexis.co.uk/CorporateMag/PSL 9 LexisCalculate – Clear days calculator

Our suite of calculators will save you time in completing everyday tasks. Each calculator is designed to be intuitive and gives an explanation of what it will compute for you and how it will be done.

Use our clear days calculator to calculate the earliest date that:

a. notice of a company’s general meeting (GM) or annual general meeting (AGM) should be sent to its shareholders (based on the proposed meeting date); or b. a company can hold its GM or AGM (based on when notice of the meeting was sent to shareholders). LexisPSL Other calculators in our suite include inflation calculators and a currency converter, as well as our useful date to date and VAT calculators, all of which will save you time.

10 Using the clear days calculator: an example

Step 1: Step 2: In this example, a public, non-traded company wants to hold its annual The company’s articles include provisions on deemed delivery, so ‘yes’ general meeting on 22 October 2014, so this date is entered into the is selected, the options in the calculator expand, and further details calculator. are entered. LexisPSL

Step 3: Step 4: There are no specific provisions in the company’s articles stating When the default statutory provisions apply, the type of company and, how many days must pass after the receipt of the notice before the in the case of public companies, the type of meeting must be specified company can hold its meeting, which means that the default statutory to determine the number of clear days’ notice required prior to the provisions will apply. meeting. In this example, it is a public non-traded company holding an annual general meeting.

(Alternatively, if the company does have specific provisions on this in its articles, ‘yes’ should be selected and the calculator will expand enabling the customer to enter further meeting information relevant to the calculation. The default statutory provisions will no longer apply because the provisions of the articles of association will override them and the question about the type of company it is would disappear in the calculator).

Step 5: The calculator generates a report specifying the last day the notice can be sent in order to comply with the requirements of statute and the articles for the meeting to be held on 22 October 2014.

11 Financial assistance—a quick guide

This Practice Note is a quick guide to the prohibition of public companies from giving financial assistance for the acquisition of its shares. It contains summaries of the statutory meaning of financial assistance, relevant case law and exceptions to the prohibition. The note also summarises the consequences of breaching the statutory provisions on financial assistance.

The Companies Act 2006 (CA 2006) prohibits: The CA 2006 gives certain exceptions to the prohibition, which are

LexisPSL considered further below. • a public company (or its subsidiary) from giving financial assistance for the acquisition by a person of the company’s shares or to reduce or discharge a liability incurred for the purpose of acquiring the shares, and What is financial assistance? • a public company that is a subsidiary of a private company from giving financial assistance for the acquisition by person of shares Meaning of financial assistance under the in the private holding company or to reduce or discharge a liability CA 2006 incurred for the purpose of acquiring the shares,whether that assistance is given before, at the time of, or after the acquisition. The term ‘financial assistance’ is not specifically defined in the CA This Practice Note summarises: 2006. Rather, the CA 2006 sets out the four forms that financial • details of the prohibition of financial assistance under the CA 2006 assistance can take: • the statutory meaning of financial assistance and relevant case law • by way of gift • exceptions to the prohibition of financial assistance • the consequences of breaching the prohibition, and • by way of: • the financial assistance regime under the Companies Act 1985 -- guarantee, security or indemnity (other than an indemnity in (CA 1985) respect of the indemnifier’s own neglect or default), or This Practice Note is intended to be a quick guide to financial assistance. -- release or waiver Further details can be found in the following Practice Notes: • by way of: • Financial assistance—what does it mean? -- a loan or any other agreement under which any of the • Financial assistance—common scenarios in practice obligations of the person giving the assistance are to be • Financial assistance—private companies fulfilled at a time when, in accordance with the agreement, • Financial assistance—when does the prohibition apply?, and any obligation of another party to the agreement remains • Financial assistance—the exceptions to the prohibition unfulfilled, or -- the novation or assignment (in Scotland, assignation) of rights arising under a loan or such other agreement, or The prohibition under the CA 2006 • where the net assets of the company are reduced to a material Where shares in a UK public company are acquired or proposed to extent by the giving of the assistance or the company has no assets be acquired, it is unlawful for that company, or a company that is a UK subsidiary of that company, to give financial assistance directly or indirectly for the purpose of the acquisition, whether before or Case law concurrently with the acquisition. The term ‘financial assistance’ has been considered in a number of cases which, given the relatively recent introduction of the CA 2006 provisions, In addition, financial assistance must not be given directly or indirectly dealt with the largely identical provisions under the CA 1985. to reduce or discharge a liability incurred for the purpose of acquiring shares in a UK public company (either by the company whose shares The words ‘financial assistance’ have been held to ‘have no technical have been acquired or a UK subsidiary of that company) if that company meaning and their frame of reference is … the language of ordinary was a UK public company at the time the assistance is given. commerce’.

