In one of our previous blog posts, we explored some of the effects that the #MeToo movement of recent years could have on relationships in work settings – including whether the ‘office romance’ may be set for decline.

There were certain questions that we didn’t address in that piece, however, with one of these being what would constitute a serious, long-lasting and therefore relatively ‘acceptable’ relationship in the workplace.

This is as opposed to the romantic relationships and affairs in direct reporting lines or those which create conflicts of interest, which tend to be much more frequently frowned upon. In short, is it possible for employers to effectively police what can be considered an ‘acceptable’ workplace relationship?

Employers are presented with a difficult balancing act

The management of workplace relationships can be a real dilemma for many organisations.

As an employer yourself, you may be concerned to ensure that business interests are protected, employee productivity and morale maintained, and conflicts avoided. But it is also necessary for an employer to respect an employee’s right to a private life.

This in turn raises the question of whether employer practices that interfere with the right of an employee to form relationships infringe the right to respect for private and family life under Article 8 of the European Convention on Human Rights.

What other concerns are businesses likely to have?

Another reason employers need to carefully consider issues that arise around employee relationships, is so that they are not left vulnerable to claims for unfair dismissal.

There are certain circumstances in which a relationship between employees may constitute a fair reason for dismissal, particularly where this would represent a breach of a consistently and notoriously applied company policy.

However, employers still need to follow a fair process and ensure consistency with regard to how they handle office romances, which should include first considering alternative options to dismissal.

The employer may consider whether the employee in question could be redeployed, for example, or whether reporting lines could be altered to avert a potential conflict. If such a conflict is identified, the employer should also consider whether this would give rise to a real commercial risk.

There are various means by which employee relationships may be dealt with fairly

While policies addressing workplace discrimination and sexual harassment remain imperative, an employer may also consider putting in place policies that set out acceptable standards of conduct with regard to consensual relationships between employees.

Some employers may adopt a stance, for example, of completely prohibiting employee relationships, especially in circumstances where a conflict of interest may arise – for instance, when there is a difference in seniority between the employees involved.

For other employers, however, the expectation may simply be that employees disclose any relationships with colleagues to HR.

Then, there is the situation in the United States, where firms sometimes use so-called “love contracts” or “consensual relationship agreements” to get employees to confirm that the given relationship is consensual. This particular measure is designed to give the employer a degree of protection against any future sexual harassment and discrimination claims.

Managers may also benefit from training in relation to how to deal with disclosures about consensual relationships and reports of sexual harassment, which could help to address any possible issues before they arise.

Ask us how we could assist you with the preparation of suitable policies

Whatever decisions you ultimately make as an employer to tackle issues like these, you will stand the best chance of avoiding workplace conflicts in the context of employee relationships if you have clear policies in place from the outset of the employment relationship, outlining acceptable standards of conduct. Such policies should also be consistently applied in case of any issues.

Our team here at London Registrars is well-equipped to help organisations to devise the most appropriate policies for dealing with employee relationships.

To learn more about our wide-ranging company secretarial and other business and legal support services – also encompassing company secretarial practice for PLCs – please do not hesitate to call us on 07415 107 436, or to email us your query.

April 2020

There is never a greater need for clear leadership, strong governance and informed decision-making than in times of trouble, as firms seeking company secretarial subscriptions – one of London Registrars’ core services – have had reason to appreciate in recent weeks.

Widespread disruption to working practices, as well as frequently changing resource demands, necessitate new forms of management and control. This is all the more reason for your organisation to carefully consider the various elements of its corporate governance during such testing times.

Management information

The present circumstances may have disrupted your company’s usual flow of management information.

Boards planning their route through the current emergency with a view to reactivating their full business activities will therefore need to consider how they can maintain and/or complement such missing information, as can also be crucial for the preparation of financial statements.

Risk management and internal control systems

The movement of staff and some business locations being rendered inaccessible may lead to the relaxation of existing risk management processes and internal controls.

Such changes may be unavoidable or regarded as necessary to preserve some level of operations in the short term. However, we would advise boards to carefully monitor these changes while implementing any alternative mitigation controls needed to ensure an effective control environment.

