Equiniti ezine February 2013

EZINE > february 2013 inside this issue: Changes ahead What company secretaries should expect in 2013 Employee benefits How the landscape is set to change this year A view from mark taylor How Equiniti will build on the successes of 2012 EQUINITI SHARE DEALING SERVICES The team is ready for whatever this year may bring POSITIVE PERFORMANCE 2012 – second half performance results The share registration world in 2013 A raft of changes are expected

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EQUINITI david venus

There are a number of changes afoot for company secretaries in the year ahead

2013, A YEAR OF CHANGE 2013 heralds significant changes for company secretaries. In particular, there will be an emphasis on additional disclosures that will need to be made in companies’ annual reports and accounts.

Additionally, there have been a number of changes to the Companies Act 2006, intended to simplify the registration of charges and extend audit exemptions.

Audit exemption for medium sized businesses and subsidiaries

The Companies and Limited Liability Partnerships (Accounts and Audit Exemptions and Change of Accounting Framework) Regulations 2012 came into effect for financial years ending on or after 1 October 2012.

The definition of a medium sized business was relaxed, and exemption is now available, provided any two of the qualifying criteria are met: ■■ Annual turnover is not in advance of £25.9 million

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■■ The balance sheet total does not exceed £12.9 million ■■ The average number of employees is no more than 250.

The exclusion from qualifying for public companies, certain financial services companies and members of ineligible groups remains.

Audit exemption is available to most subsidiary companies other than a subsidiary that is itself: ■■ Listed ■■ An authorised insurance company, a banking company, an e-Money issuer, a MiFID investment firm or an UCITS management company ■■ Carries on insurance market activity ■■ The subsidiary company is a special register body or an employer’s association (as defined in ss. 117(1) and 122 of the Trade Union and Labour Relations (Consolidation) Act 1992, or Article 4 of the Industrial Relations (Northern Ireland Order 1992)).

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EQUINITI david venus To take advantage of the exemption, the following must be filed at Companies House prior to the expiry of the period for laying the accounts in question: ■■ Written notice that All members of the company agree to the exemption ■■ Form AA06 – statement from the parent undertaking that it guarantees the subsidiary under s. 479C of the Companies Act 2006 ■■ A copy of the parent undertaking’s consolidated accounts, including a copy of the auditor’s report and the annual report on those accounts.

UK Corporate Governance Code changes

Applies to financial years beginning on or after 1 October 2012. These changes are: ■■ Accounts to be fair, balanced and understandable ■■ Revised guidance for drafting comply or explain statements ■■ FTSE 350 company audit to be put to tender at least every 10 years ■■ Disclose use of external evaluator for board evaluation ■■ Explanation of company’s business model.

To view the full code click here.

UK Stewardship Code changes

These will effect financial years beginning on or after 1 October 2012 in the following ways: ■■ Clarification of the roles and responsibilities of asset owners and managers where stewardship is outsourced ■■ Clearer explanation on how conflicts of interest are managed ■■ Guidance under Principle 6 encouraging disclosure of voting policy, use of proxy votes and voting advisory services.

To view the full code click here.

Mortgages and charges

The Companies Act 2006 (Amendment of Part 25) Regulations 2013 are due to come into force on 6 April 2013.

These regulations will repeal and replace the provisions set out in chapters 1 and 2 of Part 25 of the Companies Act 2006.

The main changes are: ■■ One regime covering all UK incorporated companies regardless of place of incorporation in the UK ■■ Relates to charges created by a UK company (and will be extended to UK incorporated LLPs at the same time)

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■■ Registration may be made electronically ■■ The definition of charges has changed

and there are now specific exemptions for certain charges, such as cash deposits held by landlords, pledges or lien over property, and charges created by a member of Lloyd’s under the Lloyds Act 1982 to secure obligations in connection with its underwriting obligations.

The 21-day filing period remains. The commencement of the 21-day filing period is now defined for differing types of charge.

Mandatory Greenhouse Gas (GHG) Reporting

Reporting GHG emissions in directors’ reports will be required for financial years ending on or after 1 October 2013. Therefore, for some companies, the period for collating information will have already started.

This change applies to the following UK incorporated companies: ■■ Listed on the main market of the London Stock Exchange ■■ Those whose equity share capital is listed in a European Economic State ■■ Those who deal on either the New York Stock Exchange or NASDAQ.

