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Corporate Finance

The Walker Report - Guidelines for disclosure and transparency in private equity

On 20 November 2007, Sir David Walker published his report on disclosure and transparency in the UK private equity industry.  The report, which was commissioned by the British Venture Capital Association in February 2007, follows the consultation document published in July 2007.  It sets out various guidelines for enhancing disclosure by private equity firms (which are authorised by the FSA and invest in the UK) and their large UK portfolio companies. In addition, the report makes certain recommendations to the BVCA in respect of its industry-wide data gathering, processing and reporting function and for the establishment by it of a group to review and monitor compliance with the guidelines.

Whilst compliance with the guidelines is voluntary, the report states that the industry should adopt a "comply or explain" approach. The main guidelines are summarised below.

Guidelines for enhanced disclosure by UK portfolio companies

Portfolio companies to whom the guidelines apply should include, as part of their audited annual reports and accounts, the following information:

  • the identity of the private equity fund that owns the company and the senior executives in the UK who have oversight of the company on behalf of the fund;
  • a report on the composition of the board of the company;
  • a business review of the type currently produced by quoted companies; and
  • a financial review, which should cover risk management objectives and policies.

The audited annual report and accounts of the portfolio company should also be readily accessible on the company's website and should be made available no more than six months after the company's year-end.  A summary mid-year update giving a brief account of major developments in the company should be placed on the company's website no more than three months after the end of the mid-year. 

The portfolio company should also provide the BVCA with certain information to enable the BVCA to fulfil the enhanced data gathering role recommended by the report.

Guidelines for enhanced disclosure by private equity firms

A private equity firm to whom the guidelines apply should publish an annual review accessible on its website or ensure regular updating of its website to communicate:

  • a description of the firm's structure, history and investment approach;
  • a description of the UK portfolio companies in the firm's portfolio;
  • an indication of the leadership of the firm in the UK, identifying the most senior members of the management or advisory teams;
  • a categorisation of the limited partners in the fund or funds that invest or have a designated capability to invest in companies that would be UK portfolio companies; and
  • a commitment to conform to the guidelines on a "comply or explain" basis and to promote conformity on the part of the UK portfolio companies owned by its fund or funds.

A private equity firm should follow established guidelines when reporting to its limited partners and valuing investments in its funds and should also commit to ensuring effective communication with portfolio company employees, particularly at times of strategic change.

A private equity firm should also provide data to the BVCA, in support of its enhanced data gathering, processing and reporting role.
 
A copy of the Walker report can be found here.

20 December 2007

Takeover Code – Changes in relation to schemes of arrangement

The Takeover Panel has published its response to the external consultation on how the City Code on Takeovers and Mergers should apply to takeover transactions implemented by way of court approved schemes of arrangement.  The consultation paper, which was published in July 2007, had proposed a number of amendments to the operation of the Code in the context of schemes, including the introduction of a new Appendix to the Code setting out specific rules relevant to schemes and a list of Code provisions that would not apply to schemes.
 
Whilst, in its response published on 29 November 2007, the Takeover Panel adopted most of its original proposals, it has made some amendments to address issues raised in the consultation process.  Those issues included what timetable should apply to a Code-governed scheme and whether a scheme can be used either to satisfy an obligation to make a Rule 9 mandatory bid or in the absence of the support of the target board. 
 
The changes to the Code take effect on 14 January 2008 and will apply to all transactions announced in accordance with Rule 2.5 of the Code on or after that date.

The response paper is available here. 

 

20 December 2007

NAPF corporate governance policy and voting guidelines

On 27 November 2007, the National Association of Pension Funds (NAPF) published an updated version of their policy paper entitled "Corporate Governance Policy and Voting Guidelines".

The guidelines are intended to assist shareholders and others in interpreting the Combined Code when considering voting decisions at public company meetings.  These guidelines are only intended to apply to those companies whose primary listing is on the main market of the London Stock Exchange.  NAPF has previously issued separate guidelines in relation to investment companies and companies listed on AIM.

