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Looking ahead

Nine issues for Boards, GCs and Company Secretaries to consider in 2018

Introduction

Increasing regulation, greater regulatory scrutiny and dramatic economic uncertainty make today’s environment a challenging one for companies. Boards, GCs and Company Secretaries are now expected to consider a much wider range of issues than ever before – not only as to whether something is legal, but also whether it is right. To do that means keeping on top of trends and always broadening one’s perspective.

This briefing highlights some of the key issues UK Boards, GCs, Company Secretaries and other in-house professionals should keep in focus.

To be forewarned is to be forearmed.

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Explore the articles below

Issues for Boards 2 

In the light of greater political, media and public scrutiny, companies and, in particular, remuneration committees (Remcos) must, more than ever, ensure they are rewarding directors appropriately for performance.

The government is proposing significant changes that will impose more stringent responsibilities on Remcos. The onus is on boards to prepare now for prospective changes and to make sure they have a well-reasoned, commercial case to show their decisions are fair. Expect greater levels of public disclosure, particularly on pay ratios.

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Issues for Boards 3 

There is currently woeful underrepresentation of ethnic minorities on company boards. Companies should not just “tick the box” to redress this imbalance, because it is in their best interests to find, nurture and promote the best talent from across society.

The Parker Review encouraged companies to take steps to address their failure to bring on people of ethnic diversity. We advocate a number of practical achievable measures that go beyond the Parker recommendations. The foundation is a diversity policy fully supported by the board that has inclusion at its core and which leads to a pipeline of good, diverse talent.

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Issues for Boards 5 

The negotiations over what shape Brexit will finally take continue to show a marked divergence between political aspiration and legal certainty. Can businesses afford to put their contingency plans on hold following the EU and UK agreement in principle on a transition period?

As UK and EU negotiators near agreement on the arrangements for the transition period up until December 2020, it is still very unclear what the eventual free trade agreement – if that indeed happens – will mean for companies doing business with, or based in, Europe. Our advice to boards is prepare for the worst.

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 Issues for Boards 6

There are plenty of actions that suppliers can take to make sure they do not lose out if their customers go out of business.

If one of your buyers of goods or services goes out of business, how do you reduce the risk of not being paid or, conversely, make sure you can get your goods back? Before anything, do your due diligence. There are also legal protections you can build into contracts.

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 Issues for Boards 7

More countries are scrutinising inward investments and, in some cases, reforming their foreign investment laws. Businesses intending to invest cross-border can expect the process to last longer and be more difficult.

In the U.S., UK and Europe in particular, governments are putting in place new powers to scrutinise inward, investment particularly in those sectors deemed to be of national importance. Intervention under foreign investment rules is already harder to predict than under tried and tested merger control regimes. Businesses need in advance to consider government policy priorities and regulatory hurdles.

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Issues for Boards 8 

Radical changes to the tax regime in the U.S., with possibly more to come, offer big advantages for European companies doing business in the U.S., but watch out for unintended consequences.

In December 2017, U.S. President Donald Trump signed into law a sweeping tax overhaul bill, the Tax Cuts and Jobs Act (“TCJA”). The TCJA will have immediate wide-ranging effects on M&A, intercompany arrangements, financing, and investment for both U.S. and non-U.S. businesses. However, the TCJA is without precedent in many ways, including the speed with which it was passed and the lack of bi-partisan support for it. As a consequence, some aspects of it are unclear and will need to be further developed through regulations. In addition, certain provisions appear to have unintended consequences that will need to be remedied through further legislation. Finally, with mid-term elections approaching in November, changes in the political environment may result in some of the new rules being reversed in the future. Nonetheless, the effects of the TCJA are already being felt.

This section outlines the key provisions that boards and GCs of UKbased businesses with operations in the United States (or that are contemplating conducting operations in the United States) should pay particular attention to.

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Issues for Boards 9 

The Serious Fraud Office is focusing more on compliance policies, and general counsel, when investigating alleged criminal behaviour.

The offence of “failure to prevent” has led to the regulatory authorities paying far closer attention to companies’ compliance policies and procedures, as well as to companies’ legal functions. Businesses may be less able to rely on legal privilege when responding to external investigations, and more constrained in how they conduct their own investigations.

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Round-up

1

The General Data Protection Regulation

The General Data Protection Regulation will finally arrive in May 2018. It marks the biggest shake-up to EU data protection laws for 20 years.

Access our guide to the GDPR

2

Cyber security – breach notification obligations on the way

This year will see significant changes to the legal framework, imposing new data security obligations and increased sanctions.

More information about cyber security is available here.

3

Concerns with tax avoidance and BEPs continue

The focus on tax annuals continues unabated, and has led to what seems to be an unending stream of domestic, international and supranational recommendations and proposals.

For further details see our pdf guides:

Looking Ahead

Five issues for financial sponsors and their UK portfolio companies

Looking Ahead

Increasing regulation, greater regulatory scrutiny and dramatic economic uncertainty make today’s environment a challenging one for financial sponsors and their portfolio companies.

This briefing highlights some of the key issues financial sponsors and their UK portfolio companies should keep in focus.

Read more Looking Ahead