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EQUINITI david venus Companies must report emissions from activities under their control in the UK or overseas, for which the company is responsible. Reporting applies to the six Kyoto greenhouse gases (CO2, CH4, N2O, HFCs, PFCs and SF6).

In January DEFRA issued updated guidance for companies.

New narrative reporting requirements

The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 are expected to be enacted and apply to financial years ending on or after 1 October 2013.

It is expected to apply to the following UK incorporated companies: ■■ Those listed on the main market of the London Stock Exchange ■■ If its equity share capital is listed in a European Economic State ■■ If it has dealings on either the New York Stock Exchange or NASDAQ.

As currently drafted, the current narrative report will be divided into: ■■ A high-level strategic report, which will replace the existing Business Review and also contain: – Strategy and a business model – Human rights issues – Diversity at director and senior executive positions ■■ The annual director’s statement.

Remuneration of directors (UK Incorporated Listed companies)

The Enterprise and Regulatory Reform Act is expected to be enacted and apply to financial years beginning on or after 1 October 2013.

Legislation is only at draft stage but currently includes proposals to split the remuneration report into two parts, which includes: ■■ A policy report at least every three years, which will be subject to a binding shareholder vote ■■ An implementation report, including simpler disclosure of directors’ remuneration, which will be updated annually and subject to an advisory shareholder vote.

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If you would like more information For more on these topics, please contact your relationship manager continued on page 5

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employee benefits

Preparing for a transformational year in employee benefits

All change in 2013 During 2012 there were significant changes to the employee benefits landscape. This year promises more of the same, as many of these employee share plan and pay issues continue to impact, and a number of new reforms are expected to land.

Plan ahead and keep on top of developments with our guide to what’s in store for 2013.

Directors’ pay

The debate over how best to align directors’ pay and performance will continue throughout this year. In March of 2012 a government paper set out fundamental changes to the framework for directors’ remuneration in listed companies.

Following consultation, a package of reforms was published aimed at empowering shareholders to engage with companies on pay and these could take effect from October this year.

They give shareholders binding votes on pay policy, including exit payments, and aim to help clearly demonstrate the link between pay and performance.

An Equiniti survey found an even split between companies planning to implement the new remuneration reporting proposals before they are formally introduced and those which were still unsure.

Many of this year’s developments will come via Europe. The EU Corporate Governance Action Plan contains an initiative to improve transparency on remuneration policies and individual remuneration of directors, and granting shareholders the right to vote on the remuneration policy (possibly with a Shareholders’ Rights Directive 2013).

As part of the action plan, the Commission plans to take action to encourage employee share ownership throughout Europe, after identifying potential obstacles to transnational employee share ownership schemes.

Income tax

Plans to reduce the 50p top rate of income tax to 45p were also announced last March and will come into effect in April. Companies and

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executives must consider now if they should defer income until after 6 April 2013. They must take into account the appropriateness for the company, disclosure requirements in relation to directors of a company and any tax and accounting repercussions.

HMRC Real Time Information system

By October 2013 all employers and pension providers must be signed up to the HMRC’s Real Time Information (RTI) system. The system was piloted from around April last year with volunteer software developers and a number of companies. Your preparation should be underway.

Internationally ...

The US Foreign Account Tax Compliance Act (FATCA) is aimed at foreign financial institutions and other financial intermediaries, to prevent tax evasion by US citizens and residents through the use of offshore accounts. The new law requires reporting of

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employee benefits large amounts of information on accounts in the name of US persons.

The potential impact is huge and HMRC has been very active, with representatives from various UK financial services sectors, including the BBA, APCIMS, and representatives from employee share plan organisations and ifsProShare. There have been direct negotiations with the IRS to develop a workable solution, culminating in an InterGovernmental Agreement (IGA), which, amongst other things, excluded reporting for certain approved share plans.

We will be working with HMRC alongside ifsProShare and other industry bodies on some outstanding issues, including the impact of FATCA on non-approved employee share plans.

We will also continue to monitor the ongoing Euro crisis and the impact any country’s withdrawal would have on international Sharesave plans, where savings are held in Euros.