Similarly, the prohibition extends to the provision of financial assistance The term ’financial’ is not necessarily confined to money and could, for by a UK subsidiary public company for the purpose of an acquisition example, include a transfer of assets.1 of shares in its UK private holding company or to reduce or discharge a liability incurred for the purpose of acquiring the shares. In brief, the prohibition applies on an acquisition, or on a proposed Exceptions to the prohibition acquisition, of shares (ie not to warrants, options and convertibles (to The CA 2006 sets out three heads of exception to the financial the extent that such instruments are not exercised or converted into assistance prohibition: shares)). The prohibition is triggered by the activities of UK companies and does not have extra-territorial effect. For more details about the • the ‘purpose’ exception, which looks at the principal purpose of the different elements and application of the prohibition, see Practice assistance, and requires that the assistance has been given in good Note: Financial assistance—when does the prohibition apply?. faith in the interests of the company

1. LexisPSL Corporate customers can find further details about the meaning of financial assistance under statute and relevant case law, see Practice Note: Financial assistance— what does it mean?. For examples of common scenarios connected with share purchase transactions encountered in practice, see Practice Note: Financial assistance—common scenarios in practice.

12 • unconditional exceptions, where a number of transactions are specified to be unconditionally excepted from the prohibition, and Financial assistance under the CA • conditional exceptions, where four types of transaction can also be excepted from the financial assistance prohibition, subject to 1985 conditions Under the CA 1985, both private and public companies were prohibited For full details on the exceptions to the financial assistance prohibition, see from giving financial assistance directly or indirectly for the purpose Practice Note: Financial assistance—the exceptions to the prohibition. of making an acquisition of their own shares. The rules were more relaxed for private companies, which could apply what was known as the ‘whitewash procedure’ in order to authorise what would otherwise be prohibited financial assistance.

Consequences of breaching the LexisPSL The CA 2006 changed the law on the financial assistance regime in the prohibition by removing the application of the financial assistance prohibition entirely for private companies from 1 October 2008. The consequences of breaching the financial assistance prohibition are serious. In the case of any doubt over whether or not a particular The reason for removing the prohibition entirely for private companies transaction may constitute financial assistance, it is well worth seeking legal was down to the ‘think small first’ approach that the Government took advice in order to minimise the risk of breaching the statutory provisions. in reforming company law in the UK. It was widely recognised that the financial assistance rules were disproportionately complex and costly for If a company contravenes the financial assistance prohibition an private companies. The following quote is taken from the Government’s offence is committed by the company and every officer of the company Regulatory Impact Assessment published in January 2007: who is in default. A person guilty of an offence is liable: ‘Although it is clearly important to protect the interests of creditors/ • on conviction on indictment, to imprisonment for a term not minority shareholders, the rules on financial assistance and the exceeding two years or a fine not exceeding the statutory exemptions available for private companies are extremely complex and maximum (being £5,000) (or both), or it is generally accepted that they are capable of capturing potentially • on summary conviction: beneficial, or at least innocuous, transactions. As a result, companies -- in England and Wales, to imprisonment for a term not spend a disproportionate amount of time and money in structuring exceeding 12 months or to a fine not exceeding the statutory transactions in such a way that they do not contravene the prohibition.’ maximum (being £5,000) (or both), or The financial assistance regime for public companies remains almost -- in Scotland or Northern Ireland, to imprisonment for a term identical under the provisions of the CA 2006, which came into force on not exceeding 6 months, or to a fine not exceeding the 1 October 2009. statutory maximum (being £5,000) (or both) An ‘officer’ includes any director, manager or secretary and any person who is to be treated as an officer of the company for the purposes of the provision in question. An officer is ‘in default’ for the purposes of the provision if he authorises or permits, participates in, or fails to take all Seller £ Buyer reasonable steps to prevent, the contravention. Consideration ‘Although it is clearly important to protect the Sale Acquisition interests of creditors/minority shareholders, X the rules on financial assistance and the exemptions available for private companies Shares £ for the are extremely complex and it is generally purpose of the acquisition accepted that they are capable of capturing potentially beneficial, or at least innocuous, UK PLC transactions.’ This is financial assistance under s 678(1) CA 2006 Directors may also be in breach of their duties if the prohibition is breached, and may be liable for disqualification. See Practice Note: Directors’ duties—scope, nature, interpretation and application. Shares

