Financial Reporting and other rules for UK listed companies eased in light of Coronavirus disruption

Given the unprecedented disruption created by the coronavirus (COVID-19) pandemic that is currently creating market volatility around the globe, certain measures have been announced today in order to ease the financial reporting and other regulatory requirements that apply to both Main Market listed and AIM quoted companies, albeit in different ways. 

Background to measures

During this period of continued disruption, it will be important that both equity and debt capital markets continue to provide a key role in providing finance to listed companies and to aid the inevitable economic downturn. Capital markets rely on timely and accurate information and with the publication of audited financial information being one of the pivotal aspects in ensuring that investors can assess the financial position of a listed company.

Accordingly, measures have been announced today affecting Main Market and AIM Companies as follows:

Joint Statement issued for Main Market Listed Companies 

The FCA, FRC and PRA have today announced a series of measures in a joint statement (which can be found here: and with the key ones being:

Ability to delay publication of annual results for up to two months

The FCA has published a statement today which permits Main Market listed companies to delay the publication of annual audited financial reports from four to six months after the end of the financial year end. This is designed to be a temporary measure whilst the disruption affecting UK capital markets is at its most severe.

The FCA has made it clear that the obligations under the Market Abuse Regulation to make public any inside information in a timely manner will still apply and therefore ensure that investors continue to receive information without delay. Listed companies will therefore still need to consider whether recent and ongoing events related to COVID-19  are having a material impact requiring an announcement to be made. 

Whilst some listed companies may still wish to stick with their current four month reporting timetable due to the nature of their operations, the FCA urges all listed companies to avail themselves of the additional two month period in order to fully assess the impact that COVID-19 may have on their businesses.

Additional measures include:

  • Delaying the filing of accounts by companies - Companies House has issued guidance to permit a delay to the filing of accounts at Companies House by companies. While companies will still have to apply for the three-month extension to be granted, those citing issues around COVID-19 will be automatically and immediately granted an extension via a fast-tracked process. 
  • Postponement of auditor tenders. Companies are encouraged to consider delaying planned tenders for new auditors, even when mandatory rotation is due. 
  • Postponement of audit partner rotation. Key audit partners are required to rotate every five years although, in the current circumstances, the rotation can be extended to no more than seven years and this can be without prior approval of the FRC.  
  • Reduction of FRC demands on companies and audit firms. The FRC will, where possible, delay or extend the deadlines for FCA consultations including, in particular, at least a one month pause on the issue of letters to companies following its review of annual reports and accounts.
  • Extension of reporting deadlines for public sector bodies. HM Government is also in the process of revising deadlines for reporting by a range of public bodies, which will also provide some relief to their auditors. 

Guidance for listed companies

The FRC recognises that a significant number of companies are currently facing unprecedented uncertainty which is affecting their immediate prospects which may challenge or disrupt their usual management and governance processes.

Accordingly, the FRC is encouraging boards to do the following things:

  • Develop and implement mitigating actions and processes. Board should ensure that they can continue to operate an effective control environment; in particular, addressing any key reporting and other controls which may no longer be appropriate in the current environment.
  • Consider how reliable and relevant reporting information may be secured (e.g. from subsidiaries or joint ventures) in order to manage future business operations on a continuing basis.
  • Paying attention to capital maintenance and ensuring sufficient reserves are available. Boards will need to pay attention to when a dividend is made, not just proposed.  

The FRC recognises that making forward-looking assessments and estimates is particularly difficult for listed companies at the current time. The FRC has therefore prepared guidance intended to help companies make key forward-looking judgements as consistently as possible. Feedback obtained from investors by the FCA has also highlighted the desire in the investor community for companies to make disclosures around the financial resources available to them and any stress testing that has been undertaken in respect of forward looking information to support going concern and viability statements. As such, the FCA encourages companies to do so given the current environment.

In addition, the PRA has provided guidance to UK banks, building societies and PRA-designated investment firms regarding the extent to which payment holidays should constitute an event of default or should otherwise attract a lifetime expected loss provision. The PRA has also provided guidance to lenders that they would expect them to treat differently, covenant breaches arising from COVID-19 related matters compared to underlying borrower specific issues when granting waivers in respect of any breaches that have occurred.

Guidance for auditors

The current environment is making it difficult for auditors to obtain appropriate audit evidence as part of being able to give an audit opinion, particularly in overseas jurisdictions where accessing information electronically is especially difficult. 

