Company Secretary Snapshot - February 2024

Welcome to February’s snapshot. This month we’re looking at the latest government consultations affecting the sector, new powers for Companies House, the latest voting guidelines for shareholders and more. Enjoy!

Social Housing Regulation Act 2023 update

Government launches consultation on Competence and Conduct Standard

On 6 February 2024, the Department for Levelling Up, Housing and Communities (DLUHC) launched a consultation on the Government’s proposed direction to the Regulator of Social Housing to set a new Competence and Conduct Standard (the Standard) for RPs. The Government is seeking views on:

1. The wording in the Direction, which sets the broad requirements for the Standard relating to the competence and conduct of all social housing staff.
2. Who is in scope of the qualification element of the Standard, and who is out of scope. The Government has proposed that those in scope must spend a significant portion of their time exercising their responsibilities for housing management services.
3. Criteria that qualifications must meet, including the level and type of qualifications required, and the course content that must be covered.
4. What constitutes “working towards” a qualification for the staff of RPs.
5. The Government’s proposal that the relevant persons and senior managers must begin working towards qualifications within a two year period.
6. Transitional arrangements for partially compliant qualifications and apprenticeships. The Government has made proposals for adjusted qualification requirements for individuals who have qualifications or apprenticeships which partially meet the qualification requirement.
7. Requirements for RPs in respect of the relevant managers of services providers.

It is proposed that the new Standard would take affect from 1 April 2025. The documentation and proposed requirements are complex, and so we recommend RPs set aside time to review and assess the implications to their organisation as soon as possible, and respond to the consultation via online survey. The consultation closes on 2 April 2024.

Awaabs Law – Consultation

On 9 January 2024, DLUHC issued a consultation regarding the proposals and implementation of Awaab’s Law. The consultation will close on 5 March 2024. For more information about the consultation and how you can input your thoughts please read our article.

Direction on the Regulatory Standards (Provision of Information)

On 19 January 2024, the Secretary of State issued a Direction on the Regulatory Standards (Provision of Information). This will be captured in the updated consumer standards. 

Other updates are considered in our article “Social Housing landlords – are you ready for what’s happening?” which you can access here.

Guidance to the UK Corporate Governance Code 2024

Last month we noted that the Financial Reporting Council (FRC) had published a revision to the UK Corporate Governance Code (the 2024 Code). Since then, the FRC has published its guidance to the 2024 Code.

The purpose of the guidance is to support those organisations that adopt the 2024 Code and to “stimulate boards' thinking on how they can carry out their role in governing the company effectively”. The guidance covers each of the key changes that we highlighted last month as well as highlighting some key questions for the boards to consider such as:

• What proportion of board time is spent on financial performance management versus other matters of strategic importance?
• How have the culture, values and desired behaviours been reinforced in our recruitment, promotion, reward, performance management and other policies, processes and practices?

The FRC states that:

• The guidance is not intended to be prescriptive and should not be used as tick-box list of actions which should be followed in every situation.
• It is for individual boards to decide on the governance arrangements most appropriate to their company’s circumstances, applying the Principles of 2024 Code and complying, or when appropriate, explaining why it has chosen to depart from one of the Code's Provisions.
• The guidance is not mandatory, and not part of the 2024 Code itself. It contains suggestions of good practice to support the application of the 2024 Code.

Economic Crime and Corporate Transparency Act 2023 – Updates to Companies House Powers

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) introduces a number of changes to company law, aimed at preventing abuse of UK corporate structures and tackling economic crime. This includes:

Providing Companies House with a series of objectives aimed at promoting the integrity of its registers

The Registrar (Annotation, Removal and Disclosure Restrictions) Regulations 2024 (the ARDR Regulations) have now been published and laid before Parliament to assist with this.

Under the ECCTA, Companies House may remove information from the registers of companies and LLPs where such information is unnecessary or inconsistent with other information. The decision to remove material can be made by Companies House or by an individual making an appropriate application. The ARDR Regulations make provision for

• the required contents of applications for removal;
• the notices required to be given in connection with applications to remove material and/or notices required for decisions to remove material;
• periods within which people may object to the removal of material; and
• the annotation of registers by Companies House with information that appears to be appropriate to address any confusion that may arise, where material previously considered to be part of the register is no longer considered to be part of the register.

The Regulations will come into force on the day that section 85 of ECCTA comes fully into force. Companies House have indicated that this will be 4 March 2024.

Companies House to get powers to impose financial penalties

As part of the ECCTA reforms, Companies House is enabled to impose financial penalties directly (as an alternative to criminal prosecution). The Economic Crime and Corporate Transparency Act 2023 (Financial Penalty) Regulations 2024 (the FPR Regulations) have now been published and laid before Parliament.
 
Briefly, the FPR Regulations:

• Set out the powers of Companies House to impose financial penalties.
• Set out the processes for Companies House to issue warning notices and penalty notices.
• Allow Companies House to vary or revoke a penalty notice, as Companies House considers. appropriate. The maximum financial penalty that can be imposed under these regulations is £10,000.
• Describe the appeal process for a person receiving a penalty notice and the related time limits.
• Allow Companies House to recover the financial penalty (with accrued interest) after the expiry of the period in the penalty notice.