The transaction itself will be void and unenforceable, as will be any prohibited security or guarantee provided. £ for the In certain circumstances, a person who has received prohibited purpose of the financial assistance to acquire shares may be ordered to hold those Subsidiary acquisition shares as constructive trustee for the company. During that time, neither the company nor the nominee or other shareholder may exercise any voting rights in respect of the shares. The company must cancel its shares (and reduce its share capital accordingly) if it has LexisPSL Corporate customers can view or print a full-size PDF version. not disposed of its interests in the shares within 12 months of their acquisition by the trustee.

13 LexisPSL Corporate checklists

LexisPSL Corporate provides easy-reference checklists to enable corporate lawyers to check a point quickly and efficiently without having to read an entire practice note or trawl through reams of legislation. Resolutions required to be filed with Companies House–checklist Resolutions under the Companies Act 2006 The Companies Act 2006 (CA 2006) specifies certain matters that must be effected by ordinary resolution (ie simple majority) passed by the members of LexisPSL a company, eg the removal of a director. CA 2006 also specifies certain matters which must be effected by special resolution of the company or where the relevant threshold for effecting a matter is 75%. 1

Not every resolution passed by the members of a company needs to be filed at Companies House. CA 2006, Ch 3, Pt 3 specifies when resolutions are to be filed with the registrar of companies (ie Companies House).

The table below sets out resolutions that are required under CA 2006 to be filed with Companies House.

Resolution/threshold Matter Regulation in relevant SI/section requirement in CA 2006

Special resolution Any special resolution2 CA 2006, s 29(1)(a)

Unanimity Any resolution agreed to by all the members of a company that, if not so agreed CA 2006, s 29(1)(b) to, would not have been effective for its purpose unless passed as a special resolution

Class unanimity Any resolution agreed to by all the members of a class of shareholders that, if CA 2006, s 29(1)(c) not so agreed to, would not have been effective for its purpose unless passed by some particular majority or otherwise in a particular manner

Binding Any resolution that effectively binds all members of a class of shareholders CA 2006, s 29(1)(d) though not agreed to by all those members

Ordinary resolution Power of directors to allot shares (unless already authorised by the articles of CA 2006, ss 551(1), 551(9) association)

Ordinary resolution Redenomination of share capital (or class of share capital) CA 2006, ss 622(1), 622(8)

Board resolution To re-register a public company as a private company as a consequence of an CA 2006, s 644(1) obligation to cancel shares

Ordinary resolution Authorising an off-market purchase for the purpose of an employees’ share CA 2006, s 693A scheme

Ordinary resolution Authorising company to make market purchase of own shares CA 2006, ss 701(1), 701(4), 701(8)

Ordinary resolution Approving the terms of an agreement for the transfer of a non-cash asset during CA 2006, ss 601, 602 an initial period (public companies only)

Ordinary resolution Affirming regulations for enabling title to securities to be evidenced and CA 2006, ss 786, 790 transferred without a written instrument under CA 2006, Ch 2, Pt 21

Ordinary resolution Agreeing to send or supply documents or information to members by making CA 2006, Sch 5, paras 10(2)(a), them available on a website 10(5)

Ordinary resolution Relating to the use of paperless securities Uncertificated Securities and board resolution Regulations 2001 (SI 2001/3755), Reg 16

1. LexisPSL Corporate customers can find more information about resolutions, see Practice note: Shareholder resolutions. 2. LexisPSL Corporate customers can find a list of special resolutions in checklist: Special resolutions and other resolutions requiring 75% member approval under the Companies Act 2006.

