Expert Insights

Expert Insights

AIM Market Webinar

On 9 February, our Capital Markets team held our annual AIM webinar on the significant legal and regulatory developments taking effect in 2022.

Once again we were joined by AIM Chief Executive Marcus Stuttard who provided a market update with Mark Howard, Victoria Younghusband, Paul Arathoon, and Paul Stone then discussing recent developments for clients and intermediaries.

AIM Webinar Slides


Well, good morning, everyone, and welcome to our annual AIM’s Seminar, 2022.


I’m Mark Howard.


I’m a partner in the corporate team here at Charles Russell Speechlys, and I’ll be your host and chairperson for today’s session.


We’re delighted today to be joined by Marcus Stoddart, the head of AIM.


Marcus has been a keynote speaker and a supporter of our annual AIM seminar for many years now and we’re delighted to have Marcus back again today.


Marcus will give us an update on recent trends, developments, and a little bit of horizon scanning and you’ll be able to ask some questions when Marcus has finished his talk.


So please, as Marcus goes through, do think of your questions, you can sort of put them onto the platform and they’ll be relayed to me and I’ll be able to put those to Marcus.


In addition, I’m delighted today to be joined by three of my colleagues from Charles Russell Speechlys.


We’re going to be doing a little legal panel Q&A on some recent developments which we think will be of interest including FCA investigation activity, ESG and the new National Security and Investment Act, which I’m sure many of you are now grappling with. Our expert speakers for that panel are my partners Victoria Young-Husband, Paul Arathoon and Paul Stone.


So, the seminar sort of slated for about one hour. As I say, we’ll start with Marcus, we’ll then move on to the panel but in-between there will be this opportunity to put some questions to Marcus.


I’m sorry, you can’t be here today. We’re back in the office but, you know, when we were doing the planning for the event we had to make a decision and so, unfortunately, we had to go with this type of format, but hopefully it will be, perhaps, the last time we’re not able to all be together and in the future we’ll be able to have more networking and a more sociable event.


So without any further ado, I’m going to hand over to Marcus for his presentation.


Thanks Mark and good morning everyone. It’s great to be here again and just to echo Marc’s comments, I look forward to being able to do this event hopefully in person next year. We were just talking before the event started and I always enjoy this event. I think it’s a sign of age, it seems to come around increasingly quickly but every year, it’s a good sort of temperature check to really think about what’s happened over the previous year.  I always sort of slightly start out thinking what updates we have since last year and then as soon as you actually start planning and mapping it out you realise actually how much happens in a year and last year was no exception.


So, what I was going to do is just give a quick overview and I know many of you in the audience know what the trends have been in the capital markets in London but just give a quick overview of what’s been happening on both AIM and main markets and then drill down into a bit more detail on AIM, some of the latest data points.


And then, as Mark was saying, just have a bit of a look forward - particularly to taking into consideration the very high levels of regulatory and policy changes that we’ve seen over the last year. So if we can go to the first slide please.


So hopefully you can all see this on your screens. I’m very conscious there is quite a lot of detail on here. The headline was last year, it was a record year for IPOs across AIM and the main market - the highest level of capital raised since 2007. So, £16.9 billion raised by 126 companies. I think for me the thing I was particularly pleased about, in my role both as a head of AIM but also head of UK primary markets, was the split of companies.


It was a pretty much even split between AIM and the main market. 60 companies came to the main market 66 onto AIM.


Last year saw a real return of some of the larger mid-cap UK names that we haven’t seen coming onto the capital markets for a while. It was great to see that. Also we had a very significant percentage - 39% of technology companies - so I think there’s a lot to celebrate there.


I know many of you have seen me use slides like this previously, but I think it is worth just reminding ourselves how dynamic London as a capital market is compared to other European capital markets. Over twice as many transactions, IPOs and follow-on issuances took place in London compared to any other markets, Frankfurt, Stockholm etc and nearly two times the number of proceeds.


