Following interim Regulations implementing the Takeover Directive, new disclosure requirements are now in force and apply to the directors’ reports of relevant companies for financial years beginning on or after 20 May 2006. The requirements have therefore applied to many companies with June 2007 and September 2007 year ends.

In recent weeks the Financial Reporting Review Panel has identified a small number of publicly traded companies that have not provided the new disclosures required by the Takeover Directive in their directors’ reports.

The Panel is therefore drawing attention to these new requirements as a reminder to the many Directors who are currently preparing their December 2007 annual reports and accounts.

Part VII to Schedule 7 of the Companies Act 1985, as revised by the Companies Act 2006, sets out matters to be dealt with in Directors’ Reports. The new disclosures apply to publicly traded companies that have securities carrying voting rights admitted to trading on a regulated market at the end of their reporting period. The requirements do not apply to AIM quoted companies or to companies whose traded securities carry no voting rights.

The new disclosures include, but are not restricted to, information about:

• Structure of the company’s capital including the rights and obligations attaching to each class of share.
• Any restrictions on the transfer of securities in the company or on voting rights and any agreements that are known to the company between holders of the company’s securities and which may result in such restrictions.
• Details of each person with a significant direct or indirect holding of securities in the company and the size and nature of the holding.
• Any rules that the company has about the appointment and replacement of directors or amendments to the company's articles of association.
• Powers of directors, including in particular any powers relating to the issue or buying back by the company’s of its shares.
• Details of each person who holds securities carrying special rights with regard to control of the company and the nature of the rights.
• Where the company has an employees' share scheme and shares relating to that scheme have rights regarding the control of the company that are not directly exercisable by the employees, how those rights are exercisable.
• Any significant agreements to which the company is party that take effect, alter or terminate upon a change of control of the company following a takeover bid, and the effects of any such agreements (other than any agreement where disclosure would be seriously prejudicial to the company and the company has no other obligation to disclose it).
• Any agreements between the company and its directors or employees providing for compensation for loss of office or employment that occurs because of a takeover bid.

Relevant disclosures are required irrespective of whether or not a bid is contemplated.

1. The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the Committee on Corporate Governance.
2. The role of the Panel is to examine the annual accounts of public and large private companies to see whether they comply with the requirements of the Companies Act 1985 (‘the Act’), including applicable accounting standards. Following implementation of the Accounting Regulation (EC) No. 1606/2002, this may mean compliance with UK or International Financial Reporting Standards.
3. Where breaches of the Act are discovered the Panel seeks to take corrective action that is proportionate to the nature and effect of the defects, taking account of market and user needs. Where a company’s accounts are defective in a material respect the Panel will, wherever possible, try to secure their revision by voluntary means, but if this approach fails the Panel is empowered to make an application to the court under section 245B of the Companies Act 1985 for an order for revision. To date no court applications have been made.
4. The new disclosure requirements were implemented by SI 2006/1183 ‘The Takeover Directive (Interim Implementation) Regulations 2006 and were transferred into Schedule 7 Part VII of the Companies Act 1985 by section 992 of the Companies Act 2006.
5. The Chairman of the Panel is Bill Knight and the Deputy Chairmen are Ian Brindle and Ian Wright. There are currently 27 other Panel members drawn from a broad spectrum of commerce and the professions. Individual cases are normally dealt with by specially constituted Groups of 5 or more members.
6. All Press enquiries and consultation responses should be directed to: Carol Page tel: 020 7492 2460 or at c.page@frc-frrp.org.uk