Government launches call for views on Cyber Governance Code of Practice

The Department for Science, Innovation and Technology has launched a call for views on a draft Cyber Governance Code of Practice, to support directors in driving greater cyber resilience. The Code has been co-designed with industry leaders and technical experts at the National Cyber Security Centre and focuses on the most critical areas that leaders must engage with, forming simple, actions-focused guidance, making it easier for directors to understand what actions to take. The Government has explained that the cyber governance Code of Practice aims to “bring together the critical governance areas that directors need to take ownership of in one place, in a form that is simple to engage with, for organisations of all sizes”.

To participate in the above, Governance and IT teams should complete the online survey. The survey will close on 19 March 2024. 

PLSA Stewardship and Voting Guidelines 2024

On 15 February 2024, the Pensions and Lifetime Savings Association (PLSA) published its 2024 stewardship and voting guidelines:

These guidelines are a notable indicator of issues that lenders and investors consider in their own strategies, and are helpful guides for RPs as to wider best practice. 

Amendments to the 2023 guidelines include:

• Cybersecurity. The guidelines highlight the need for companies to manage increasing cybersecurity risks through implementing appropriate governance and oversight structures.
• Artificial intelligence. Section 4 (Audit, risk and internal control) is expanded to highlight opportunities and risks associated with the rise of AI, including in the employment space.
• Climate change and sustainability. Section 6 is expanded to address the importance of biodiversity loss and the need to treat this with the same prominence given to climate change.
• Social factors. Section 7 is expanded to consider social issues (such as health and safety in supply chains, modern slavery, product quality and safety, privacy and data security and community engagement) and to highlight examples of good company behaviour in this area.

ISS 2024 proxy voting guidelines updates

Institutional Shareholder Services (ISS) has published updates to its proxy voting guidelines for 2024. Like the PLSA guidelines, the ISS guidelines give can give RPs an indication of what benchmarks investors consider when applying principles of good corporate governance.

Amendments to the ISS 2023 guidelines include:

• The recommendations relating to voting against the chair of the nomination committee (or other directors on a case-by-case basis) in connection with the gender and ethnic diversity of the board have been updated to remove the guidelines that applied to companies with financial years beginning on or after 1 April 2022.
• The recommendation on board independence has been updated to provide that a significant shareholder is recognised as a holding of 3% or more.

CGI terms of reference for sustainability or ESG committees

The Chartered Governance Institute UK & Ireland (CGI) has published a guidance note on terms of reference for sustainability or ESG committees, which includes a model set of terms of reference.

The guidance sets out how to ensure sustainability or ESG committees adopt good practice in accordance with the other committee recommendations in the 2024 Code. CGI states that the model terms of reference can be adapted to a company's own needs and allow a company to:

• Base the committee's activity and scope on good practice
• Tailor the committee's role to the business needs and context of the company.
• Be flexible to encompass changing regulatory, investor and stakeholder demands.
• Clearly set out and define the committee's remit, in particular, by highlighting certain areas which may overlap with the remit of other committees.

Responsibility for ESG and sustainability may not always sit in one committee which can have obvious implications for what is covered in each committee’s remit. Being clear about which committee is responsible for which aspects of ESG and sustainability is a key consideration.

Regulatory grades

Our review of regulatory upgrades/downgrades in the sector has highlighted the following themes:

• Upgrade to Financial Viability resulting from:
  • Provision of greater certainty regarding interest costs due to securing new finance.
  • Adequately funded business plan with sufficient security to support borrowing requirements
  • Forecast to continue to meet financial covenants.

AOB

Legal Update Service

As you will be aware, all RPs are required to meet the Governance and Financial Viability Standard requirement to comply with ‘all relevant law’, and make certifications in their annual accounts in respect of this.

With so much change in the sector at the moment, it can be difficult to monitor, interpret and implement requirements. We offer a variety of services to enable you to demonstrate compliance, including a subscription-based legal update service covering key legal, regulatory and policy changes within the social housing sector.

Our approach has been created in partnership with the sector, for the sector, and moves away from a ‘tick box’ approach to a meaningful tool, enabling you to:

• integrate the product into your control and risk management frameworks
• easily and quickly identify priority actions and access tools to assist with this
• empower and inform your teams to take responsibility for effecting such actions
• confidently report back to your Board on key risks areas and how these are being addressed.

To find how you can subscribe to our legal update service, please contact Diarmaid O’Sullivan, Associate.

NHF Housing Finance Conference – 13-14 March

Are you or your colleagues attending the forthcoming NHF Housing Finance Conference in Liverpool? Our Housing Finance team will be in attendance, with our Joint Head of Housing – Louise Leaver presenting alongside Pobl Group, UK Infrastructure Bank and The Housing Finance Corporation on How to fund your retrofit project.  We hope you can join us and look forward to seeing you during the Conference.