New employee shareholder status

The Government’s focus on employment legislation is evidenced by the Growth and Infrastructure Bill (commencement date to be announced). This will amend the Employment

Rights Act to create a new employment status ‘employee owner’. Individuals may exchange some of their employment rights for shares worth at least £2,000. By accepting the new status, an individual gives up rights such as unfair dismissal rights and the right to statutory redundancy pay. There is no upper limit of the value of employee shareholder shares. The 2013 Finance Bill will enable gains on disposal of employee shareholder shares (worth up to £50,000 on receipt) to be exempt from Capital Gains Tax.

Employee ownership

The Government is expected to report on proposals to support an expansion in the number of employee owned businesses at Budget 2013.

In 2012, The Nuttall Review set out recommendations to support this expansion and the Treasury and HMRC will support the Department for Business, Innovation and Skills and Cabinet Office in implementing the Government’s response. Further incentives will be announced this year.

Monthly savings limits for SAYE and SIP Labour MP Jim Fitzpatrick has recently

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called on treasury secretary David Gauke to review the monthly saving limits for both SAYE and SIP share plans (£450 a month for SAYE plans and £2,000 a year for SIPs). He points out that although most people do not save the maximum amount in SIP/SAYE, as a comparison 80% of people with ISA’s did not use the maximum ISA allowance either, but their limits continue to rise.

The industry and ifsProShare have been campaigning vociferously for this review for five years, and hopefully momentum will continue to build during 2013.

OTS proposals for simplification of HMRC approved employee share schemes

It was in September 2011 that the Office of Tax Simplification began its review into how to simplify approved share schemes, publishing a paper in March 2012, followed by a consultation report in June. Following the Autumn Statement, recommendations were published. The full consultation document issued in December 2012 can be found at: www.hmrc.gov.uk/budgetupdates/11dec12/2068.pdf

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employee benefits Here is a summary of the proposals: Plan SIP SAYE CSOP SIP SAYE CSOP EMI SIP SAYE CSOP SIP SAYE CSOP SIP SAYE CSOP SIP SAYE CSOP

Summary of proposal/change New approval process HMRC approval of schemes will be replaced by a self-certification process. Online filing of returns will be implemented alongside self-certification. HMRC is currently consulting with stakeholders on this.

Prescriptive rules regarding operation of schemes HMRC has already provided guidance on this. Companies and trustees have a number of information obligations when they offer approved plans. The notifications can be made electronically, but companies and trustees must ensure that all participants are notified.

Giving information on a web portal will satisfy this requirement, providing all participants are made aware of the information and updates given on the portal.

Scheme features not essential or reasonably incidental to the provision of shares or share options HMRC will work with stakeholders (as part of the new approval process) to identify a suitable approach.

Retirement age Companies will be able to apply their own definition of retirement across their share plans to ensure harmonisation of ‘good leaver’ provisions. HMRC guidance will set out the circumstances in which a presumption can be made that an individual is retiring.

Cash takeovers Tax free exercise or payments for SIP shares may be allowed, should an option/share exchange not be possible on the cash takeover of a business.

Material interest The material interest rules for SIP and SAYE will be removed and the material interest percentage for CSOP will be aligned to EMI at 30 per cent.

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Target date for implementation 2014 However, additional details will be provided at Budget 2013

Page 7 - 10

In place 10 – 12 December 2012 HMRC issued ERSS bulletin 5

2014

12 – 13

2013 From Royal Assent of Finance Bill 2013

13 - 15

2013 From Royal Assent of Finance Bill 2013 2013 From Royal Assent of Finance Bill 2013

16 - 17 17 - 18

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employee benefits Restrictions on shares SIP SAYE The current prohibition on the use of certain restricted shares in SIP, SAYE and CSOP will be CSOP removed to allow more private companies to offer the schemes. Restricted shares will be valued for the purposes of the schemes as if they were unrestricted.

SIP Redundant legislation Paragraph 78 of Schedule 2 to ITEPA (acquisition of shares from an employee share ownership trust) will be removed as it is now redundant.

SIP Accumulation period There will be a change to the basis on which the number of shares awarded to an employee is calculated. It will be determined by reference to the share price at the start of the accumulation period - or at the end of the accumulation period - or the lower of these prices.

