• The Supreme Court clarifies when directors are required to consider the interests of creditors
• Our private equity team has published its first Private Equity Review
• The House of Commons Library publishes a research briefing on the new Economic Crime Bill
• The FRC publishes a review of net zero disclosures by listed companies
• The LSE sets out next steps for the Voluntary Carbon Market and its Stock Connect facility
• ESMA updates its EU Prospectus Regulation Q&A
• ESMA asks for evidence on whether the Shareholder Rights Directive is working effectively

Supreme Court clarifies directors’ duty to consider creditors

In a key judgment, the Supreme Court has confirmed that the directors of a company are under a duty to take the interests of the company’s creditors into account when it enters or approaches insolvency.

In BTI 2014 LLC v Sequana SA and others [2022] UKSC 25, the court examined when the duty arises and what it entails, as well as commenting on several aspects of company law that are of importance to companies with cashflow difficulties.

The court also commented on when it will not be appropriate for the directors of a company to pay a dividend, even if the company has distributable profits and the dividend complies with the statutory requirements of the Companies Act 2006.

You can read more about the decision, including our key take-aways for company directors, in our in-depth review.

Macfarlanes publishes first Private Equity Review

Our private equity team has published our first Private Equity Review. The document pulls together short articles covering a range of topics impacting the house, fundraising and deployment of capital. If would like to receive a copy, please contact us.

Briefing on new Economic Crime Bill published

Two weeks ago, we reported that the Government had introduced a new Economic Crime and Corporate Transparency Bill into Parliament.

The House of Commons Library has now published a research briefing on the Bill. The briefing provides an overview of the Bill, then sets out the background to and detail of the four main aspects: Companies House reform, limited partnership reform, changes to the Register of Overseas Entities, and new measures relating to cryptoassets.

FRC publishes report on net zero disclosures

The Financial Reporting Council (FRC) has published a new report on net zero reporting by listed companies, along with several practical examples of good practice.

The report follows the FRC’s recent thematic review on disclosures against the recommendations and recommended disclosures of the Task Force on Climate-Related Financial Disclosures (TCFD) (see our previous Corporate Law Update). It will be useful to reporting teams preparing disclosures on net zero and other greenhouse gas (GHG) emission reduction commitments.

The FRC Lab spoke to investors, companies and other stakeholders to understand how investors use net zero and GHG emission reduction disclosures and where reporting could be improved.

The Lab identified three elements that investors want to understand from net zero disclosures:

• the scope and timing of a company’s net zero commitment;
• how the commitment impacts the company’s strategy and business model; and
• how the company measures performance in the short, medium and long terms.

LSE confirms extension of Voluntary Carbon Market and Stock Connect

The London Stock Exchange has published Market Notice 19/22, setting out the response to its consultation in May 2022 (and its subsequent supplemental consultation in July 2022) on extending its proposed Voluntary Carbon Market (VCM) and its separate Shanghai-London Stock Connect facility.

For more information on those consultations, see our previous Corporate Law Update.

The LSE has decided to proceed as originally proposed, with a few minor modifications.

As proposed, the new VCM will cover not only funds, but also operating companies. The main criteria for inclusion on the VCM remain broadly the same, although a new issuer will have two years from designation under the VCM to invest in a qualifying project (not three years, as originally proposed)

Separately, the Shanghai-London Stock Connect facility will be extended to issuers on the Shanghai Stock Exchange Science and Technology Board, and there will be a new Shenzhen-London Stock Connect facility for issuers on the Shenzhen Stock Exchange Main Board Market or ChiNext Market.

You can read more about the VCM in our short read.

ESMA updates Prospectus Regulation Q&A

The European Securities and Markets Authority (ESMA) has updated its Q&A document on the EU Prospectus Regulation to clarify the exemption from producing a prospectus where an “approved document” is issued on a takeover.

The Q&A clarify that a document is “approved” for this purpose if it has been approved by the competent authority for takeovers in the relevant EU member state according to that authority’s own approval procedures.

Following Brexit, the Q&A have no force in the UK. However, they are relevant to UK businesses that have securities admitted to trading in the European Union.

ESMA calls for evidence on the Shareholder Rights Directive

The European Securities and Markets Authority (ESMA) has asked for evidence on certain aspects of the EU Shareholder Rights Directive (SRD) to gauge whether it is operating effectively.

SRD (which has since been amended by the Second EU Shareholder Rights Directive (SRD II)) requires EEA Member States to ensure that certain rights and protections of shareholders are enshrined in their domestic law.

The UK implemented SRD and SRD II into UK domestic law prior to Brexit but is no longer required to implement any further changes. Any changes that ESMA will ultimately recommend, and whether the UK opts to implement them into its domestic law, remain to be seen.

The aspects on which ESMA has asked for evidence include identifying shareholders, transmitting information to underlying economic owners, facilitating the exercise of shareholder rights, and transparency of proxy advisors.

ESMA has asked for responses by 28 November 2022.