Inside AIM Notices issued for AIM Companies containing temporary measures relating to COVID-19

The London Stock Exchange (LSE) has recently issued two AIM Notices, one of which contains details of some temporary measures designed to ease requirements around the publication of annual accounts by AIM companies and another to allow flexibility in respect of certain AIM Rules given the COVID-19 situation, which are follows:

Temporary measures for publication of annual audited accounts

The LSE issued an AIM Notice earlier today which contains certain temporary changes relating to an AIM company’s obligation to publish annual audited accounts in accordance with the AIM Rules for Companies. This follows in the light of recent events surrounding COVID-19 and for the reasons outlined above relating to the issue of the Joint Statement to Main Market companies.

AIM companies currently have six months after the end of their financial year to publish their annual audited accounts, which is consistent with the legal filing deadline for UK incorporated public companies under the Companies Act 2006. 

However, given the joint initiative of the Department of Business, Energy & Industrial Strategy and Companies House, to allow UK companies to apply to Companies House for a three month extension of the legal filing deadline as outline above and, in order to assist AIM Companies in the preparation of their annual accounts in the current difficult circumstances, an AIM Company will also be able to apply to AIM Regulation for a three month extension to the reporting deadline for the publication of its annual audited accounts. This extension will be available for AIM Companies whose financial year ends between 30 September 2019 to 30 June 2020. At present, the LSE will keep under review the operation of the AIM Rules and, in particular, the requirements for reporting of half yearly reports under AIM Rule 18.

The nominated adviser will need to make the request prior to the AIM Company’s current AIM Rules reporting deadline. 

It is worth noting that AIM Companies will often seek shareholder authorities at the AGM to enable them to be able to issue shares on a non pre-emptive following the AGM and which authorities will typically expire on the earlier of the next scheduled AGM to be held by the AIM Company and 15 months after the date on which the resolutions have been passed. As such, in addition to the extension of the filing deadline for an AIM Company's annual accounts as outlined above, AIM Companies are now likely to have additional time in order to postpone the holding of their AGM for the present time. Thus, this year's AGM season may well shift from May/ June to August/ September. However, the expiry of the AIM Company's current share authorities should be checked here to determine the position.

Please also see our earlier article on AGMs during the current pandemic.

Further temporary measures to allow for flexibility in the application of the AIM Rules

The LSE has also recently published guidance which sets out temporary measures to assist AIM Companies and their Nominated Advisers in dealing with specific issues caused by the pandemic. Such measures allow the LSE to apply discretion when considering the application of the AIM Rules for Companies and the AIM Rules for Nominated Advisers.

These include the following:

  • Disclosure of information and suspension of trading

    The AIM Rules oblige AIM Companies to publish certain information in a timely and accurate manner. Nomads are required to understand and oversee this disclosure process, thereby ensuring the AIM Company fully adheres to its obligations under the AIM Rules.

    The LSE has recognised that following the UK Government's introduction of guidelines and restrictions aimed at combating the spread of COVID-19, adhering to the AIM Rules may prove more challenging than usual. As such, where immediate disclosure may not be possible, the LSE is encouraging AIM Companies and Nomads to discuss with the LSE whether a temporary suspension to the trading of the AIM Company's securities is required in order to provide the AIM Company with sufficient time to make the disclosure.

    The AIM Company and the Nomad will need to explain in detail why the suspension is appropriate. The LSE may then use its discretion and grant a temporary suspension to the trading of the AIM Company's securities to enable the AIM Company to make the compliant disclosure.
  • Suspended Companies

    Under AIM Rule 41, "the Exchange will cancel the admission of AIM securities where these have been suspended from trading for six months".

    The LSE has noted that in current circumstances, it may not be possible for a suspended AIM Company to address the issues it was required to resolve in order to lift the suspension. As such, the LSE has temporarily extended the "suspension period" from six months to 12 months – this extension only applies to AIM Companies which had their securities suspended between 30 September and 1 July 2020.
  • Nomads and new clients

    Nomads are required to undertake due diligence on prospective clients prior to formally engaging with such clients. As part of this process, Nomads should, if appropriate, visit locations where the AIM Company's material operations take place and meet with the directors and key personnel.

    However, following the implementation of travel restrictions and social distancing measures, it has been recognised that fulfilling such obligations may not be possible. In order to circumvent the difficulties presented, the LSE has agreed to loosen the strictness of the measures typically imposed and has acknowledged that in such times, reasonable alternative methods of due diligence, such as virtual meetings, will be appropriate. Notwithstanding this, once travel restrictions and social distancing measures have been lifted, Nomads are expected to carry out physical meetings and site inspections at that point.

For more guidance on how Bird & Bird can help you overcome difficulties presented by COVID-19, please visit our COVID-19 information page where a number of additional resources are available, which can be found here.

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