SIP The operation of PAYE in relation to SIP shares that leave a plan early It was recommended that where SIP shares leave a plan early, if the PAYE liability was met within 90 days, there should not be a penalty for late payment. In November 2012, HMRC issued ERSS bulletin 4, highlighting that where there is a reasonable excuse for late payment, a penalty will not apply, and this encompasses a wider range of arrangements than SIP. This recommendation will, therefore, not be adopted with a proviso that the issue will be monitored once RTI is in full operation.

SIP SIP dividend reinvestment The ÂŁ1,500 limit on SIP dividend reinvestment will be removed along with the three year carry forward rule.

SAYE SAYE savings periods The SAYE prospectus will be changed to remove the seven year feature of SAYE.

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2013 From Royal Assent of Finance Bill 2013

18 - 21

2013 From Royal Assent of Finance Bill 2013 2013 From Royal Assent of Finance Bill 2013

21 21 - 22

In place 22 - 24 November 2012 HMRC issued ERSS bulletin 4 providing information

6 April 2013 Although Royal Assent of Finance Bill 2013 needed 2013 Date to be announced once amended SAYE savings prospectus wording has been agreed

24 - 25 25 - 26

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employee benefits SAYE Non PAYE contributions under SAYE The savings prospectus requires that contributions should normally be made from pay. The exceptions list has been updated.

EMI EMI disqualifying events The exercise period for EMI share options following a disqualifying event will be extended to 90 days.

SAYE ‘Good leavers’ CSOP SAYE and CSOP ‘good leaver’ circumstances will be harmonised with those currently in place for SIP. As at present, it will be optional for good leaver provisions to be included in CSOP awards.

The Treasury believes that these changes will provide the most wide-ranging simplification of the tax advantaged employee share schemes for years, and could well make these schemes even more attractive to businesses and employees.

As with any management of change, timely communication to stakeholders is vital and this is certainly the case here to ensure employees are aware of relevant changes. It is especially important as the draft legislation provides for current schemes to be ‘deemed’ to be amended from Royal Assent.

A review of scheme/plan documentation needs to take place with updates made where necessary

Top of the list is a review of documentation for SIP plans where dividend reinvestment takes place. SIP participants will need to be aware of the removal of the £1,500 limit from dividends paid from 6 April 2013. Wording on terms and conditions, brochures and applications, will all need updating.

Information provided about the circumstances that make a ‘good leaver’ will need updating. This may involve companies discussing what definition of retirement best meets the harmonisation provisions. Part of

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In place 27 – 28 December 2012 HMRC issued ERSS bulletin 5 2013 28 - 30 From Royal Assent of Finance Bill 2013 2013 30 – 31 From Royal Assent of Finance Bill 2013

the proposed legislative changes will mean the removal of the term ‘specified retirement age’. This will mean the removal of the SAYE choice of ‘exercise of options – reaching specified age without retiring’.

The seven-year savings term has been a feature of SAYE since its introduction in 1980 (when the bonus rate was x36 monthly payments!) Launch information will need reviewing to remove either references to saving for five years, with a choice to extend for a further two years, and/or to saving for seven years.

Companies using SIP accumulation periods will need to consider the basis on which

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employee benefits they wish to continue awarding shares and update documentation if any change is made.

Your relationship team will be in touch to discuss further. We are also planning to host a forum to discuss the OTS changes. It would be useful to discuss how companies are planning on setting their definition for retirement, what issues are being considered and how the ‘good leaver’ changes will impact on payroll/HR functions (and how to ensure correct leaver reasons are recorded and advised to the plan administrator). If you are interested in attending please contact us by emailing marketing@equiniti.com.

OTS proposals for unapproved share plans

In January, the OTS issued its final report having reviewed unapproved employee share plans. It has made recommendations in six areas and has submitted these to the Chancellor of the Exchequer in advance of Budget 2013. We will cover this in more detail next time. The report can be found at: www.hm-treasury.gov.uk/d/ots_ unapproved_employee_share_schemes_ final.pdf

If you have any questions regarding this article Please contact your relationship manager

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employee benefits calendar

Your at a glance guide to the year ahead in employee benefits

The year ahead Date tbc: New SAYE prospectus with removal of seven-year feature February ■■ End

of consultation period FEB for draft Finance Bill 2013.

MAR

APR

MAY

March

■■ Budget Day on 20 March ■■ Government response to

the OTS report on unapproved share plans expected.