I think the thing for me also was £49 billion was raised last year in total between IPOs and follow-on issuances. Add to that the £52 billion that we saw raised the previous year. That’s over £100 billion that’s been raised through our market since the onset of the pandemic, which is a staggering amount of money.  I think really also demonstrates the value of public capital markets. At this event over many years we’ve talked about the inextricable rise of private markets and I really do think the last couple of years have demonstrated the value, the depth, the vibrancy and the ability of the capital markets to react very quickly and so great to see an increase in IPO transactions but also the very strong continued trend of companies on market being able to go back to their investors and raise further capital.


We go to the next slide. I’ll now talk in a little bit more detail about AIM which I know this is the subject that you’re all here to hear a little bit more about.


So as I’ve said, we had 66 new companies came to AIM last year and actually, I know there’s been a bit of press commentary about the performance globally of IPOs last year but at the end of last year AIM IPOs were up 22% so there was a really good strong performance there.


The purpose of including these various charts on this slide was really to just reiterate yet again the diversity of AIM as a market because I think that’s something we can forget from time to time.


Not only did we see IPOs onto AIM last year be spread across all of the market cap brackets, but also the further issuances that AIM companies did, were very broadly distributed. So it wasn’t just the largest companies that raised the majority of that £9.5 billion it really was evenly spread.


It was great to see some of the largest transactions ever come to AIM and also the global diversity of those.


Companies like Victorian Plumbing but also Tiny Build and Devolver from the US in that, you know 500 million categorisation and more. But also, you know, it felt last year on AIM that we saw a return of some of the smaller IPOs that we haven’t seen for a while. I think, anecdotally, that’s partly because I think the VCTs have been playing a greater role and we’ve seen a much greater we retail interest both in IPOs and further issuances. We saw some smaller companies, the likes of Light Science Technologies, The Vitrix come to the market.


And again, we saw a good spread of sectors.


I think from a UK perspective, one of the things again, I was really pleased to see was the regional spread.


And I think, you know, we talked at this event last year about having transition to a world where companies can now do fully virtual IP roadshows. And in a way, I think that’s helping to break down some of those regional barriers.


So, last year, we saw four companies come from Scotland, seven from the North-East, nine from the North-West and nine from the Midlands, and some of those regions historically have been a little bit quieter.  So, really good to see that regional spread, but, also, I think over 25% of the companies, the new companies that came to AIM last year, were founder lead.


So, that feels like there was a really good diversity on all levels, something that I think, you know, we should again also sort of feel very proud of.


So, again, you know, I know many of you will know some of these data points, but in terms of a brief snapshot of where we’re up to on AIM, last year was the first year since 2007, that we had Net new admissions to the market, which I was clearly delighted to see, so, 33 Net new companies onto the market.


So we’ve now got over 850 companies, with the highest ever total valuation of £150 billion.  So, I know we’ve talked to this event on a number of occasions about AIM really becoming a mainstream market and very much part of the UK’s financing ecosystem.


And I think, you know, that was just absolutely reiterated last year, whilst it might be a little bit small on people’s screens on the bottom.


As, I’m looking at bottom left-hand corner, the bar charts there, again, just show how frequently, you know, not just existing companies, but new companies that have come to the market, have come back to the market. So, I think over 50% of companies that have IPO’d on AIM in the last five years, have already done following issuance, and again, you know, for me, this is a bit of a defining factor for AIM and you know, as we’ve said previously underpinned by the very deep pool of institutional capital.  If we look at some of the other European growth markets, they don’t, they just don’t have that depth of follow on funding ability, and that was, again, one of the reasons.


Last year, that 53% of all of the capital that was raised across European, the European growth markets, was raised on AIM so, you know, again, a real sort of critical mass there.


I think, you know, on the bottom, right-hand side of the slide, you know, we have, for a number of years, seen an increase in the capital raised at IPO and so last year, the average capital raised, which was £49 million.


Which I think has been a sort of positive trend, but it’s good, as I was saying on the previous slide, to see an increase in the smaller companies, also IPO.  So, again, you know, I think we’ve got a really robust, very rounded market.


So, having talked about, the primary markets, just focus for a few moments on the secondary market, and the investor side of AIM.  So, I know, indices globally have been off since the start of this year, But, it’s worth just remembering that over the last five years, the AIM indices, although, I know you’ve heard me many times say that AIM is a stock picker, rather than index driven market still.