The full text of the NAPF guidelines can be found at here.  

 

20 December 2007

Companies Act 2006 – Revised timetable now published

On 13 December 2007, the Minister for Competitiveness made a further announcement concerning the implementation timetable of the Companies Act 2006. 

This announcement follows the earlier announcement made by the Minister on 7 November when he indicated that certain provisions of the Act previously timetabled for commencement on 1 October 2008 would be postponed to 1 October 2009, subject to certain areas where the Government indicated that it would consult with key stakeholders regarding the implementation timetable.

Following such consultation, the Government has published what it is hoped will be the final version of the implementation timetable and has clarified which provisions of the Act are intended to come into force on 1 October 2008 and 1 October 2009 respectively.

Our updated implementation timetable can be found at here.

20 December 2007

ABI executive remuneration guidelines

The Association of British Insurers (ABI) has published an updated version of its executive remuneration guidelines.

The guidelines are intended to assist companies in interpreting the Combined Code when setting executive remuneration.  These guidelines are aimed predominantly at those companies whose primary listing is on the main market of the London Stock Exchange but are useful for companies on other public markets. 

The full text of the updated ABI guidelines, which were issued on 3 December 2007, can be found here. 

 

20 December 2007

UKLA publishes LIST! 17

In November 2007 the UK Listing Authority (UKLA) published the 17th edition of LIST! As well as covering a range of topics relating to the new listing rules introduced in September 2007 for investment entities, this edition covers electronic communications with shareholders, certain FAQs on eligibility requirements and the cancellation of Simon Group plc's listing for its failure to maintain the requisite percentage of shares in public hands. 

LIST! 17 can be found here.

 

20 December 2007

Listing Rules – Amendments for investment entities

On 7 December 2007, the Financial Services Authority (FSA) published policy statement 07/20 on its investment entities listing review.  This policy statement, which follows on from an earlier policy statement issued in June 2007, outlines changes to be made to the Listing Rules and Glossary sections of the FSA handbook.  The changes principally relate to chapter 15 (Investment Entities) of the Listing Rules.

The full text of the changes, which are to be implemented on 6 March 2008, can be found at Appendix 1 of policy statement 07/20 which can be found here. 

20 December 2007

Companies Act 2006 - Implementation timetable

The table below is intended to provide guidance on the commencement timetable for the Companies Act 2006.

This table was last updated on 19 December 2007. Whilst it cannot be considered definitive, the table has been compiled based upon the Companies Act 2006 Table of Commencement Dates produced by the Department for Business, Enterprise and Regulatory Reform (BERR) and the first, second, third and fourth Companies Act 2006 commencement orders.  Future commencement dates may be subject to change.

It should be noted that on 7 November 2007 BERR announced that the implementation of those provisions of the Companies Act 2006 previously timetabled for implementation on 1 October 2008 would be delayed to 1 October 2009, subject to certain areas where the Government indicated that it would consult with key stakeholders regarding the implementation timetable.  Following such consultation, on 13 December 2007, BERR published what it is hoped will be the final version of the implementation timetable.

Those commencement dates indicated with an asterix (*) are taken from the commencement orders rather than the guidance commencement timetable produced by BERR.  The orange highlighting indicates those provisions which are already in force.