April

■■ Reduction of the 50p top rate of income tax to 45p ■■ Finance Bill 2013 (once enacted): – Removal of the £1,500 dividend reinvestment limit from SIPs, along with three-year carry forward rule – Gains on up to £50,000 of shares acquired by employee shareholders will be exempt from capital gains tax under proposed new ‘employee shareholder’ status.

JUN

JUL

May

OCT

October

■■ ESMA remuneration guidelines under MiFID expected in Q2.

to the framework for directors’ remuneration included in amendments to the Enterprise and Regulatory Reform Bill could take effect with revised disclosure and revised shareholder voting powers ■■ All employers should have joined HMRC’s Real Time Information system.

July

December

■■ Consultation

by FRC on clawback arrangements and other issues relating to directors’ remuneration expected to launch.

June

■■ Royal Assent expected for Finance Bill 2013 ■■ Approved share plan rule changes for: – Retirement provisions and other changes to leaver status – Material interest – Removal of use of restricted shares – Basis of SIP accumulation period calculation – EMI disqualifying events.

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DEC

■■ Reforms

■■ Chancellor’s Autumn Statement expected.

2014 ■■ New approval process for SIP/SAYE/CSOP ■■ Likely implementation of OTS

recommendations following review into unapproved share plans ■■ Binding votes on directors’ remuneration will be taking place at shareholders meetings.

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looking forward

Mark Taylor, Managing Director of Investment Services, Equiniti, gives his view of the year in prospect

Investing in the future The biggest issue Equiniti’s Investment Services team will be monitoring throughout 2013 will be the fallout from the Retail Distribution Review (RDR). It had a significant impact in the run up to its implementation on January 1, and how the industry reacts to the changes it has brought about will be critical. Many companies are unaware how much it will potentially impact upon business models. It will be for us to monitor that very closely, and act as a partner to our clients and customers to help them adapt to the new environment.

The biggest change RDR presents is the creation of orphan customers. Many of the intermediaries who served customers are no longer there – many have left the industry. That leaves many customers with a predicament. They have purchased investment funds or other types of investment and there is no one for them to turn to for advice. They must become more self sufficient, or, you will see the emergence of an industry that

serves the needs of clients that need to be self-directed. We must make sure the client firms we deal with have sufficient capability, technology and resources to address the needs of that emerging orphan client base.

Halfway through 2013 the powers of the Financial Standards Authority will transfer to two new bodies: the Prudential Regulation Authority and the Financial Conduct Authority.

It’s unclear what the exact ramifications of that will be but we will undoubtedly see closer supervision and greater involvement by the regulators, as demonstrated last year by the increased scrutiny of banks and intermediaries.

A raft of regulatory changes will come into effect in 2013, much of that driven by Europe and we must, and will, be ready to address those changes with solutions for our clients.

Taking a macro perspective, we must consider the continuing problems with the UK economy. There will undoubtedly be more significant changes which impact on

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Changes resulting from the Retail Distribution Review will create 'orphan customers' who will still need support

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looking forward the fortunes of companies and we must make sure we are well positioned in terms of managing our costs, our operations, and ensuring we are well primed for growth and ensuring that our clients can continue to grow. I am very sceptical about the way the economy is going. I still think we are in a recession and there is evidence, as we have seen recently from Germany’s numbers, that the situation could continue for quite some time. We need to innovate our way out of this. We can’t continue to repeat what we have been doing in the past. That will not get us to where we need to be.

Looking further forward there are even bigger issues looming on the horizon, with the prospect of dematerialisation and the potential disappearance of share certificates.

There must be a serious debate within the industry on this.

For Equiniti Investment Services, 2013 will be a year of building upon the successes of 2012. As part of Equiniti Group’s strategic priorities, Investment Services will be developing our business process outsourcing services for the broker back office. It will also address the needs of our direct customers by providing a wider range

I am very sceptical about the way the economy is going. I still think we are in a recession and there is evidence, as we have seen recently from Germany’s numbers, that the situation could continue for quite some time. of marketing and information to ensure they can make informed decisions about their investments.

In 2012 our major successes were largely around developments in our technology.

The integration of some of our acquisitions, like peterevans and NatWest Stockbrokers’ Corporate and Employee Services, means we have much more control over our strategic direction. We also enjoyed other successes as we launched our executive share dealing service on our new platform and increased service volumes and marketing activity. But the star accolade and highlight of the year was being crowned Best Shareholder Services Provider at the Shares Awards 2012.