If you use the indices as a benchmark for performance, the A100 is up 45% compared to, I think, 6% for the FTSE 100.


So, you know, clearly, investors have been looking to AIM for growth. Again, over the years, we’ve talked a lot about liquidity on AIM.  We saw the highest daily liquidity, whether that’s by volume or value, on AIM last year and that’s a trend that we’ve seen, not as a one-off, but something that we’ve seen continue to increase over the years and something, you know, I’m very pleased and proud of.  I think part of the reason for that has been, you know, the increase in, retail activity and the ability for retail investors, to be able to participate in IPOs and further issuances, whether that’s, you know, via some of the platforms that the Brokers operate or whether it’s through third parties, light, like primary bid.  So, I think, you know, we’re in a good position, from an AIM liquidity perspective, as well.


So there have been a number of sort of key sectors that performed very strongly last year.  I’ve mentioned technology, health care was, you know, was another sector where historically across both AIM and the main markets, you know, we’ve seen relatively small numbers of IPOs.  So I think in 2020, we had four Health Care IPOs, last year on AIM that was up to 14, so you know a good increase there, but also the Green economy is an area where you know, we’re seeing a very significant growth.


I think many of you will be aware that, you know, a number of years ago, we launched our green economy mark for companies that have got more than 50% of their revenue from activities that contribute to the transition to the green economy.


And of the hundred plus companies now that have got over have been awarded, that green economy mark, 51 of those, are AIM businesses.


You know, we saw businesses like Psi Eta like, Jen Encode like Music Magpie come to AIM last year, so, the number of those companies is gradually increasing.


And one of the reasons, I think, that companies find the green economy mark, very important is, you know, in the far right-hand side of this chart, you can see just the increased amount of investors, that are deploying ESG Strategies and the fact that we see a, you know, an annual growth rate of about 14% of capital that’s allocated specifically to the green economy.  So, as the capital increases, the demand for companies increases and we’re seeing companies applying for the green economy mark on both.


AIM and the market, the main market, prior to their IPO because they’re using the fact that they expect to be awarded the mark as a key selling point as part of the whole IPO process. So, you know, that’s one of the ways that we’re supporting companies last year through our issue of services platform.


We rolled out the, the ability for companies to look at their sort of green disclosure mark, or credentials and benchmark themselves against other companies.  So we’re trying to look at very practical ways that we can help companies as they increase the disclosure that they make and the investors expect them to make about the ESG and green credentials.


So, if we move on to the next and the final slide, I think, you know, I often sort of finish this sort of annual presentation, looking at some of the regulatory and some of the tax changes.


So, if we look at the sort of the regulatory reform last year, there was an awful lot that happened in the year.


Clearly, we started last year with the Hill review then, you know, the Government, Treasury, FCA, moved very quickly to start to implement the sort of the elements that they could. And I’m very conscious that many of the changes that have been announced or introduced have been related to the main market, but I think there is a knock on impact on AIM in a very positive way. So last year, we know that there were things like the Secondary Capital raising review, the wholesale markets review, the prospectus regime review and then towards the end of the obviously, the FCA implemented the policy changes, I guess the biggest of those changes that the FCA introduced was the minimum market cap of 30 million to the main market, and I think as many of you will know, because we’ve been very public about this, you know, we encouraged.


The FCA not to introduce too high a threshold, because we think it’s good that companies, and investors have choice.  That said, it was positive, that they reduced the threshold from 50 to 30 million.


And also, you know, given, as I was saying earlier, the increased number of sort of sub £30 million companies that came to AIM last year, I think that change may well result in more smaller companies coming through to AIM over the coming year.


I mean, the other thing that happened in December that I think might, might have gone a little bit less noticed by people, was the Treasury on behalf of the Chancellor, wrote to the Office for Tax Simplification.


To comment on the OTS’s review both of capital gains and importantly for AIM, inheritance tax.


And, I’m pleased to say that the Treasury have decided not to take any reforms to inheritance tax or business property relief forward.