 Part   Commencement Date
1  General introductory provisions (sections 1 to 6) 1 October 2009
Exceptions:  
  • section 2 (The Companies Acts)
6 April 2007*
2  Company formation (sections 7 to 16) 1 October 2009
3  A company's constitution (sections 17 to 38) 1 October 2009
Exceptions:  
  • section 17 (a company's constitution) which comes into force so far as necessary for the purposes of those provisions brought into force in October 2007
1 October 2007*
  • sections 29 (resolutions and agreements affecting a company's constitution) and 30 (copies of resolutions or agreements to be forwarded to registrar)
1 October 2007*
4  A company's capacity and related matters (sections 39 to 52) 1 October 2009
Exceptions:  
  • section 44 (execution of documents)
6 April 2008
5  A company's name (sections 53 to 85) 1 October 2009
Exceptions:  
  • sections 69 to 74 (similarity to other name in which person has goodwill)
 1 October 2008
  • sections 82 to 85 (trading disclosures)
 1 October 2008
6 A company's registered office (sections 86 to 88) 1 October 2009
7  Re-registration as a means of altering a company's status
(sections 89 to 111)		 1 October 2009
8  A company's members (sections 112 to 144) 1 October 2009
Exceptions:  
  • sections 116 to 119 (rights to inspect and require copies of the Register of Members)
1 October 2007*
  • sections 121 (removal of entries relating to former members) and 128 (time limit for claims arising from entry in register)
6 April 2008
9  Exercise of members' rights (sections 145 to 153) 1 October 2007*
10  A company's directors (sections 154 to 259) 1 October 2007*
  Exceptions:  
  • sections 155 to 159 (underage and natural directors)
1 October 2008
  • sections 162 to 167 and 240 to 246 (directors' residential addresses)
1 October 2009
  • sections 175 to 177 and 182 to 187 (directors' conflict of interest duties)
1 October 2008
  • sections 180(1), (2) and (4)(b) (consent, approval or authorisation by members) and 181(2) and (3) (modification of provisions in relation to charitable companies)
1 October 2008
  • section 247 (power to make provision for employees on cessation or transfer of business)
1 October 2009
11  Derivative claims and proceedings by members (sections 260 to 269) 1 October 2007*
12  Company secretaries (sections 270 to 280) 6 April 2008
Exceptions:  
  • sections 270(3)(b)(ii) (private company not required to have secretary)
 1 October 2009
  • sections 275 to 279 (provisions applying to private companies with a secretary and to public companies)
 1 October 2009
13  Resolutions and meetings (sections 281 to 361) 1 October 2007*
Exceptions:  
  • sections 308 (manner in which notice to be given), 309 (publication of notice of meeting on website) and 333 (sending documents relating to meetings etc in electronic form)
20 January 2007*
  • sections 327(2)(c) (notice required of appointment of proxy etc) and 330(6)(c) (notice required of termination of proxy's authority)
Unlikely to be brought into force
14  Control of political donations and expenditure (sections 362 to 379) 1 October 2007*
Exceptions:  
  • section 362(a) (introductory) and the words "and to independent election candidates"
 1 October 2008*
  • section 363(2)(a) (political parties, organisations etc to which this part applies) and the words "or an independent election candidate to whom"
 1 October 2008*
  • section 363(3) (political parties, organisations etc to which this part applies)
 1 October 2008*
  • section 363(4) (political parties, organisations etc to which this part applies) and the words "or independent election candidate" and "independent candidate"
 1 October 2008*
  • section 364(3) (meaning of "political donation")
 1 October 2008*
  • sections 365(1)(a) and (b)(i) (meaning of "political expenditure") and the words "or an independent election candidate"
 1 October 2008*
  • section 366(1)(a) (authorisation required for donations or expenditure) and the words "or to an independent election candidate"
 1 October 2008*
  • section 367(3)(a) (form of authorising resolution) and the words "or independent election candidates"
 1 October 2008*
  • section 378(2) (donations not amounting to more than £5,000 in any twelve month period) and the words "or to an independent election candidate"
 1 October 2008*
15  Accounts and reports (sections 380 to 474) 6 April 2008
Exceptions:  
  • section 385 (quoted and unquoted companies) which comes into force in so far as necessary for the purposes of those provisions brought into force in October 2007
1 October 2007*
  • section 417 (contents of directors' report: business review)
1 October 2007*
  • section 463 (liability for false or misleading statements in reports)
20 January 2007*
16  Audit (sections 475 to 539) 6 April 2008
  Exceptions:  
  • sections 485 to 488 (appointment of auditors by private companies)
1 October 2007*
17  A company's share capital (sections 540 to 657) 1 October 2009
Exceptions:  
  • section 544 (transferability of shares)
 6 April 2008
  • sections 545 (companies having a share capital), 546 (issued and allotted share capital), 548 (equity share capital) and 629 (classes of shares) which come into force so far as necessary for the purposes of those provisions brought into force in October 2007
1 October 2007*