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This has all laid a solid foundation for growth and in 2013 we will further develop our technology platform to enable us to offer a much broader range of business process outsourcing solutions. We will have more to offer in terms of broker back office solutions and addressing the needs of the custody settlement and trading environment.

For the Equiniti Group I predict it will be another year in which we go from strength to strength.

If you have any questions regarding this article Please contact your relationship manager continued on page 14

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equiniti share dealing services

The ESDS team is ready for the challenges 2013 may bring

Forewarned is forearmed A specialised share dealing team, Equiniti Share Dealing Services (ESDS), offers exceptional help with all employee share plans, bulk volume maturities and complex share dealing requirements for company directors and employees.

So that they can successfully support the share plan dealing requirements of corporate clients, the ESDS team is currently focusing on potential impacts. With this in mind, Stuart Allin, ESDS Director, tells us what we should be looking out for in 2013.

Reduction in the Additional Rate of Tax

Following the introduction of the additional 50% tax rate in April 2010, individuals earning over £150,000 saw their tax liability increase by 10%. As a result, some companies brought forward their share plan exercises so their employees did not incur the higher rate of tax.

tax

Two years on, this rate is set to fall to 45%, and there is now speculation around whether companies will defer the release of their share plans so their employees benefit from the reduced rate of tax. Goldman Sachs has already been in the press as one of these companies, but has confirmed that they will not be deferring their employee bonuses.

This begs the question; should a company manoeuvre its share plans to benefit its employees, especially since there is a risk that this could be considered as tax

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avoidance? This is certainly something that will be debated widely, but Equiniti can assist companies with the tax deductions at source, in a variety of ways, particularly for those affected by the additional rate of tax.

Individual Savings Accounts

For a number of employees, three years need to pass before they can obtain shares from their share plan. In this time – despite current economic conditions – some companies have seen a sizeable increase in their share

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equiniti share dealing services price. When you add this increase to the maximum 20% discount that can be applied to a sharesave scheme, an employee saving £250 each month may see significant growth in their shares. This could make the employee liable for Capital Gains Tax (CGT) should they choose to sell or transfer their shares.

Although it’s a nice position for the employee to be in, many companies feel they should offer financial support to their employees. However, this causes concern around straying into an advisory role when producing documentation on protecting the employee’s income from CGT. By way of support, the ESDS team has produced a non-advisory guide to aid the employee through the potential choices they have at the point of a SAYE exercise. Equiniti’s Tax Planning booklet takes employees through the potential tax consequences of exercising and selling their SAYE shares.

Stock Market Liquidity

The introduction of the FSA’s Remuneration Code has changed the way companies reward their employees – bonuses over a certain value are given in the form of shares on a deferred basis rather than immediate

cash. As a result, we are seeing significantly higher volumes of shares being awarded, and as employees are used to receiving cash immediately when their share plans mature, they are typically selling their shares at the earliest opportunity. This in itself is a challenge as there are now more shares that have to be sold into the market. The ESDS team has vast experience in this field, ensuring that the volume of shares being transacted does not have an adverse effect on the company share price through our own well-established corporate broker and market maker connections.

Additional considerations to look out for

Settlement Timescales - Part of the MiFID2 proposals make reference to the shortened timescales for stock market settlement. This will affect the way we do business, particularly for paper certificated share dealing, due to the manual nature of collecting share certificates and CREST Transfer Forms from shareholders.

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If you have any questions regarding this article Please contact your relationship manager continued on page 16

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dashboard

Shareholder Solutions Dashboard – H2 2012

Equiniti Business Performance The latest on Equiniti's Contact Centre Service Levels, Transaction Processing Service Levels, Customer Complaint Quarterly Trends and a round-up of new developments.

Contact Centre Service Level Standards – Quarterly Trends The Contact Centre answered 89% of calls in 20 seconds against the target of 80%, which is outstanding.

98% of calls were answered in the last six months and 941,431 were handled.

The Contact Centre has achieved its service level standard every month for the last two years and successfully retained the CCA Global Standard award for the third consecutive year demonstrating the continued improvement in service.

A total of 29,211 customers completed the end of call customer satisfaction survey with 92% rating us as ‘Very Good’ or ‘Good’.