14 Companies registered under the Companies Act 1985 For companies registered under the Companies Act 1985 (or under any earlier predecessor), certain additional resolutions (to the extent the articles have not been amended/new articles adopted which take account of the relevant changes introduced by CA 2006) will need to be filed:

Type of resolution Matter Regulation in relevant SI/section in CA 2006

Ordinary resolution A private company applying the provisions of CA 2006, s 550 (ability of Companies Act 2006 (Commencement No. directors to issue shares without requiring shareholder consent) 8, Transitional Provisions and Savings) Order 2008, SI 2008/2860, Sch 2, para 43 LexisPSL Ordinary resolution A company varying or revoking a provision setting the maximum amount of SI 2008/2860, Sch 2, para 42 shares that may be allotted (ie the authorised share capital that was set out CA 2006, s 28 in the company’s memorandum but which is now treated as forming part of the company’s articles)

Ordinary resolution To permit the board to authorise a conflict of interest under CA 2006, s Companies Act 2006 (Commencement No. 175(5)(a) 5, Transitional Provisions and Savings) Order 2007, SI 2007/3495, Sch 4, para 47

Extraordinary To the extent that the articles or any relevant contract (eg, shareholders’ Companies Act 2006 (Commencement No resolutions agreement) refers to an extraordinary resolution, such provision continues 3, Consequential Amendments, Transitional to have effect and CA 2006, Ch 3, Pt 3 applies Provisions and Savings) Order 2007 as amended by SI 2007/2194, Sch 3, para 23 SI 2007/3495, Sch 5, para 2(4)

Resolutions requiring special notice—checklist This checklist sets out those resolutions that require special notice under the Companies Act 2006.

Special notice The CA 2006 states that certain resolutions require special notice. Where special notice is required, the resolution is not effective unless notice of the intention to move it has been given to the company at least 28 days before the meeting at which it is moved. The company must, where practicable, give its members notice of any such resolution in the same manner and at the same time as it gives notice of the meeting. For further details about special notice, see: Ordinary resolutions requiring special notice.

The following ordinary resolutions require special notice:

Matter Section(s) in CA 2006 Link to precedent in LexisPSLCorporate

Removal of a director before the expiration of his period of office CA 2006, s 168 Special notice of proposed ordinary resolution to remove a director from office

Removal of an auditor before the expiration of his term of office CA 2006, ss 510, 511 Special notice of proposed ordinary resolution to remove an auditor from office

Appointment of a person as auditor in place of an auditor whose CA 2006, s 515 Special notice of proposed ordinary resolution— term of office has ended or is to end at the end of the period for failure to appoint an auditor: private limited company appointing auditors (private companies)

Appointment of a person as auditor in place of an auditor whose CA 2006, ss 437(3),515 Special notice of proposed ordinary resolution— term of office has ended or is to end at the end of the next failure to appoint an auditor: public limited company accounts meeting (as defined) (public companies)

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15 Takeover offers v schemes of arrangement—key advantages and disadvantages—comparative table

Produced in partnership with Julian Henwood of Wragge Lawrence Graham & Co

This checklist contrasts and compares the principal features of the two most commonly utilised structures for the acquisition of a UK public limited company (or

LexisPSL any other company governed by the City Code on Takeovers and Mergers (the Code)), ie contractual takeover offers and schemes of arrangement, and summarises the key advantages and disadvantages of each structure.

OFFER SCHEME

Minimum required approval = in excess of 50% of target’s issued share Minimum required approval = 75% by value, plus a majority in number capital—although in practice likely to be much higher to avoid minority (in each case, of target shareholders present and voting either in shareholders (see below). person or by proxy at the shareholders’ meeting)—non-voting shares and shares held by bidder and its associates are not counted. Separate class meetings may also be required.

