#1 Climate change reporting
The UK is leading the way in becoming the first G20 country to enshrine mandatory climate disclosures for 1300+ of Britain’s largest businesses. This is in line with Taskforce on Climate-related Financial Disclosures (TCFD) recommendations, with new rules coming into force from April 2022. The TCFD will work with businesses to help them better understand the financial impacts of their exposure to climate change, and price climate-related risks more accurately. In a bid to make the UK financial system the greenest in the world, this will put climate change at the heart of business activities and decision making.
It’s interesting to note that transformation advisory firm Kin + Carta Americas recently became the first publicly-traded business on the London Stock Exchange to achieve B Corp Certification. This represents a significant regulatory milestone and could have far-reaching implications for other FTSE organisations. The Financial Conduct Authority (FCA) also published its own policy statement based on the recommendations by the TCFD, which sets out rules and guidelines for a new climate-related disclosure regime for asset managers and certain FCA-regulated asset owners. Clients in financial services may need to bolster their legal advisory capacity to stay abreast of these changing requirements.
#2 The new NSI regime
A new, more extensive national security regime will come into effect from 4 January 2022. According to the National Security and Investment Act 2021, business secretary Kwasi Kwarteng will have the authority to impose conditions on any proposed merger if it’s believed to compromise British interests. Commercial enterprises that are looking to expand or make acquisitions of UK companies need to notify the government of their intention to do so and allow for deals to be reviewed. The lowest percentage threshold to trigger a mandatory notification under the Act requires an acquisition of more than 25 per cent of votes or shares in a qualifying entity.
The key outcomes to consider include: the need to alert the Government of any transactions entered into, on or after 12 November 2020 to manage the risk of those deals reviewed retrospectively, and devising new timelines to deal with increased documentation and potential delays due to government intervention.
Finally, in the case of a failure to comply, there is the risk of heavy sanctions including criminal liability, turnover-based fines, and transactions deemed void. For clients involved in mergers and acquisitions, a specialist view of this new regime is a must.
#3 LIBOR transition
LIBOR, the interest rate benchmark used in financial markets, is being phased out from January 2022. The FCA has confirmed it will allow the temporary use of synthetic sterling and yen LIBOR rates in all legacy LIBOR contracts (other than cleared derivatives) that have not been changed at or ahead of end-31 December 2021. It is requiring the publication of 1-, 3-, and 6-month LIBOR rates for sterling and Japanese yen on a synthetic basis until the end of 2022, to allow more time to complete transition. Five US dollar LIBOR settings will continue to be calculated using panel bank submissions until mid-2023.
The FCA has pointed out that it will be monitoring organisations’ progress in actively transitioning away from LIBOR during 2022. If your firm or clients are impacted, you will need to ensure you have the resources to continue addressing the unfolding legal and contractual challenges of this reform.
#4 Data protection and privacy
2022 is a crucial year for the Information Commissioner’s Office (ICO). In a post-Brexit move, the government indicated that the UK plans to break away from the EU’s data protection regime (GDPR). New ICO information commissioner John Edwards will work with government on proposed reforms to the UK’s Data Protection Act – something that is framed by government as driving growth, creating jobs and cutting red tape.
The ICO will also introduce the controversial Online Safety Bill, which aims to establish a new way to regulate online content and regulate harmful material online, from abusive messages and bullying to pornography. Also high on the agenda is the Age Appropriate Design Code which wants to make the online world safer for children. For any businesses that supply information society services likely to be accessed by children, the so-called Children’s code must be considered. Online services are wide-ranging, including things like apps, games, connected toys, and news services. If your organisation offers these services, it’s a good idea to proactively start future-proofing your offering.
#5 UK pensions
Employer reporting obligations changed greatly with the introduction of the Pension Schemes Act 2021. The main intention of the act is to alert both the Pensions Regulator and trustees at an earlier stage to financial decisions that could impact on the pension scheme. Draft regulations are expected to come into force on from April 2022 and continue into 2023. These will include specific notifiable events, scheme funding regimes, legislative framework for pensions dashboards, stipulations for the authorisation and supervision regime for CDC schemes, and much more.
Schemes with £1 billion or more in assets will be required to align their governance processes and disclosures with TCFD recommendations. The Regulator is also looking to improve trustees’ stewardship practices such as voting and engagement. These changes could bring a vast amount of additional administration to legal departments.
#6 Employment and working conditions
And finally, of course, Brexit and tougher customs measures from January 2022 will impact British businesses trading with Europe. Traders can no longer delay import customs declarations. Instead, they must submit declarations and pay relevant tariffs at the point of import. Goods will no longer be released into circulation without a valid declaration and customs clearance, and could end up detained at ports. These imported goods will be directed to an Inland Border Facility for inspection if documentary and physical checks cannot be completed on site.
Goods shipped back and forth between the UK and the EU can be eligible for a reduced rate of customs duty, providing proof of origin can be presented from the exporter. In addition, UK businesses exporting to the EU may now also need to provide a supplier declaration when the goods are shipped.
#7 Brexit and customs controls
A new Employment Bill, first announced in 2019, has yet to materialise but is expected to be back on the agenda in 2022. Experts are predicting that a new enforcement body will come to life to bring an end to labour exploitation and modern slavery, and promote employee rights to fair wages, parental leave, and so forth. Businesses will be notified of the latest gender pay reporting deadlines, mandatory for any employer with more than 250 staff. An ethnic pay report may also be on cards, which scrutinises employee wages along racial lines.
As an organisation who believes that diversity, equity and inclusion should be a top priority in the legal industry and wider business environment, we will be watching these developments closely.
We’re here to assist
With these and many other regulatory developments to monitor and manage up ahead, you may need extra support or new skills, in the form of flexible legal resources that can be pulled in as needed to manage your growing workload and/or bring specialised knowledge to your table. With Obelisk Support, you have flexible access to the world’s largest freelance legal team. Whatever you need in 2022 and beyond, we’re here to help you face new challenges and opportunities head on.