Quarterly % Total Calls Answered

Average Monthly Volumes of Calls Received

Service Standard %

% 100

volume 250k

98

225k

96

200k

94

175k

92

150k

90

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Q4 10

Q1 11

Q2 11

Q3 11

Q4 11

Q1 12

Q2 12

Q3 12

Q4 12

125k

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dashboard Transaction Processing Service Level Standards – Quarterly Trends Service levels across all tasks and activities continued to meet or exceed service standards in Q3/Q4 of 2012 and were around 99% during this period.

The annual Capital Analytics UK Registrars Survey results, published in Q3, were very positive, demonstrating consistently high levels of service in operations.

■■ 99% of Equiniti clients rated our Dividend payment service ‘Good’ or ‘Very Good’.

■■ 96% of clients rated our AGM meeting management service ‘Good’ or ‘Very Good’.

Customer Complaint Quarterly Trends The second half of the year has seen justified complaints against transaction volumes fall to an average of just 0.015% (H1 -0.17%).

During 2012 incoming complaints fell by 4% compared to 2011. However, the number recorded as upheld equates to just 27% of the total number received. This is an improvement of 11% on last year.

Cases addressed for the Chief Executive were 16.5% lower than 2011 with just one third of those being upheld following investigation.

In 2012, cases referred to the Financial Ombudsman were down 44% compared with 2011. This represents a decrease of 59% in the actual and potential costs of these cases.

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Quarterly Average Service %

Quarterly Average Volumes processed

Service Standard %

% 100

volume 1,400k

98

1,200k

96

1,000k

94

800k

92

600k

90

400k Q4 10

Q3 11

Q2 11

Q1 11

Q4 11

Q4 12

Q3 12

Q2 12

Q1 12

Quarterly Average Service % % 0.04 0.03 0.02 0.01 0

Q4 10

Q1 11

Q2 11

Q3 11

Q4 11

Q1 12

Q2 12

Q3 12

Q4 12

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dashboard Key Equiniti Developments H2 2012 Share Registration

■■ Equiniti

achieved ‘Best Shareholder Services’ provider at the Shares Awards 2012 ■■ Equiniti acquired Prism CoSec strengthening our corporate governance company secretarial services offering.

■■ The first phase of the overseas dividend payment service promotional campaigns have generated a range of results. Further pilot campaigns will continue throughout Q1 2013 and we expect to establish our recommendations from the additional data of the broader mailings group.

■■ The total value repatriated to shareholders in 2012 through the unclaimed monies notification was £22m.

Employee Share Plans

■■ Administrator

access now available for ESP Portal, allowing client to view screens as a user.

■■ ESP Portal wins Innovation in Technology award at Financial World Innovation Awards.

■■ Work progressing to enhance our Executive and Global offering to improve both client and employee experience. Anticipated delivery is during first half of 2013.

■■ Smith & Nephew win ifsProShare award, BT and M&S highly commended.

Investment Services

■■ Investment

Services went live with the new operating platform for Equiniti Share Dealing Services in August 2012.

■■ New Citibank Global Custody relationship was introduced in August 2012.

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Quality

■■ More

than 9,000 hours of training were delivered in 2012 within the Operational Team and Contact Centre. This now involves up-skilling established agents and staff to support on-going development.

■■ A Quality partnership between departments and the Contact Centre has lead to successful implementation of a Letter of Indemnity process by telephone, benefiting the customer by first point of contact resolution.

■■ The Quality initiative implemented to address ‘failure to complete and comply’ has realised benefits with improved communication and guidelines within the Operational Teams and the Contact Centre.

■■ The Quality Team have identified key actions regarding the review of unjustified complaints and are investigating why customers may report expectations not being met.