No court sanction required Court sanction required—creates potential forum for objections if a shareholder can establish that all target shareholders of same class are not being treated equally.

Risk of minority shareholders—if holders of less than 90% of target Certainty of 100% control—if scheme is approved by target shares accept offer, or any other condition of the compulsory shareholders and sanctioned by the court (ie provided the twin voting acquisition (squeeze-out) procedure in the Companies Act 2006 (CA thresholds above are met). 2006) is not met.

Stamp duty —cost of 0.5% of the value of the consideration. No stamp duty—if cancellation scheme adopted.

Potentially shorter time period for obtaining immediate control— Longer time period for obtaining control—around eight weeks from minimum 21 days from posting, where offer is recommended. But posting, not counting a likely delay (one to two weeks) between acquiring 100% control after offer has gone unconditional is not announcement and posting, even if scheme document is ready, due guaranteed and could take considerably longer than under a scheme. to court process (eg the need to obtain court permission to convene Using the squeeze-out provisions of CA 2006, s 979 to compulsorily shareholders’ meeting). But once the scheme does become effective, acquire the remaining shares will take at least 6 weeks from the start bidder automatically acquires 100% of target. of the process. In a hostile situation, a full 60-day timetable is likely and the timetable will commence again if there is a competing offer. If the offer document is ready, announcement and posting can be simultaneous.

More flexibility to change terms after posting of documents Little flexibility to change terms (other than price) after posting of documents without restarting full scheme timetable.

Controlled by the bidder—the offer document is issued by, and the Controlled by the target company—the scheme document is issued offer process is controlled by, the bidder. by, and the scheme process is controlled by, the target. The bidder will usually require an ‘implementation agreement’ to retain some control over the process, although the contents of such agreements are strictly regulated by the Panel.

16 UKLA-approved prospectus (or equivalent document) required—in No prospectus requirement—even on a share-for-share exchange, respect of any offer including shares (or other transferable securities) as not an offer to the public, unless consideration shares or other as consideration. Loan note alternative may need to include securities being issued by bidder amount to 10% or more of the restrictions on transfer to prevent them being ‘transferable securities’ relevant class of shares already admitted to trading. and therefore avoid prospectus requirements.

Market purchases can be used to increase the chances of success—as Market purchases are of no effect—since shares already owned by they can count towards the acceptance condition (but note that they bidder will not form part of the class approving the scheme, and can will not count for compulsory acquisition purposes if made before the even be counter-productive where there is an active dissentient posting of the offer document). minority (as they reduce the number of shares in the class and LexisPSL therefore the number of shares needed for a blocking stake).

Shares acquired pursuant to irrevocable undertakings count towards Irrevocable undertakings may reduce the number of shares in respect the acceptance condition and compulsory acquisition test—which of which 75% approval must be obtained—as the court may decide therefore makes it more likely that the offer will be successful. that it would be unfair to sanction the scheme in such circumstances (that is, where certain shareholders were obliged, pursuant to such undertakings, to vote in favour of the scheme).

Overseas securities law restrictions can give rise to problems if offer Scheme generally give rise to fewer overseas securities law restrictions made into certain jurisdictions—eg a cash offer may be made into where there are overseas shareholders—as it involves a ‘shareholder the US if less than 10% of target shares are held by US shareholders vote’ rather than an individual investment decision. For example, a and the documents are submitted to the Securities and Exchange scheme should not be subject to SEC review or SEC exchange and Commission (SEC) (a limited share alternative available to directors tender offer rules, which leads to a much quicker timetable. However, and institutions is permissible). A share offer will be subject to full SEC the quality of the disclosure documents and their coverage should be exchange and tender offer rules and full registration of the shares substantially comparable with the disclosure used for a UK offer into offered (if de minimis levels are not applicable and discretionary relief the US. is not available) (with resulting SEC review period).

Under the Code, all offer conditions must be satisfied or, where All conditions must be satisfied or waived by the time of the court applicable, waived within 21 days after the offer is declared or becomes hearing to sanction the scheme. unconditional as to acceptances.

