This note summarises actions and guidance various regulatory bodies have taken and issued to assist businesses in the capital markets arena which are likely to suffer disruption as a result of COVID-19.
Due to the challenges posed by COVID-19, companies may be facing difficulties in preparing financial reports, releasing information under the Transparency Directive (TD), paying dividends and holding shareholder meetings. Accordingly, the following guidance and rule changes have been issued by various regulatory and industry bodies:
FCA
On 21 March 2020 the FCA requested that all listed companies observe a moratorium on the publication of preliminary financial statements for at least two weeks, to reduce unnecessary pressures on companies and the audit profession. It has been confirmed that the moratorium will end on 5 April 2020.
The moratorium statement can be found herehttps://www.fca.org.uk/news/statements/fca-requests-delay-forthcoming-announcement-preliminary-financial-accounts
:
The FCA, together with the FRC and PRA issued a joint statement announcing a number of measures designed to ensure that information continues to flow to investors and supports the continued functioning of the UK's capital markets. These include:
- A statement by the FCA allowing listed companies an extra 2 months to publish their audited annual financial reports;
- Guidance from the FRC for companies preparing financial statements in the current uncertain environment, complemented by PRA guidance) regarding the approach that should be taken by banks, building societies and PRA-designated investment firms in assessing expected loss provisions under IFRS9.
- Guidance from the FRC for audit firms seeking to overcome challenges in obtaining audit evidence.
The full joint statement can be found here: https://www.fca.org.uk/news/statements/joint-statement-fca-frc-pra
European Securities and Markets Authority (ESMA)
ESMA has issued a Public Statement stipulating that it expects national competent authorities (including the FCA) during this specific period not to prioritise supervisory actions against issuers in respect of the upcoming deadlines set out in the TD regarding:
a. annual financial reports referring to a year-end occurring on or after 31 December 2019 but before 1 April 2020 for a period of two months following the TD deadline; and
b half-yearly financial reports referring to a reporting period ending on or after 31 December 2019 but before 1 April 2020 for a period of one month following the TD deadline.
Any such delays must be announced and ESMA reminds issuers that they continue to be subject to the disclosure obligations laid down the Market Abuse Regulation. In particular, issuers must continue to inform the market as soon as possible of any inside information that directly concerns them.
The full Public Statement is here:https://www.esma.europa.eu/sites/default/files/library/esma31-67-742_public_statement_on_publication_deadlines_under_the_td.pdf
London Stock Exchange
Market Notice N07/20
The London Stock Exchange has issued a notice temporarily changing the Dividend Procedure Timetable, in light of the challenges and uncertainties caused by COVID-19. From 25 March 2020 a deferral period of up to 30 business days for payment of dividends up to a maximum of 60 business days after the record date. An issuer must inform the Stock Situations Team of any deferral of a dividend payment and this must be notified without delay. After the deferral period has expired the dividend must be paid or cancelled. If any dividend is to be cancelled and not paid, this should be notified by the issuer without delay.
This notice can be found here:https://www.londonstockexchange.com/traders-and-brokers/rules-regulations/change-and-updates/stock-exchange-notices/2020/n0720.pdf
Market Notice N08/20
On 26 March 2020 the LSE published market notice N08/20 confirming its support for the joint FCA / FRC / PRA statement referred to above, highlighting the temporary changes it has made to assist AIM nominated advisers and AIM companies, and noting that the London Stock Exchange is in close contact with regulators and stakeholders around the world and will continue to adjust its response to COVID-19 as needed.
This notice can be found here:https://www.londonstockexchange.com/traders-and-brokers/rules-regulations/change-and-updates/stock-exchange-notices/2020/n0820.pdf
The Chartered Governance Institute
The Chartered Governance Institute, along with a number of law firms and with the support of various other bodies (such as the AIC, the QCA, the FRC and City of London Law Society) has produced a guidance note for listed companies incorporated under the UK Companies Acts on how they might implement contingency plans for AGMs following the imposition of Stay at Home Measures. The guidance suggests various measures for holding quorate general meetings whilst ensuring that the prohibition on public gatherings of more than two people other than those 'essential for work purposes' is observed.
The full guidance is et out here:https://www.icsa.org.uk/assets/files/pdfs/guidance/agms-and-impact-of-covid-19-supplement-web.pdf
Statement by The Rt Hon Alok Sharma MP, Secretary of State for Business, Energy and Industrial Strategy
On 28 March 2020 the government announced that it was planning on introducing legislation at the earliest opportunity to enable companies required by law to hold AGMs to do so safely, consistent with the restrictions on movement and gatherings introduced to address the spread of coronavirus. Companies will temporarily be extended greater flexibilities, including postponing meetings or holding AGMs virtually. The exact timing of this proposed legislation remains uncertain, however, it should be noted that Parliament is in recess until 21 April 2020, to combat the spread of coronavirus.
Companies House
Companies House has announced that businesses will be given an additional 3 months to file accounts with Companies House to help them avoid penalties as they deal with the impact of COVID-19. Companies will still have to apply for the 3-month extension to be granted, those citing issues around COVID-19 will be automatically and immediately granted an extension. Applications can be made through a fast-tracked online system which should take just 15 minutes to complete.
The full announcement is here: https://www.gov.uk/government/news/companies-to-receive-3-month-extension-period-to-file-accounts-during-covid-19
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