So, I think you know, that’s very good for the BPR position on AIM.  So, clearly, there was a lot of regulatory reform.


One area that I just wanted to sort of touch upon is, there was a bit of Press commentary two or three ago about London Stock Exchange, continuing to engage with both Treasury and FCA around the wholesale markets review.


And specifically, the chapter in the Wholesale Markets Review, this asked the question, whether there’s potentially gap for an additional kind of regulatory framework for a new sort of type of NTF.


And, you know, we responded to say, actually, we do think there is a gap, but not necessarily a sub 50 million market cap gap.


But that a market framework that potentially allows companies to transition from private to public in an environment where they don’t have continuous disclosure.


And there isn’t continuous trading. Maybe a very valuable option for companies that have widely distributed shareholder registers, whether that’s because they have a lot of employees on their register or whether it’s because they’ve got angels, VCs, who want liquidity.


So, you know, that’s something that, you know, we continue to talk to SCA and Treasury about and something that you may well be hearing more from us about this year.


I think, though, just in conclusion, one of our big focuses and this is where your AIM is so important to London Stock Exchange, is making sure that that whole funding continuum, from seed to VC and you know the whole private market environment, through to the public markets, remains as seamless as possible.


And those cliff edges between private and public are eradicated to the greatest extent.


So, you know, we will do everything we can to continue to smooth that funding journey for companies and for investors, and also to democratise, you know, wealth creation and so, you know, final point there is the UK or the Treasury’s review of the UK.


Prospectus regime asked a very bold question about, you know, whether AIM admission documents should be viewed on a par with prospectuses, so that companies could get back to being able to do retail offerings.


You know using an AIM admission document, which, I guess, was the case, way back when, pre 2004, which is something that, you know, we have welcomed and hope to see sort of future positive change on this year


A lot of change last year. A lot of exciting reform coming up, I think, this year. So that added to, I think, the very strong capital raising position that we saw last year.  I think despite some of the volatility and the uncertainty that we’ve seen in January, I think sets us up for another very strong year and look forward to seeing many of you in person over the course of the year, and to continue to work with you and again, thank you for all of your support and to Mark and your team, for all your support as well.


And now I’m very happy to take any questions.


Thank you. Thank you Marcus for a very helpful overview there.  Lots of bits of information to take away.


A question that I wanted to raise was you mentioned there about founder led businesses some of the IPOs that came to market last year, and you know, one of the significant changes we’ve seen for the main market is this introduction of the ability to have dual class share structures. You know, the idea being that this will facilitate founder led businesses coming to market, You know, a little bit earlier in their journey, perhaps, and it struck me, you know, is that something that AIM may be thinking about in terms of a regulatory change?


Yeah, I think it’s a really good question, which is often the answer that politicians give well in the answer.


And the reason I say that is, you know, we want to do everything that we can to support founders.  I think AIM is already very founder friendly.  We, you know, we’ve been very much, whether it’s on dual class shares or some of the other regulatory changes that are going to apply to the main market.  We’ve been waiting to sort of see what the market reaction and, importantly, I think, what investor reaction has been to some of those changes.  So, I think both with dual class shares and some other areas of the AIM rules that we will look at those in light of the broader regulatory change agenda, and, you know, I think possibly just start, you know very softly talking to market participants to get their views.


You know, we don’t feel necessarily that, you know, we have to, on all of these levels, track exactly what’s happening on the main market, but, you know, we do want to make sure that AIM continues to evolve and remains very founder and investor friendly, so we don’t have a specific answer to that yet, but nothing’s off the table.


Because I think now we should turn to the, the legal panel, the Q&A with my colleagues here from Charles Russell Speechlys, as I say there’s been quite a lot of, well Marcus touched on it, quite a lot of regulatory change over the past year and we wanted to delve into to some bits which we thought would be particularly interesting for you guys.


Turning first of all to Paul, Paul Arathoon, FCA investigations Paul, how are you seeing the FCA deal with potential market abuse regulation issues and other matters for listed companies?