It is possible to have a hostile or contested offer. A scheme is very rarely used where there is a hostile bid—and is generally only used for an agreed bid where the continued support of the target board is anticipated.

Application to court required for lost and untraceable shareholders to Lost and untraceable shareholders are not likely to be relevant when be included in calculating the 90% level of acceptances—in order to be considering a scheme—as the required approval level for a scheme entitled to compulsorily acquire shares of minority shareholders. is 75% by value and majority in number. If lost and untraceable shareholders are more than a small proportion of the target’s members, then there may be a requirement to advertise relevant meetings in the press.

The financial assistance provisions of section 678 of the CA 2006 As part of the scheme, it is possible to obtain the authorisation of the will apply—therefore, the ability for the target to provide financial court to target acts that would otherwise constitute unlawful financial assistance (eg to provide security for bidder’s debt finance for the assistance—(CA 2006, s 681(2)(e)). However, the court may require offer) will depend on its re-registration as a private company following evidence that target, if it were a private company, could lawfully give completion of the offer. such assistance (eg it does not amount to an unlawful dividend etc).

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17 Amending the articles of association —flowchart

This flowchart is a step-by-step guide illustrating the procedure for amending the articles of a private or public company limited by shares.

Company wants to amend its articles of association LexisPSL

Does the proposed Has the agreement of amendment require a Obtain agreement the affected shareholder to subscribe for Yes No of affected shareholder(s) been more shares or increase shareholders obtained? liability of shareholders?

Yes No

Obtain consent in writing of ¾ in nominal value of relevant class Does the Have articles got of shares amendment vary or Yes bespoke provisions No OR abrogate class for variation? call separate class rights? meeting of relevant class to pass special resolution to vary rights

Yes Follow procedure for variation

No

Is the company public Public or private?

Private

Call general meeting to propose special Call general meeting resolution or to propose special circulate written resolution resolution

Has special resolution been passed?

No Yes

Amendment to File copy of resolution and Amendment is articles is not amended articles with effective effective Companies House

18 LexisPSL Corporate Topic Tree

Browse LexisPSL Corporate’s topics and subtopics to find all the information you need. Each subtopic includes relevant content including practice notes, precedents, flowcharts, checklists and diagrams, as well as links to useful forms, cases and legislation.

Market Tracker Accounts and reports Partnerships LexisPSL • Market Tracker • The statutory regime • General partnerships • Specific content requirements • Limited partnerships Company incorporation • Financial reporting obligations of a • Limited liability partnerships company and its directors • Forms of business vehicle • Setting up a company Demergers, reorganisation, restructuring • A company’s constitution Re-registration of companies and insolvency • Public to private • Reorganisation Company administration • Private to public • Restructuring for corporate lawyers • Unlimited companies • A company’s ongoing obligations • Insolvency for corporate lawyers • Demergers Striking off, dissolution and restoration Directors and company secretaries • Striking off and dissolution Financing for corporate lawyers • A company’s directors • Restoration • The company secretary • Lending • Directors’ service contracts • Security • Powers, duties and liabilities of directors Private M and A • Quasi-security • Transactions with directors • Shares • Assets Corporate crime for corporate lawyers Corporate governance • Bribery and corruption • The corporate governance regime Joint ventures • Money laundering and terrorist financing • Board committees • Preliminary issues • Corporate manslaughter • Directors’ remuneration • Joint venture agreements • Financial services offences • Articles of association Members’ meetings and resolutions • Other transaction documents Environmental, health and safety law for • Cross-border joint ventures corporate lawyers • General meetings • Annual general meetings • Environmental issues on corporate • Proxies and corporate representatives Private equity transactions • Resolutions • Private equity investment • CRC Energy Efficiency Scheme • Company communications • Venture capital • Health and safety issues on corporate • Buyouts transactions Share capital • Development capital • Shares and shareholders • Funds International • Allotment, issue and pre-emption • Getting the Deal Through guides • Share transfers Public company takeovers • Dividends and distributions • Offers Tax for corporate lawyers • Alteration of share capital • Schemes • Tax • Reduction of capital • Share buybacks Equity capital markets Clause bank for corporate lawyers • Redemption of shares • Main market • Share schemes and incentives for • Definitions • AIM corporate lawyers • Clauses • Secondary offers • Execution • Financial services regulation for Audit and auditors corporate lawyers • A company’s audit obligations Q&As • A company’s auditor • Q&As • An auditor’s duties, rights and liabilities

