November 6, 2012
We promised to keep you updated on the legal and regulatory developments which we identified as pending developments in our Alert “From the Shareholders’ Spring to the Autumn of Activism . . . Power without Accountability — A look at the latest developments in activism and related regulations in the UK and EU” dated 10 August 2012[1]. Since that time there have been a few new developments as summarised below:
1. Institute of Chartered Secretaries and Administrators (ICSA): New Guidance for Shareholder Engagement — Issue of Consultation Paper (October 2012)[2]
In July 2012, ICSA announced that it would partner with the Investor Stewardship Working Party to develop a good practice guide to supplement (not replace) the guidance in the UK Stewardship Code (see 3 below).
Together the groups concluded that in addition to improving the process of holding engagement meetings with shareholders, the very tone of conversation between companies and their investors should change.
ICSA published its consultation paper on 12 October seeking views on:
The consultation period ends on 30 November 2012, and the group intend to issue its guidance in March 2013.
2. Changes to the UK Code on Corporate Governance and Guidance on Audit Committees — Feedback from the UK Financial Reporting Council (FRC) on Proposed Revisions (September 2012)[3]
As previously reported, the FRC issued a consultation document in April 2012, seeking views on proposed changes to the UK Corporate Governance Code (the CG Code) and the Guidance on Audit Committees (the Guidance). In September 2012, the FRC issued a feedback statement on its consultation and has now issued new editions of both the CG Code[4] and the Guidance[5].
The FRC is proceeding with the majority of proposals set out in the original consultation. A few amendments however have been made to the final editions of the documents in response to feedback including the following:
The new editions of the CG Code and Guidance will apply to reporting periods beginning on or after 1 October 2012.
3. Changes to the UK Stewardship Code — Feedback from the FRC[6] and new edition of the Stewardship Code [7]
The FRC has issued a new edition of the UK Stewardship Code. In April 2012, the FRC issued a consultation document containing proposals to amend the Code. Industry was generally supportive of the proposals outlined by the FRC and the majority of changes have been implemented in the new edition of the Stewardship Code, some with modifications. These include:
As with the CG Code and Guidance, the new Stewardship Code is effective from 1 October 2012. The FRC has also flagged that it will review the need for further changes in relation to the use of proxy voting or other voting advisory services[8], in light of market and regulatory developments.
[1] (https://www.gibsondunn.com/from-the-shareholders-spring-to-the-autumn-of-activism-power-without-accountability/)
[2] http://www.icsaglobal.com/assets/files/pdfs/Policy2/01-Improving-Engagement-Practices-between-Companies-and-Institutional-Investors-Consultation-Oct-2012.pdf
[3] https://www.frc.org.uk/document-library/corporate-governance/2012/feedback-statement-on-uk-corporate-governance-code
[4] https://www.frc.org.uk/document-library/corporate-governance/2012/uk-corporate-governance-code-september-2012
[5] https://www.frc.org.uk/document-library/corporate-governance/2012/guidance-on-audit-committees-september-2012
[6] https://www.frc.org.uk/document-library/corporate-governance/2012/feedback-statement-uk-stewardship-code-september
[7] https://www.frc.org.uk/document-library/corporate-governance/2012/uk-stewardship-code-september-2012
[8] See client alert (Fn 1) for a summary of the review being undertaken by ESMA
Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have about these developments. Please contact the Gibson Dunn lawyer with whom you work, or any of the following lawyers in the firm’s London office:
Selina S. Sagayam (+44 20 7071 4263, [email protected])
James Barabas (+44 20 7071 4253, [email protected])
Jeffery Roberts (+44 20 7071 4291, [email protected])
© 2012 Gibson, Dunn & Crutcher LLP
Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.