Thanks Mark.  I think we’re seeing the FCA sort of take more notice in investor forums, direct complaints from investors, articles on, more sensations websites, as well as their sort of usual market surveillance activity and typically, what we’ll say is the FCA contact the issuer with a short pro forma inquiry saying, we’ve seen this, please can you give us some information and the FCA then go on to say, you know, have a dialog with company and we do see them then widening that inquiry sometimes, they go back and look at other announcements, look at other issues that have arisen and.


Share price movements are probably key to that, that’s where we’re seeing a lot of these initial queries and as a consistent theme, when the FCA ask an issuer a question, they want to see Board Minutes, they want to see supporting documentation. They want to know when the Board should have should have become aware of the issue.


That led to a share price movement.


Detailed consideration, for example, of when, if any, inside information was identified by the Board, the analysis of delaying disclosure is a key question they want to know, and they also want to know what advice they took from Auditors, Nomads and lawyers.  Now, obviously AIM companies should be discussing everything their Nomads as a matter of course, they are to create some announcements where lawyers and potentially Auditors get involved, maybe even PR.


And that the FCA want to know what advice was taken at that time?


And so linked to that, I’d also recommend that as soon as the company is in receipt of their letter from the FCA, they share it with Nomad lawyer and potentially auditors and PR.


It is key to have that contemporaneous Board Minutes, other information at the time because whilst the FCA may say you’ve got two weeks to answer.


If you don’t have that information to hand, it’s quite difficult to backfill it.


And obviously, companies should be keeping board minutes at the relevant time, justifying reasons for delaying disclosure, etc.


But, you know, if you don’t have that information, you’re potentially in a bit of trouble, and once yes, you’re on FCA’s radar.


You’re potentially then setting yourself up for further investigations and they will look at your announcements, future announcements more closely.


In relation to delay disclosure of inside information under and once you’ve taken the decision delay and it’s on legitimate grounds, you release the information and you’re then meant to put a notification into the FCA.


The FCA noted, I think it was in November 2020. That only 25% of issuers had actually done that, which, you know, they highlighted, couldn’t be the case because almost every issuer will put out inside of information that has been delayed.


So we would recommend that as a matter of course, in transactions it’s on the documents list.


The advisors are reminding their issuer clients that, this transaction undertakings inside information once we put the announcement out, publish a circular or whatever it may be, we notify the FCA.


Of the disclosure?


Something that’s very key. It’s all about information when dealing with the FCA.


It strikes me that you mention there the contemporaneous note points, you know, often, when I’m working with corporates and an issue comes along, you know, people jump on a call, there’s conference calls, video conference calls, that’s a lot of how, you know, the way that we’re doing it these days and of course, if you’re the person participating in the actual conversation, it’s quite difficult to make a good fulsome note, so it did strike me… you know, I think sometimes where I’ve seen it, it’s worked well, is you do need your company Secretary or somebody to be nominated at the beginning of the call, you know, who’s going to take a note of this?  Because as you say that the contemporaneous nature of the note is actually the sort of strength of the case, isn’t it?  In many instances, rather than trying to recall it several weeks later.


Yeah that’s exactly right, we will see what kind of Board minutes set out and fully start detail and insight of this, we have to put on the insider list, the time each person knew and I believe some of my clients anyway have said the FCA want detailed chronologies saying who knew what, when?  Yeah, which again, is very difficult to do.


If the FCA are looking at something that happened six months ago, if you don’t have the information in the form that you should have had at the time.  So, again, it comes back to who knew?  You know, who’s updating the insider list, who’s in charge of that for any particular transaction.


And it’s two weeks, I think, I seem to recall one that I did recently, two weeks, seems quite a long time.


To have to come back, have sort of seen it in five days.


I think it might depend on the issuer itself but I think two weeks for initial inquiry, but once they, if they aren’t satisfied, and they are asking more questions, they tend to shorten that timeframe. I’ve actually seen it, in sort of three working days to get some information across.


Um, Paul a further question for you.  I understand that the disciplinary and sanctions regime in relation to financial information might be changing, that there’s something coming down the track and you’re able to enlighten us there.