Dividends and capital maintenance

While many firms have already sought to support their balance sheets and maximise financial flexibility by adjusting their approach to dividends and shorter-term dividend policies, other companies may have proposed, but not yet made, a dividend.

If the latter is the case for your organisation, it is crucial for directors to consider the company’s position – not only at the time of the dividend being proposed, but also when it is made. If the company is no longer able to pay a dividend, any such plans should be halted by the directors, with this being appropriately communicated to the market.

Corporate reporting

Investors’ key information requirements are those related to companies’ liquidity, viability and solvency. However, it is also difficult for boards to easily predict how long or damaging the COVID-19 pandemic will be, including its impact on the global economy.

Nonetheless, investors can still reasonably expect companies to be able to articulate what they expect the potential impacts to be on their particular business in a range of scenarios.

The Strategic Report

While it is always crucial for the Strategic Report to be forward-looking, this importance heightens in crises like the present one. An entity-specific approach should also be taken, given that while all businesses and individuals will be affected by COVID-19, there will likely be significant differences in the critical implications from one company to the next.

This, in turn, means different organisations will need to set out different plans for mitigating the effects of the Corona virus. Firms will also vary in their capacity to follow such plans and the level of resources they have to withstand the ongoing effects of the pandemic.

Would you like to take advantage of the first-hand know-how in these aspects of corporate governance that the London Registrars team can lend you? If so, please note that we remain available to serve your firm’s wealth of requirements, including through company secretarial subscriptions, when you contact our professional and friendly team.

April 2020

Considerable disruption to companies’ usual management and governance processes has taken place as a result of the unprecedented uncertainty brought about by the COVID-19 outbreak.

So, when boards are looking to maintain strong corporate governance in such a time of crisis, what should some of their key focus areas be with regard to the preparation of their annual report and other corporate reporting?

The main steps that boards should take

There are various measures that we would advise boards to adopt during this time to ensure the highest possible standards of corporate governance are maintained within their companies.

Such steps should include the development and implementation of mitigating actions and processes to ensure the continuation of an effective control environment. You are urged to look afresh, for example, at key reporting and other controls that you may have historically depended on, but which may not be effective in the current drastically changed circumstances.

It is also important to think about how you will continue to secure reliable and relevant information for your management of the future operations, including the flow of financial information across major subsidiary, joint venture and associate entities.

Capital maintenance also ought to be a significant priority for boards at this time of crisis. You must ensure, for instance, that sufficient reserves are available at the time of the payment of the dividend, rather than merely when it is proposed. Furthermore, there have to be sufficient remaining resources to meet the company’s needs.

What about your firm’s corporate reporting during this time?

It is especially difficult right now to make forward-looking assessments and estimates for the purposes of financial statements and other corporate reporting.

We would therefore advise boards to focus most on those areas of reporting that are of particular interest to investors, as well as to provide clarity around their use of key forward-looking judgements.

It is especially crucial in the present moment, for instance, for narrative reporting to provide forward-looking information that is specific to the entity, and which is insightful in relation to the board’s assessment of business viability and the methods and assumptions that underpin this assessment.

There are also going concern and associated material uncertainties to consider, and certain matters to think about when confirming the preparation of the financial statements on a going concern basis.

Also heightened during this time of crisis, is the importance of providing information on the significant judgements applied when financial statements are being prepared, in addition to sources of estimation uncertainty and other assumptions made.

Finally, companies will also need to determine the appropriate reporting response to events after the reporting date, and the extent to which it may be appropriate to make qualitative or quantitative disclosures.

Don’t hesitate to seek out London Registrars’ company guidance and services

Here at London Registrars, we are pleased to be continuing to provide organisations with the benefit of a comprehensive range of company secretarial services during this time of uncertainty.

Contact our professional, capable and friendly team today to discuss your requirements in relation to such services as the maintenance of statutory registers, ensuring timely filings at Companies House, and forwarding any mail received from Companies House, HMRC and the Courts Service.

April  2020

 

It has been just over two years since the widespread allegations of sexual abuse against film producer Harvey Weinstein effectively launched a whole new era, summed up by the hashtag #MeToo.

The movement has largely focused on non-consensual actions such as discriminatory treatment, sexual harassment and assault. However, recent developments have shown that there could be reason for concern even in instances where relationships between colleagues are consensual.