19 Persons with significant control

Eleanor Kelly , Solicitor, LexisPSL Corporate. First published in Company Secretary’s Review

In this article, Eleanor Kelly from LexisPSL Corporate explores the detail of the proposed requirements for a new company register of people with significant control. Company Secretary Review

• annually, at the same time that the confirmation statement (which Introduction replaces the annual return) [see page 72 of this newsletter] is The Small Business, Enterprise and Employment Bill (“the Bill”) was delivered. introduced into Parliament on 25 June 2014. The objective of the new Private companies will have the option to keep their information on legislation is to improve transparency and trust in all UK companies, in persons with significant control (“PSC”) entirely on the “central register” particular by showing who really owns and controls them, in order to held at Companies House and not maintain their own PSC register. minimise the potential for misuse and promote good corporate behaviour.

One of the key provisions in the Bill intended to improve transparency Who do the new requirements apply to? is the introduction of a new register of “people with significant control”. The new requirements relating to the PSC register apply to all companies The Government is dissatisfied with the opaque nature of the existing except for those that are already subject to the disclosure obligations company share register, which shows only the legal and not the under Rule 5 of the Financial Conduct Authority’s Disclosure Rules and beneficial owner of a company’s shares. The new register will give Transparency Rules, and companies with securities listed on a non-UK accurate and current information on beneficial owners of companies, regulated market subject to equivalent disclosure requirements. and it will be publicly accessible on a central registry. The requirement for a PSC register also applies to other bodies The new register is one of a number of measures within the Bill tackling corporate that currently register information on their members at elements of the corporate structure that currently offer anonymity and Companies House. It will therefore apply to limited liability partnerships. could potentially disguise criminal activity. Other areas being addressed by the Bill include bearer shares, corporate directors, nominee directors and shadow directors. Who is a PSC? The Bill is currently progressing through Parliament. The references A PSC is a legal person (which includes bodies corporate and limited liability in this article to the proposed legislation and amendments to the partnerships) that meets at least one of the following five conditions: Companies Act 2006 (“CA 2006”) are to the draft Bill in its current form • The person holds, directly or indirectly, more than 25% of the and, therefore, are subject to change. shares in the company. • The person is entitled, directly or indirectly: What will be required? -- to exercise more than 25% of the voting rights in the Every company will be required to keep a new register of people with company; or significant control. This will be known as the “PSC register”. -- to control the exercise of more than 25% of those rights. • The person is entitled, directly or indirectly: The information on the PSC register must be provided to Companies House in two circumstances: -- to appoint or remove a majority of the board of directors of the company; or • on incorporation of a company, in a statement of significant -- to control the exercise of a right or rights (in aggregate) to control; and appoint or remove a majority of that board. 20 • The person has the right to exercise, or actually exercises, • to state whether or not they are a PSC; and significant influence over the company. • if so, to confirm or correct any information regarding them that is • In relation to a trust or a firm, there are two parts to the condition included in the notice, and supply any required information that is for someone to be a PSC: missing. -- the trustees of a trust or the members of a firm that, under A company may also give notice to a person if it has reasonable cause to the law by which it is governed, is not a legal person meet one believe that person: of the other specified conditions in relation to the relevant