That’s right the so currently the FCA have a memorandum of understanding with the Financial Reporting Council, so the FRC regulate auditors at the moment, and so if there’s a question about a company’s financial statements that the FCA are looking at, they’ll likely loop in the FRC, share information and the FRC might open their own investigation.  As it stands, the IFRC can only discipline directors who are chartered accountants.


So they can’t take action against any other director. They can take action against junior employees if they’re chartered accountants, but generally the rest of the board are outside the remit of the FRC.  So if, if the FCA are, they will lean on the FCA if there’s a serious financial issue, which they can’t take action against, but the FRC is being rebranded in, I think, 2023 is the Audit Reporting and Governance Authority, and they’re pushing for the ability to be able to take action against the entire boards for misstatements in financials.  Currently that would only cover main market companies.


But at the same time there is a proposal that the definition of Public Interest Entities are extended to cover larger AIM companies and potentially large private companies.


And so if that occurs then the FRC will be able to take action potentially against Directors of those entities.  That’s potentially problematic for two specific reasons.  Firstly, D&O cover, the smaller listed companies, or listed companies on AIM, it’s difficult to get, the market has definitely tightened even well-established listed companies are finding it.


Hard to get cover at decent rates.  Having to… effectively pay


through the nose, for the same cover, and, secondly, it could put off non-executive Directors, there’s a reasonably small pool of non-execs.


And they might may just decide it’s, you know, they don’t want to be on a board where they could have liability to the FRC and the FCA, they can take it as non execs.


You’re not involved in the day-to-day.


The financials are dealt with by other people by large, obviously they might be on the audit committee, but extending that disciplinary sanctions could be fatal some people’s decision to join the board of a company.  Yeah, I certainly think that’s right.  That, you know, there’s a wealth of entrepreneurs out there, but, you know and as they become experienced, and have been through various different scenarios, them participating, as NEDs in, you know, in growth companies is a really valuable contribution.


But I’ve certainly heard it said that, you know, some of them are nervous about the exposure, that that can bring for them and yes, as you say, if the D&O cover is also tightening, it’s a bit of a double whammy, isn’t it?  Yeah, exactly. And I think that D&O market is problematic for listed companies generally.


And it’s always on the market.


I was just going to say, on the, I think you’re absolutely right, to bring up the proposal or the consultation on the pie definition, it won’t surprise you to hear that we are, opposed to the, sort of, the consultation threshold of 200 million, because it just doesn’t make any sense.


And ironically, I think, links back to the kind of MIFID II definition, which shouldn’t be used, where it is benchmark now.  We’re no longer part of Europe, so we, we would not support that change in the pie definition, certainly not at the 200 million mark, I think you make a really good point.


I think also, it would negatively affect the future diversity of the non-exec pool as well.


Well, that sort of segways into another topic we wanted to talk about today.  ESG, very hot topic.  It’s difficult to do a seminar without touching on ESG with so much development taking place. Victoria, one area I wanted to focus in with you, there’s been a lot of, a lot in the Press about mandatory climate related financial disclosures by large, corporates.  Will this be coming to AIM.  Do AIM companies need to get familiar with these reporting obligations?


Thank you, Mark, the answer to that is, yes, yes, and yes, although some companies will be more directly affected than others.  Picking up on large AIM companies.


There’s new disclosure obligations, which come into force for accounting periods starting 6 April this year, so, fairly soon.


And they affect AIM companies with more than 500 employees.


So, and, part of their strategic report


They’re going to have to include specific disclosures, following the reporting principles of the task force on climate related disclosure?


I always get my acronyms wrong, but this is the TCFD and this includes a scenario analysis where they actually have to work.


They have to, to show what they’re going to do, in particular circumstances.  What a particular circumstance would mean for that company.


In terms of missing, perhaps, a climate target.


So this is all to do with measurement, and there’s a new industry now of climate consultants who can come in and help you report on how well you’ve done in terms of your emissions.  Well, the whole gamut.


I said, yes and yes, because even for those many smaller AIM companies, you can’t ignore climate or, in fact, ESG, generally.


Because, and Marcus very kindly has given me quite a lot of points to look back on, on his talk.