  • section 558 (when shares are allotted) which came into force so far as necessary for those provisions brought into force in April 2007
6 April 2007*
  • sections 641(1)(a) and (2)-(6) (circumstances in which a company may reduce its share capital), 642 (reduction of capital supported by solvency statement), 643 (solvency statement), 652 (liability of members following reduction of capital) and 654 (treatment of reserve arising from reduction of capital)
1 October 2008
18  Acquisition by limited company of its own shares (sections 658 to 737) 1 October 2009
19  Debenture (sections 738 to 754) 6 April 2008
20  Private and public companies (sections 755 to 767) 6 April 2008
21  Certification and transfer of securities (sections 768 to 790) 6 April 2008
22  Information about interests in a company's shares (sections 791 to 828) 20 January 2007*
Exceptions:  
  • sections 811(4) (right to inspect and require copies of entries), 812 (court supervision of purpose for which rights may be exercised) and 814 (register of interests disclosed: offence in connection with request for or disclosure of information)
6 April 2008
23  Distributions (sections 829 to 853) 6 April 2008
24  A company's annual return (sections 854 to 859) 1 October 2009
25  Company charges (sections 860 to 894) 1 October 2009
26  Arrangements and reconstructions (sections 895 to 901) 6 April 2008
27  Mergers and divisions of public companies (sections 902 to 941) 6 April 2008
28  Takeovers etc (sections 942 to 992) 6 April 2007*
29  Fraudulent trading (section 993) 1 October 2007*
30  Protection of members against unfair prejudice (sections 994 to 999) 1 October 2007*
31 Dissolution and restoration to the register (sections 1000 to 1034) 1 October 2009
32  Company investigations: amendments (sections 1035 to 1039) 1 October 2007*
33  UK companies not formed under the Companies Acts
(sections 1040 to 1043) 		1 October 2009
Exceptions:  
  • section 1043 (unregistered companies)
6 April 2007*
34  Overseas companies (sections 1044 to 1059) 1 October 2009
35  The registrar of companies (sections 1060 to 1120) 1 October 2009
Exceptions:  
  • sections 1060 (the registrar) to 1061 (the registrar's function) which came into force in so far as necessary for those provisions brought into force in April 2007
6 April 2007*
  • section 1063 (fees payable to registrar)
6 April 2007*
  • sections 1068(5) (registrar's requirements as to form, authentication and manner of delivery), 1077 to 1080 (public notice of receipt of certain documents), 1085 to 1092 (inspection etc of the register), 1102 to 1107 (language requirements: translation) and 1111 (registrar's requirements as to certification or verification)
1 January 2007*
  • sections 1068(1) to (4), (6) and (7) (registrar's requirements as to form, authentication and manner of delivery), 1114 (application of provisions about documents and delivery), 1117 (registrar's rules) and 1120 (application of this Part to overseas companies) which came into force so far as necessary for the purposes of those provisions brought into force in January 2007
1 January 2007*
  • section 1068(1) to (4), (6) and (7) (registrar's requirements as to form, authentication and manner of delivery) so far as necessary for the purposes of The Companies (Cross-Border Mergers) Regulations 2007
15 December 2007*
36  Offences under the Companies Act (sections 1121 to 1133) With relevant provisions
Exceptions:  
  • sections 1121 (liability of officer in default), 1122 (liability of company as officer in default), 1125 to 1131 (general provisions) and 1133 (transitional provisions) which came into force so far as necessary for those provisions brought into force in January 2007
20 January 2007*
  • sections 1121 to 1123 (liability of officer in default) and 1125 to 1133 (general provisions, production and inspection of documents and supplementary) which came into force so far as necessary for those provisions brought into force in April 2007
6 April 2007*
  • sections 1121 to 1123 (liability of officer in default) and 1125 to 1133 (general provisions, production and inspection of documents and supplementary) which came into force so far as they apply to offences under Part 14 or 15 of the Companies Act 1985
1 October 2007*
  • section 1124 (amendments of the Companies Act 1985)
1 October 2007*
37  Companies: supplementary provisions (sections 1134 to 1157) With relevant provisions
Exceptions:  
  • sections 1134 (meaning of "company records"), 1135 (form of company records) and 1138 to 1140 (duty to take precautions against falsification and service of documents on the company, directors, secretaries and others) which came into force so far as necessary for those provisions brought into force in April 2007
6 April 2007*
  • sections 1137(1), (4), (5)(b) and (6) (regulations about inspection of records and provision of copies)
30 September 2007*
  • sections 1143 to 1148 (sending or supplying documents or information)
20 January 2007*
  • section 1157 (power of court to grant relief in certain cases)
1 October 2008
38  Companies: interpretation (sections 1158 to 1174) With relevant provisions
Exceptions:  
  • section 1158 (meaning of "UK-registered company") which came into force so far as necessary for the purposes of those provisions brought into force in October 2007

