Capital Markets Climate-related Financial Disclosures AQSE: SPACs consultation UK Secondary Capital Raising Review
Capital Markets FCA Task Force on Climate-related Financial Disclosures On 15 November 2021 The Financial Conduct Authority (FCA) published Primary Market Bulletin 36 (PMB 36), its newsletter for primary market participants. This edition is focused on climate-related disclosure requirements for listed companies and sets out the FCA’s disclosure expectations and supervisory strategy introducing specific Task Force on Climate-related Financial Disclosures (TCFD).
Johnathan Rees Partner | Head of Corporate & Commercial johnathan.rees@laytons.com +44 (0)20 7842 8000
Capital Markets | FCA Task Force on Climate-related Financial Disclosures (TCFD)
The PMB follows the introduction of Listing Rule 9.8.6R(8) (LR9) which applies to premium listed commercial companies and came into force for financial years beginning on or after 1 January 2021. This means the first annual financial reports including the required disclosures will be published in spring 2022. LR9 requires a commercial company with a premium listing to include a statement in its annual report on whether it has made climate- related financial disclosures which are consistent with the recommendations of the TCFD. This statement operates on a ‘comply or explain’ basis. In summary, when making the required statement under LR9 a premium listed company must set out: • whether it has made climate-related financial disclosures consistent with the TCFD in its annual report • where it has not made disclosures which are consistent with some or all of the TCFD recommendations and/ or recommended disclosures, an explanation of why together with a description of the steps being taken to make consistent disclosures in the future • if the company has included some or all of its disclosures in a document other than the annual report an explanation of why • where in the annual report (or other document if relevant) the disclosures can be found. To assist listed companies, their directors and advisers the FCA is consulting on a new technical note to provide further guidance on the disclosure requirements. The note covers, amongst other things, expectations around explanations for non-compliance and the role of third party advisers in preparing disclosures.
Whilst the FCA is responsible for monitoring and, where necessary, enforcing compliance with LR9, the Financial Reporting Council will also play a significant role. The FRC may ask for corrective action to be taken, including seeking an undertaking that disclosures will be enhanced in the next reporting year. PMB 36 emphasises that where a listed company fails to make the required climate-related disclosures in its annual report, the FCA will request the statement be published via an RIS as soon as possible. Any non-compliance will be viewed seriously by the FCA and lead to action using the full suite of FCA powers and sanctions where appropriate. The FCA has published proposals to extend these climate related disclosure requirements to issuers of standard listed equity shares (other than standard listed investment entities and shell companies). The new rule (if implemented as proposed) will directly mirror the structure and wording of the rule in LR 9 and associated guidance.
AQSE Response to SPAC consultation Aquis Stock Exchange (AQSE) published its response on 7 December 2021 to its October 2021 consultation on proposed changes to the rules governing the eligibility criteria and ongoing obligations applicable to special purpose acquisition companies (SPACs) on the Access segment of the AQSE Growth Market. Changes include: • Broadening the scope of the SPAC rules:
A new definition of 'enterprise company' has been added to the Access Rulebook. The definition will encompass companies that may have previously classified themselves as SPACs or investing companies. The term ‘venture company’ had been proposed in the consultation, but feedback suggested that this might be confused with venture capital.
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Capital Markets | FCA Task Force on Climate-related Financial Disclosures (TCFD)
• Minimum fundraise at admission: Enterprise companies will be required to raise a minimum of £2 million prior to or at admission.
Background On 3 March 2021, the government published its report (UK Listing Review) following a review of the UK’s listing regime.
• Maximum valuation of twice the company's net assets:
The review’s objective was to propose recommendations
The market capitalisation of an enterprise company
to boost the UK as a destination for IPOs and optimise the
at admission should be no more than twice its net
capital raising process for companies seeking to list on UK
tangible assets.
markets. One of those recommendations was to consider how to
• Free float: To be eligible for admission, an enterprise company
improve the efficiency of secondary capital raisings by listed companies.
must have a minimum free float of 25%. While not proposed in the consultation, the increase is recognised as being beneficial in helping to maximise liquidity and limit volatility. • Time limit to make an investment or acquisition: AQSE will be able to suspend (and subsequently withdraw) an enterprise company if the company has not substantially progressed its investment plan or completed an acquisition or reverse takeover within 2 years of admission. The amended Access Rulebook has also been published and will take effect from 8 December 2021.
UK Secondary Capital Raising Review The government recently launched the UK Secondary Capital Raising Review (the Review) to consider how to improve secondary capital raising processes for UK listed companies.
Review The UK Secondary Capital Raising Review was established by the government in response to certain of the UK Listing Review’s recommendation and was asked to focus on various areas including: • whether the overall duration of the secondary capital raising process could be reduced including, in relation to rights issues, by reducing the period in which shareholders trade their rights • the use of new technology in the process to ensure that shareholders receive relevant information in a timely fashion and are able to exercise their rights • whether fund-raising models in other jurisdictions should be considered for use in the UK • whether there are any other ways of improving the capital-raising process by UK listed companies that are consistent with the UK's commitment to high standards A report and recommendations are expected in spring 2022.
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