The importance of the big pool of institutional capital and FCA, regulated asset managers and pension funds and insurance companies are themselves obliged under the New FCA Rules to report on their own climate related non-financial disclosure.


And, so, they’re not gonna invest in AIM companies that, that can’t help them with our own reporting?


So, every AIM Company to a degree, it’s going to have to focus on climate related?


Yes, yes, yes and I guess that, you know, that feels right in many ways, but so, you know, I suppose the message is these obligations, they’re not just for the large corporates.


They are, in fact for all and we do need to be to be getting a lot more familiar with them.


It’s an interesting statistic on the green economy mark that actually, just more than half of the 100 companies that now have the exchanges, green economy mark are AIM related companies, so, that shows how important it is.


Can I just add to that?


Not only is it important, I mean, the whole transition to a greener economy is really important.


And because there are more investors focusing, there is more capital available to companies that make these disclosures and you’re absolutely right to point out that this doesn’t just affect public companies, you know, the regulations apply to larger private businesses, but even beyond that, as you’ve highlighted, this is very, very much investor driven, so, you know, we’re increasingly hearing that smaller, privately owned businesses, their venture capital, their private equity owners are requesting the same sorts of disclosures, because as you say, that, you know, the private equity houses themselves are having to report.


So this is something that’s coming across the peace.


And, you know, what we’re trying to do is help companies to disclose the right points that are actually helpful to investors and to see the benefits in terms of the additional capital that’s available, rather than just seeing this as disclosure for the sake of disclosure.


Yeah, and I think that’s, that’s a really, there’s a bit of an analogy there with corporate governance, you know, that’s a topic where there’s a lot of scrutiny around corporate governance and the way it’s reported and you know, the drive to, for a number of years now, to, to tailor it, to the specific circumstance of your company to not be doing this sort of boilerplate type disclosure to not be doing the copy and paste. You know, when companies do invest the time and the effort in getting that right, they tell you that actually, you know, it adds value. It helps with investability and I think this is, this is an area where the same, you know, very much the same principal applies.


Victoria, I had another question for you, which was, what about the S in ESG? What’s happening in that space?


Well, it’s another, the S is for Social and it’s another very hot topic.


It includes diversity, which Marcus also mentions, the D&I was an expression which quite a lot of people will be familiar with, which is diversity and inclusion.  Inclusion, meaning, that the stakeholders, so your employees, your suppliers and the wider environment.


I came across recently an extension to this which is D, E and I with the E, meaning Equity or fairness and how you treat all these people.


Diversity in particular, has been the subject of a lot of work by the FCA and diversity used to just mean have you got….how many women have you’ve got on your board for example or in your workforce?


It’s got much wider than that now and it includes racial, religious, and disability.


So, and there’s now a move from the FCA to report, and it’s, they’ve said yesterday in a speech that they will be bringing forward these disclosures to report in some detail.


The makeup of the board with specific reference to ethnic diversity and gender, which, of course, and these days, can be a bit of a difficult subject, but including people who self-identify as agenda.


This is difficult for companies because a lot of it is rather personal questions that people may not want to disclose but.


Well, we’ll see what’s going to happen here.


And again, this just doesn’t affect only companies but also the asset managers, the pension firms and insurance companies. Yes, yes.


So we talked about there the FCA may be coming forward with enhanced diversity disclosure.  Are there sort of diversity, comply or explain requirements in either the full sort of UK corporate governance code or perhaps in the QCA code.


Both codes say that the boards should make sure that they are diverse and they also refer to being diverse in attitude, as well as the characteristics I have mentioned.


For main board companies, and this is going back again to an EU directive, the accounting directive, they actually have to report on their diversity policy.


Which is not just the board, but the company as a whole.


But I don’t think it’s materially different between the QCA that....


The corporate governance code is perhaps a bit more explicit but the QCA code, also has, you know, a fair amount on diversity. Yeah, OK. Thank you.


I’m just checking… no questions from the audience. If you do have something, please, please, do fire through the questions I’ve, I can pick them up and I can put them to the panel.


But now we’ll turn to Paul Stone.  Paul is a in our competition and regulatory team.


and Paul, the first question around the National Security and Investment Act.  Will the new power to block IPO’s on national security grounds create uncertainty for companies looking to come to Market to IPO?