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share registration

Get ready for share registration changes

A HEAD START ON THE RACE The share registration world can expect to see plenty of changes as we go through 2013, as there are a variety of initiatives being planned which will either be implemented or move significantly towards implementation during the coming year. Some of these include:

Narrative reporting

New requirements around narrative reporting are expected to come into play around Easter time. The UK Government wants to make annual reports simpler, clearer and more focused, and to create a framework, which makes it easier for companies, and particularly investors, to locate the information they need. The proposals would see the narrative divided into two documents – a high level strategic report and an annual directors’ statement containing the bulk of the company figures. At this point it seems that the annual directors’ statement will be online, whereas companies will potentially still need to send the strategic report to shareholders. A number of companies have already indicated that, as far as possible, they will seek to be early adopters of the proposed model although, of course, final regulations are unlikely to be available before the majority of companies have prepared their 2013 report. The EU’s Corporate Law Action

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share registration Plan also contains references to additional requirements in narrative reporting. In order to encourage companies to enhance board diversity and give greater consideration to non-financial risks, in 2013 the Commission will make a proposal to strengthen disclosure requirements with regard to their board diversity policy and risk management through amendment of the accounting Directive.

The Government wants to ensure that there is a clear relationship between pay and performance, with executive remuneration being clearly aligned with the interests of investors.

Executive remuneration

At the same time, legislation will address how companies assess directors’ pay and how this is reported. Again, this is expected to go through Parliament around Easter time, and the final regulations are, therefore, not yet available. However, the draft regulations propose that there will continue to be an advisory vote every year on how the remuneration policy of the company has been implemented, together with a binding vote at least every three years on the policy underpinning executive pay, including policy on respect of signing-on and exit payments.

The Government wants to ensure that there is a clear relationship between pay and performance, with executive remuneration being clearly aligned with the interests of

investors. This will mean additional resolutions at the AGM, and it will be interesting to see how companies address this requirement.

However, with remuneration reports usually passed by about 95% of votes, it seems that investors and shareholders are generally happy with the current arrangements, and it is hard to see the benefits of the new regime.

In terms of reporting, the Government believes that the best way to ensure clarity and transparency is to require the publication of a single figure for the payments made to each director, and to prescribe the method of calculation of this single figure in such a way that comparability is guaranteed. Again, many companies have indicated that they will seek

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to implement the new reporting requirements as far as they can and as early as they can.

Unsurprisingly, the European Commission also believes that this is an area which can benefit from their contribution. The Commission believes that companies could benefit from remuneration policies which stimulate longer-term value creation and genuinely link pay to performance … shareholders should be enabled to exercise better oversight of remuneration policies applying to directors of listed companies and the implementation of those policies. Like the UK Government, the Commission believes that clear, comprehensive and comparable information on remuneration policies and individual remuneration of directors will deliver this benefit, but their inevitable view is that this will be achieved through the harmonisation of disclosure requirements.

They go further, arguing that shareholders should be able to express their views on the matter, through a mandatory shareholder vote on the company’s remuneration policy and the remuneration report, providing an overview of the manner in which the remuneration policy has been implemented. The plan states that the Commission will propose an initiative

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share registration in 2013, possibly through a modification of the shareholders’ rights Directive, to improve transparency on remuneration policies and individual remuneration of directors, as well as to grant shareholders the right to vote on remuneration policy and the remuneration report.

Dematerialisation

The European Commission is considering a series of changes, which could start coming into force as early as 2014. These measures are likely to include regulating Central Securities Depositories (CSDs) including CREST, the UK’s CSD. New rules would require all trades to be settled on a T+2 basis (i.e. two days after trade date) instead of the current UK arrangement of a standard T+3 settlement, with T+10 for certificated shares where more time is allowed for documents to be exchanged.

The same regulation is likely to require the dematerialisation of UK traded securities, so that a share certificate would no longer be evidence of title and all holdings would be held electronically. This is a good idea in principle, and the current system is certainly not one that anyone would design on a blank

sheet of paper, but the fact is that it works, and any replacement must be fully explained to shareholders.

Equiniti is engaging with the Government and other stakeholders to seek to ensure that, in the event that these changes are imposed on the UK market by the Commission, sufficient thought has been given to the mechanism by which the certificated UK market settling at T+10 can transition to a dematerialised environment with T+2 settlement. Historically, proposals for the dematerialisation of the UK market have become bogged down in commercial issues and one of the positives of the imposition by the Commission is that it will no longer be possible for entrenched commercial interests to hold sway. That said, it is essential that we take this opportunity to improve the UK model where we can, whilst carefully examining the commercial case for each part of a redesigned process – it is only too easy to over-engineer new market solutions, and the optimal solution for the market as a whole may not necessarily be one that is theoretically perfect.

We will continue to work to ensure that any new model is cost-effective for our clients and their shareholders.

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