1 October 2007*
  • section 1167 (meaning of "prescribed")

30 September 2007*
  • sections 1168 (hard copy and electronic form and related expressions) and 1173 (minor definitions: general) which came into force so far as necessary for the purposes of those provisions brought into force in January 2007 and again in April 2007, October 2007 and December 2007 so far as necessary for the purposes of those provisions brought into force in April 2007, October 2007 and December 2007
1 January 2007*
  • section 1170 (meaning of "EEA State" and related expressions)
6 April 2007*
39  Companies: minor amendments (sections 1175 to 1181) 6 April 2007
Exceptions:  
  • sections 1175 (removal of special provisions about accounts and audit of charitable companies)
1 April 2008
  • sections 1180 (repeal of certain provisions about company charges) and 1181 (access to constitutional documents of RTE and RTM companies)
1 October 2009
40  Company directors: foreign disqualification etc (sections 1182 to 1191) 1 October 2009
41  Business names (sections 1192 to 1208) 1 October 2009
42  Statutory auditors (sections 1209 to 1264) 6 April 2008
43  Transparency obligations and related matters (sections 1265 to 1273) 8 November 2006*
44 Miscellaneous provisions (sections 1274 to 1283) With relevant provisions
Exceptions:  
  • sections 1274 (grants to bodies concerned with actuarial standards etc) and 1276 (application of provisions to Scotland and Northern Ireland)
8 November 2006
  • sections 1277 to 1280 (information as to exercise of voting rights by institutional investors) and 1283 (commonhold associations)
1 October 2008
  • section 1281 (disclosure of information under the Enterprise Act 2002)
6 April 2007*
  • section 1282 (expenses of winding up)
6 April 2008
  • section 1283 (amendment of memorandum or articles of commonhold association)
1 October 2009
45  Northern Ireland (sections 1284 to 1287) With relevant provisions
Exceptions:  
  • section 1284 (extension of Companies Act to Northern Ireland) which came into force so far as necessary for those provisions brought into force in April 2007 and again in September 2007, October 2007 and December 2007 so far as necessary for those provisions brought into force in September 2007, October 2007 and December 2007
6 April 2007*
46  General supplementary provisions (sections 1288 to 1297) 8 November 2006*
Exceptions:  
  • section 1295 (repeals)
With relevant provisions
47  Final provisions (sections 1298 to 1300) 8 November 2006*

20 December 2007