Thanks Mark.


So, we are seeing national security becoming a bigger issue, both in the UK and internationally.


And last year, we saw the UK Government issue a consultation on this proposed new power, to be able to block any listing or admission to a UK market on national security grounds.


So, we’re at the initial consultation stage at the moment, and it was quite a brief consultation.


And although the power is appears to be drawn very broadly, we have been promised some guidance from the Government, and hopefully that will provide a little bit more certainty for companies.


It’s fair to say it’s also only at the initial consultation stage, and I think that we can hope for more certainty from the Government.


As the consultation process goes forward, we’ve had the responses in, and we’re waiting for what the Government is going to say.


Quite helpfully, I think, in the initial consultation. One of the points the Government said was, would it be helpful for us to have some ability to approach the Government for comfort before actually going ahead with an admission or a listing and I think that that would be certainly a very welcome development and I think that’s been reflected in the feedback that the Government has received so far.


And that’s, you know, sort of some sort of fireside chat, perhaps, is it.


So I think within the sort of antitrust area, that’s, you know, that’s one of the options open to you, isn’t it, to try and go and have a conversation sort of informally, if you like?


That’s right. Yes. I mean, that’s certainly how it’s been phrased in the consultation, whether, in fact, companies would find it more useful to have a slightly more formal process and a little bit more comfort that may be that may be what companies are looking for now.


So, that’s the sort of this new piece of legislation, which, of course, came into force as people may know, at the beginning of this year, in terms of the sort of the mandatory notification regime, which exists around M&A transactions, so we just touched there on IPOs.  Just turning to an M&A transactions, because I am conscious a lot of our audience, you know, there’ll be working with companies that are looking to grow by acquisition.


What effect is the is this new regime, this new Investment National Security Investment Act having on M&A transactions in practice Paul?


Thanks, Mark. Yes, well this act is very broad in scope.


It applies to any acquisition of a business or assets, and it allows the Government to investigate those acquisitions on national security grounds.


The Act includes a mandatory notification regime where a business that’s being acquired is active in one of certain specified sensitive sectors.


And there are 17 of those sectors. And so, you can see that it has a very broad scope.


And in practice, we’re seeing it come up on most M&A transactions, because no one wants to be in a situation where they were required to make a mandatory notification to the Government and didn’t do so.


So, that’s usually the first question: are we within the mandatory notification regime?


And, although we have regulations and guidance, and the answer to that question is not always clear cut.


And so, it can take some time and a little bit of drilling into the nature of the target’s business to work out whether you’re in or out of the mandatory notification regime.


Even if you’re outside, it’s still open to the Government to investigate.


And so, in cases of uncertainty, we’re certainly seeing companies considering making a voluntary notification, in order to have comfort that the Government aren’t going to come along later down the track and want to open an investigation.


Yes. Because I suppose the idea that you go ahead thinking the regime does not apply, completes your transaction only to find out later, that it gets called in, you know, that’s a bit of a disaster scenario.


Yes, absolutely. The Government can investigate after completion.


And they can if they find concerns, they can require the parties to unwind the transaction.


So, that is obviously quite a significant transaction risk.


And if there is, if there is any doubt, then parties tend to want to make a voluntary notification to avoid that risk. Yes, I mean, I should say that Paul and I we’ve had a couple of these already, the regime was with sort of, you know, well trailed.  So, last year, we started looking at this and as a firm, we’re very active within the data centre space, also, within sort of, IT services and software and these are two areas which very much are, you know, within scope and we do need to be thinking about them quite carefully.


And we did participate through Tech UK, in sort of contributing to some of the consultation around defining what the sensitive sectors mean, but it still, even having participated in that process, there’s still quite a lot of learning to be doing in terms of how it applies in practice. And that’s really for, I suppose the next year, and the years ahead.


Yeah, absolutely, Mark, I think, you know, we’re at the very early stages of the regime.


I think once we see some notifications going in and hopefully some decisions and further guidance that may give us a little bit more certainty about where the regime is going.

Thank you.

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