The case of McDonald’s and Steve Easterbrook

Late last year, US fast food giant McDonald’s fired the British businessman, Steve Easterbrook, who had served as its president and chief executive since 2015, after he had a relationship with an employee. While the corporation said the relationship was consensual, it added that he had “violated company policy” and shown “poor judgement”.

Mr Easterbrook delivered considerable success for the company over his four-year spell at the helm, with the corporation’s share price reportedly doubling during this time.

Details about the relationship were not disclosed. However, it appears that McDonald’s has a standard policy prohibiting dating or sexual relationships between employees who have a direct or indirect reporting relationship, and that it has decided to take a zero-tolerance approach.

What it could all mean for firms – including your own

Office romances are hardly a recent phenomenon, of course, and nor will Mr Easterbrook be the last employee to be involved in one. Indeed, it has been said that between a quarter and a third of all long-term relationships begin in the workplace.

In the #MeToo era, however, such relationships raise difficult questions, including whether they are ethical or should be characterised as misconduct, or even gross misconduct. In association with this, many have asked whether dismissals for behaviour like Mr Easterbrook’s will become more frequent.

#MeToo has undoubtedly served to heighten awareness of these issues, which may lead to the adoption of more hard-line approaches by employers. Furthermore, with many relationships today now starting online, one might ask whether the office romance will become less common, thereby encouraging employers to be less tolerant when issues with workplace relationships do occur.

There’s no question that relationships between workers are often problematic for employers. They can cause disruption and discomfort among co-workers, while also undermining team hierarchy and impacting on retention. Conflicts of interests can also arise, and if a workplace relationship ends badly, there can be a heightened risk of dispute and litigation.

Turn to London Registrars for the most informed assistance and advice  

Is this an area of concern for your own organisation, and are you presently considering the best ways for your firm to respond to the challenges that employee relationships can pose?

If so, you may wish to talk to the London Registrars team about how we can provide the business support services to help – including by assisting in the preparation of appropriate policies. Call 020 7608 0011 or email [email protected] today, to learn more about our specialist expertise.

11 March 2020

 

If you find yourself involved in a small claims dispute in the civil courts, you may be interested in a free service known as the Small Claims Mediation Service.

Introducing the Small Claims Mediation Service

As its name suggests, the Small Claims Mediation Service exists to help parties to attempt to resolve a small claims dispute without it going to court. For these purposes, a small claim is defined as a money claim for below £10,000.

It is important to appreciate, first of all, that a mediator is not a judge. They are not responsible, in other words, for deciding who is right or wrong, and they do not take sides.

They may not be very knowledgeable about the claim, and are often not trained in law or possess any particular legal expertise. Instead, mediators are known for their negotiating skills, which enable them to assist the parties in disputes to reach settlement terms.

The mediator will seek to break down barriers between the parties and encourage them to outline what it is that each of them is seeking. This will then allow the mediator to explore whether any middle ground exists that could create scope for a deal to be struck.

Mediation is a route with a proven track record of helping parties involved in small claims disputes to resolve their disagreement and reach terms of settlement, as an alternative to going all the way to trial. While it is by no means guaranteed that any given claim will settle at mediation, many claims do.

When should you consider using this service?

 It is best for mediation to take place at the earliest opportunity, for the benefit of everyone concerned. The settlement of a case after a defence has been filed will mean there is no need for witness statements and documents to be prepared, as well as – of course – the trial itself.

Successful mediation will therefore save time and expense for not only the two parties, but also the court service.

While judges cannot force parties in a small claims case to use the service, they can encourage the parties to take advantage of this alternative dispute resolution procedure.

As a general rule, it is recommended that the parties involved in a small claims dispute try this court-provided mediation service, not least given that it is – after all – free.

Ask us for further guidance and support in relation to the running of your business

 Our team of business support professionals and company incorporation agents here at London Registrars can play an integral role in helping you to get more out of your company’s operations.

Don’t hesitate, then, to enquire today about our company secretarial, business formation and other support services that could make a significant difference to your efforts to power your firm to success in 2020 and beyond.