• knows the identity of a PSC; or Review Secretary Company company, or would do so if they were individuals (i.e. the trustees or the members have “significant control” over a • knows the identity of someone likely to have that knowledge. company under one of the previous four conditions); and Any notice given must give a reasonable time frame for compliance, -- the person has a right to exercise, or actually exercises, which must not be more than three months from the date of the notice. significant influence or control over the activities of that trust or firm (i.e. the PSC is a person who has significant control or Duty to keep information on the PSC register up to date influence over that trust or firm). A company must give notice to a PSC as soon as reasonably practicable Guidance on the meaning of “significant influence or control” will be if it knows or has cause to believe that a relevant change has occurred published prior to the Bill coming into force. Such guidance will be (for example, that the person is no longer a PSC or any of the particulars welcomed, as otherwise it would be very difficult in some circumstances have become incorrect or incomplete). The notice must give a to know whether the PSC register requirements apply. reasonable time frame for compliance, which must not be more than three months from the date of the notice. Information on the register The particulars required to be entered on the register for individuals Duties of persons with significant control include name, service address, residential address, country or state of The Bill places disclosure obligations not only on companies but usual residence, nationality, date of birth, the date on which that person also on shareholders to ensure that all relevant beneficial ownership became registrable on the PSC register, and the nature of their control information is disclosed without placing a disproportionate over that company. administrative cost or burden on the company.

The particulars required to be entered on the register for bodies corporate In summary, when a person is a PSC in relation to a particular company, include the name, the principal office, the legal form of the person and law the proposed legislation imposes obligations on that PSC to: by which it is governed, the date on which it became registrable on the PSC register, and the nature of its control over that company. • notify the company and supply relevant information when the company has not already registered that person on its PSC register; and Disclosure of the register • notify the company of any relevant change in order to keep With the exception of residential addresses, the company’s PSC information on the PSC register up to date when the register has register must be kept available for public inspection. The PSC register not already been altered to reflect the relevant change. information held by Companies House will also be publicly accessible on Shareholders should also be made aware that the Bill introduces a central register, with the exception of residential addresses and (apart the concept of a “reasonable PSC”, since a PSC is required to make a from private companies that have opted not to hold their own PSC notification: register) the day of the dates of birth. • supplying information not only when they know they must do so, There has been concern expressed over the level of public disclosure but when they reasonably ought to have known; and of personal information contained on the PSC register, but the • updating information not only when they know about a notifiable Government considers there to be an even balance between the risks change, but also when they reasonably ought to have known. related to public disclosure and the benefits of transparency. Prior to the Bill coming into force, a framework will be put into place to protect Changes to CA 2006 individuals at risk from publicly disclosing their information (other than to specified authorities). The main changes relating to the new PSC register will be contained in a new Part 21A (ss 790A–790ZF) of CA 2006. A new Schedule 1A will contain further provisions, including the specified conditions which Company’s duties in relation to the register must be met by an individual in order to be a PSC. Other than keeping and maintaining the register and delivering the required information to Companies House, a company will also have What next? duties to investigate and identify persons with significant control and keep the information on the PSC register up to date. At the time of writing, the Bill has reached the Committee stage in the House of Commons. It is anticipated that the legislation will receive Royal Assent before the next general election in May 2015. Accompanying Duty to identify a PSC guidance and new Companies House forms are also awaited. A company must take reasonable steps to find out if there is anyone who While it will be some time before the Bill and accompanying guidance is a PSC and, if so, to identify them. are finalised, companies, shareholders and advisers should start A company must give notice to anyone whom it knows or has reasonable familiarising themselves with the new requirements and be prepared cause to believe to be a PSC. The notice must require the addressee: to deal with the extra administration involved in compliance with their duties in relation to the new PSC register by putting appropriate procedures in place.

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24/09/2014 13/10/2014 30/10/2014 Practical insights into the Takeover Code Boardroom coups and shareholder activism Corporate governance developments Examining the key changes to the Takeover This webinar addresses two critical topics in This webinar will provide a penetrating analysis Code and associated developments. Corporate legal practice: Boardroom Coups and of the key developments. • Gillian Fairfield, Partner, Shareholder Activism. • David Styles, Director of Corporate Freehills LLP • Peter Griffiths, Barrister, 4 Governance, Financial Reporting Council • Tony Pullinger, Deputy Director, Takeover Panel • Andrew Clutterbuck QC, Chris Putt, Partner, • Martin Webster, Partner, Pinsent Masons LLP Speechly Bircham

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