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DTR 1B.1 Application and purpose (Corporate governance)

Note: ESMA has also issued guidelines under article 16(3) of the ESMA Regulation covering ‘Alternative Performance Measures’. See https://www.esma.europa.eu/sites/default/files/library/2015/10/2015-esma-1415en.pdf

Purpose: Audit committees

DTR 1B.1.1 G

1The purpose of the requirements in DTR 7.1 is to implement parts of the Audit Directive which require issuers that are required to appoint a statutory auditor to appoint an audit committee or have a body performing equivalent functions.

Application: Audit committees

DTR 1B.1.2 R

Except as set out in DTR 1B.1.3 R, DTR 7.1 applies to an issuer:

  1. (1)

    whose transferable securities are admitted to trading; and

  2. (2)

    which is required to appoint a statutory auditor.

Exemptions

DTR 1B.1.3 R

DTR 7.1 does not apply to:

  1. (1)

    any issuer which is a subsidiary undertaking of a parent undertaking where the parent undertaking is subject to:3

    1. (a)

      DTR 7.1, or to requirements implementing article 39 of the Audit Directive in any other EEA State; and3

    2. (b)

      articles 11(1), 11(2) and 16(5) of the Audit Regulation;3

[Note: article 39(3)(a)3 of the Audit Directive]

  1. (2)

    any issuer the sole business of which is to act as the issuer of asset-backed securities provided the entity makes a statement available to the public setting out the reasons for which it considers it is not appropriate to have either an audit committee or an administrative or supervisory body entrusted to carry out the functions of an audit committee;

[Note: article 39(3)(c)3 of the Audit Directive]

  1. (3)

    a credit institution whose shares are not admitted to trading and which has, in a continuous or repeated manner, issued only debt securities which are admitted to trading3 provided that:

    1. (a)

      the total nominal amount of all such debt securities remains below 100,000,000 Euros; and

    2. (b)

      the credit institution has not been subject to a requirement to publish a prospectus in accordance with section 85 of the Act; and3

    [Note: article 39(3)(d)3 of the Audit Directive]

  2. (4)

    any issuer which is:3

    1. (a)

      a UCITS; or3

    2. (b)

      an AIF.3

    [Note: article 39(3)(b) of the Audit Directive]3

Purpose: Corporate governance statements

DTR 1B.1.4 G

The purpose of the requirements in DTR 7.2 is to implement parts of the Accounting Directive4 (including that Directive 4as applied to banking and insurance companies) which require companies to publish a corporate governance statement.

Application: Corporate governance statements

DTR 1B.1.5 R

Except as set out in DTR 1B.1.6R and DTR 1B.1.7R5, DTR 7.2 applies to an issuer:

  1. (1)

    whose transferable securities are admitted to trading; and

  2. (2)

    which is a company within the meaning of section 1(1) of the Companies Act 2006.

DTR 1B.1.5A G

2 LR 9.8.7A R , LR 14.3.24 R and LR 18.4.3 R (2) extend the application of DTR 7.2 (Corporate governance statements) for certain overseas companies which have securities admitted to the official list maintained by the FCA in accordance with section 74 (The official list) of the Act.

Exemptions

DTR 1B.1.6 R

The rules in DTR 7.2.2 R, 7.2.3R, 7.2.7R and 7.2.8AR5 do not apply to an issuer which has not issued shares which are admitted to trading unless it has issued shares which are traded on an MTF.

[Note: article 20(4) of the Accounting Directive4]

DTR 1B.1.7 R

5 DTR 7.2.8AR does not apply to an issuer which:

  1. (1)

    qualifies as a small company under sections 382 to 383 of the Companies Act 2006; or

  2. (2)

    qualifies as a medium company under sections 465 to 466 of the Companies Act 2006,

in relation to the financial year to which the corporate governance statement relates.

[Note: article 20(5) of the Accounting Directive]

DTR 1B.1.8 G

5 DTR 7.2.8AR does not apply to a listed company which:

  1. (1)

    is required to comply with DTR 7.2 as if it were an issuer by LR 9.8.7AR, LR 14.3.24R or LR 18.4.3R(2); and

  2. (2)

    would meet the criteria in DTR 1B.1.7R if it were a company incorporated in the United Kingdom.