4 March 2020

The Financial Reporting Council (FRC) has published its annual review of the UK Corporate Governance Code. In doing so, it urged firms to enhance their governance practices and reporting in order to demonstrate their positive impact on the economy and wider society.

What have firms been told to do?

The independent regulator said that while the bar had been raised ‘considerably’ by alterations to the 2018 UK Corporate Governance Code leading to some high-quality reporting, there was a need for more emphasis to be placed on longer-term sustainability.

Such a sustainability focus, the body said, needed to encompass such matters as stakeholder engagement, diversity and the importance of corporate culture, and that it expected these changes to ‘take time to bed in’.

The UK Corporate Governance Code was updated to aid in building trust in business by forging strong relationships with key stakeholders. It urged firms to align purpose, strategy and culture in addition to promoting integrity and valuing diversity as part of a focus on long-term sustainability.

The FRC’s annual review looked into reporting against the 2016 Corporate Governance Code and assessed FTSE 100 ‘early adopters’ of the modified 2018 Code. This revised Code came into force in 2019, with all premium listed companies set to report against it in 2020.

Some eye-catching highlights in the FRC’s analysis  

The regulator said it had found some good examples of reporting by firms that were increasingly using incentives relating to non-financial matters and embracing a longer-term strategic perspective.

Many companies, however, were evidently grappling with defining purpose, and what an effective culture means, the body criticising some firms for ‘substituting slogans or marketing lines for a clear purpose’.

The FRC added that the companies it examined were still insufficiently considering the importance of culture and strategy and the views of stakeholders. It said that in the wake of the regulator’s 2016 report on culture, organisations should be commenting on culture, in addition to outlining how they are monitoring and assessing it.

A lack of reporting on diversity also disappointed the regulator, which nonetheless said that “those companies that did report well had clear plans to meet targets – beyond just gender – and understood the long-term value of diversity”.

It was noted, too, that many firms described the use of engagement surveys as an effective means of gaining insight into employee engagement and culture. However, while the FRC said such surveys can be useful, it warned against the use of them in isolation, explaining that “companies must be able to demonstrate that the engagement methods used are effective in identifying issues that can be elevated to the board, and how this affects company decisions.”

Companies urged not to pay mere ‘lip service’ to the Code 

Chief executive of the FRC, Sir Jon Thompson, said of the review’s findings: “While there are examples of high quality governance reporting from ‘early adopters’, looking ahead, we expect to see much greater insight into governance practices and outcomes reporting on a range of key issues from diversity to climate change.”

“Concentrating on achieving box-ticking compliance, at the expense of effective governance and reporting, is paying lip service to the spirit of the Code and does a disservice to the interests of shareholders and wider stakeholders, including the public.”

Are all aspects of your own organisation’s governance and reporting well aligned with the principles of the latest UK Corporate Governance Code, or would you possibly benefit considerably from the know-how in this area of our own experienced professionals here at London Registrars?

Either way, we would be delighted to talk to you about our wealth of company compliance services, to help to ensure that the most specific and demanding aspects of corporate governance are not a cause of headache to you and other stakeholders in your organisation in 2020. Simply email [email protected] or call 020 7608011 for further information.  

23 January 2020

 

 

On 12 September 2019, the Quoted Company Alliance (QCA) released a new and updated version of its Audit Committee Guide. This updated version of the guide, which is designed to help audit committee members, and especially the audit committee chair, to be more effective in their roles, succeeds the version dated November 2014.

The Guide outlines what the QCA regards to be best practice and is intended to accompany the organisation’s Corporate Governance Code.

How does the Guide differ from the 2014 version?

There are various respects in which the newly published Guide has been altered compared to its predecessor – including on such subjects as audit committee effectiveness, roles and responsibilities, risk management and internal control.

The new Guide, for instance, states that audit committees are most effective when they consist of a minimum of two independent non-executive directors. It underlines the importance of an adequate balance of skills, as well as the need for ongoing improvement.

Meanwhile, the updated Guide has also expanded the roles of the audit committee, its chair, the finance director and the company secretary. In this section, which will be of interest to those considering or drawing upon London Registrars’company secretarial expertise, the document states that the company secretary is not normally, and should not be, a committee member. Nor, unless this is impractical, should the company secretary be the finance director.

The parts of the document dedicated to risk management and internal control has also undergone significant expansion. It recognises, among other things, the dynamic and evolving risk landscape and the requirement for companies to think about risks in their extended business.

Building on this subject, it is advised in the Guide that the audit committee obtains a clear understanding of threats and opportunities, their potential impact and monitoring. Every committee meeting should also consider any new risks and any changes to the impact of risks.

The 2019 version lacks the anti-bribery and anti-corruption section that was contained in its 2014 counterpart, and the whistle-blowing section has also been reduced.

But those are not the only notable changes 

Looking elsewhere in the Guide, a new section has been introduced on the subject of the audit committee’s relationship with external auditors, largely incorporating guidance from other sections of the 2014 version. New provisions are outlined here on tendering.

The annual cycle is also addressed in the latest document, this section’s guidance largely resembling that of the previous version. Further guidance does appear, however, in relation to new accounting policies, the payment of dividends and the audit opinion.

There is also a section on the audit committee report, covering additional features of the report. These features are with regard to auditor rotation, appointment, tendering, the risk and control framework and processes, and the internal assurance or audit function.

Finally, changes can also be found in the appendices: Appendix A (Work programme for the audit committee), which includes additional agenda items for the sixth month of the financial year in relation to approving audit fees and non-audit service provision policy, and Appendix B (Induction framework information pack). The information in Appendix B was previously included in the body of the Guide.

Contact London Registrars for further related guidance and know-how

There is much in the Guide that is of relevance to non-listed companies and we would advise you to consult London Registrars who can also give you the benefit of more comprehensive assistance and advice in respect of any of the points contained in the document.

Call our experienced professionals today on 020 7608 0011, to discuss the far-reaching company secretarial support that we can provide to free you up to focus more closely on your core business.

13 January 2020

Late October saw the Financial Reporting Council (FRC) publish the final draft of the UK Stewardship Code 2020, with various notable changes having been made to the consultation draft that will be of interest to organisations making use of London Registrars’ company secretarial services.

What changes have been made?

Among the alterations made to the previous draft are amendments to the definition of stewardship, to clarify that the purpose is to create value for clients and beneficiaries as opposed to the beneficiaries, the economy and society as the previous draft stated.

Indeed, the Code now defines stewardship as “the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and the society”.

The 2012 Code had 10 ‘comply and explain’ principles with supporting provisions, supported by detailed guidance.

The new Code has been substantially restructured, so that it now consists of 12 ‘apply and explain’ principles for asset owners and six ‘apply and explain’ principles for service providers, with reporting obligations for both.

But these are not the only significant edits

The final draft of the 2020 Code also incorporates an introductory statement that reporting should be fair, balanced and understandable, with examples of successful and unsuccessful outcomes.

Removed from this draft, meanwhile, is the requirements for a separate policy and practice statement on signing up to the Code.

Another significant change is the addition of a further reporting expectation that asset owners and managers must disclose the proportion of shares voted in the past year, and why.

As for the FRC’s proposed mechanism for investors to escalate concerns about an investee company in confidence, the FRC said it had shared responses to this consultation question with the Department for Business, Energy and Industrial Strategy (BEIS) for their consideration.

With regard to enforcement, the FRC stated that it would grow its stewardship team and work with BEIS to keep enforcement and regulatory powers under review.

The new version of the Code will take effect from 1 January 2020.

Ask London Registrars about their company secretarial support services

If you are seeking to position your company advantageously for success in the months and years ahead, do not hesitate to talk to the London Registrars team today.

We will provide the company secretarial services and expertise necessary to ensure your firm benefits from the highest standards of compliance and governance throughout 2020.

13 January 2020

Many of those who set up a company with the assistance of London Registrars may be interested to learn more about the UK’s coming Digital Services Tax (DST), which – while not yet in force – is expected to apply from 1 April 2020 to profitable high-tech businesses making sales in Britain.

What is the Digital Services Tax?

First announced in the 2018 Budget, the DST is a new 2% tax that will be levied on the revenues of search engines, social media platforms and online marketplaces that derive value from UK users.

While the obvious targets for such a tax are American tech giants like Amazon, Apple, Google and Airbnb, examples have been found of other companies that are likely to be subject to the DST.

The European Commission was the first entity to propose a DST in response to the increasing digitalisation of the economies of the European Union (EU). However, the UK is set to become one of the first territories to implement the tax in its domestic legislation.

France has already approved a temporary DST, levying a tax of 3% on the turnover of companies with digital business in the country that have digital business models and revenues exceeding €750 million globally and €25 million in France.

Meanwhile, in the UK, DST will apply to qualifying firms for which a double threshold has been reached, of £25 million annual UK turnover and £500 million annual turnover worldwide. A 2% charge will be imposed on the UK revenues of the aforementioned ‘specific digital business models’ of search engines, social media platforms and online marketplaces.

Is your own company likely to be subject to this tax?

Those who have set up a company and are curious as to whether they may be affected by DST should note that it is applicable to revenues rather than profits. This differs from corporation tax protocols, where tax is charged on profits instead of turnover.

Put simply, a digital business that generates more than £500 million turnover worldwide is likely to find that its UK trade is within the scope of the DST; however, the first £25 million of its UK sales will be tax-exempt.

Will non-UK incorporated and/or non-UK resident companies be affected?

The UK’s approach to the new tax is narrower than that applied in France, with the provision of a social media platform, search engine and online marketplace being regarded as a taxable business activity for the purposes of DST.

A non-UK resident company providing digital services to its UK customers who use the company’s services online from the UK will therefore be within the DST’s scope in the same way as a UK-resident firm.

How are gambling businesses impacted?

In principle, it is thought that DST should apply to gambling businesses. This is in light of the European Commission specifically clarifying that neither online gambling nor gambling companies should be excluded from the legislative framework for DST.

Then, there is the matter of the UK, EU and US

The British government has said that it will only apply DST when an appropriate long-term solution – for example, an international agreement – is in place. However, it is far from certain as to when this may happen.

Finally, the strong opposition to the French DST voiced by US trade representative Robert Lighthizer – who complained that the tax unfairly targeted American firms – could also have very serious implications for the UK DST, perhaps even ultimately leading to the tax being abandoned altogether.

With the UK set to depart from the EU, hostility from Washington would seem especially pertinent as it is Lighthizer who the UK would need to negotiate with for a future trade deal.

Are you looking to set up  a company and benefit from the highest standard of business support services now and into the 2020s? If so, the London Registrars team would be happy to receive your enquiry about any area of our wide-ranging expertise.

9 September 2019

As a user of company compliance and business address services like those provided by us here at London Registrars, you may have previously encountered references to the ‘three lines of defence’ model. This is a well-established governance framework for risk management and will help your organisation to set out clear roles and responsibilities in this vital area.

The ‘three lines of defence’ model was developed as a result of concerns about the potentially greater risk of accidents in organisations where additional layers of redundancy and safeguards are added.

It was feared that such extra layers could make systems unduly complex, thereby increasing the inevitability of failure. Firms implementing the ‘three lines of defence’ model therefore do so with the aim of defining clear roles and responsibilities, and maintaining separation between those roles, to help prevent accidents.

Defining the three lines of defence

The model sets out three distinct groups within an organisation that are necessary if risk is to be effectively managed. The aim is to provide a simple and effective way to enhance risk management communication through the clarification of essential roles and duties.

The roles and responsibilities are spread across first, second and third lines of defence. The first line of defence concerns functions that own and manage risk.  The second line of defence relates to functions that monitor risk and compliance. Finally, the functions that  make up the third line of defence are those that provide independent assurance on risk management.

The board and senior managers are the primary stakeholders served by these lines. Crucially, the three lines are closely aligned in their work, partnering with each other to ensure the strongest possible risk management.

How can your company ensure the success of this model?

The ‘three lines of defence’ model is as much about the wider system as it is about the individual lines. To implement this risk management model successfully within your own firm, it is vital to freely share information, coordinate activities and keep stakeholders informed.

Information must flow dynamically across the three lines if your organisation is to achieve the best possible results from this model. However, the exact way each line of defence works will depend on what suits your organisation.

For more comprehensive corporate governance, risk and compliance support, and business address services, do not hesitate to contact the London Registrars team.

16 August 2019