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Welcome to the latest edition of Corporate Update.

Corporate Update is our fortnightly bulletin offering a quick read of the latest developments relevant to corporate counsel. Please get in touch with your usual contact or any of the contacts listed below if you want to explore any of the topics covered in more detail. If you would like to subscribe to this bulletin as a regular email, please click here.

Publications

The Securities Transfer Tax

We have published a briefing in our European Tax blog series on the Government’s proposed Securities Transfer Tax which is intended to replace stamp duty and stamp duty reserve tax (SDRT). The briefing gives an overview of the reforms, noting that the legislation is in draft form and may be amended, and outlines what will, and will not, be changing. For further information about the Securities Transfer Tax, see the Legislation section below.

Closed-ended investment funds: FCA consults on targeted changes to the Listing Rules

We have published a briefing on the Financial Conduct Authority’s (FCA) consultation paper (CP26/21) on proposed amendments to the UK Listing Rules (UKLR) appliable to closed-ended investment funds (investment trusts), noted in our 9 July 2026 Corporate Update Bulletin. The proposed changes are designed to help strengthen the protections for minority investors against conflicts of interest, and are partly in response to recent shareholder activism in investment trusts. The consultation closes on 14 August 2026, and the FCA is aiming to finalise the rules and publish a Policy Statement before the end of 2026.

DEMAT’s final report on the digitisation of UK traded shares

We have published a briefing on the Dematerialisation Market Action Taskforce’s (DEMAT) final report on the digitisation of UK traded shares in UK incorporated companies.  This briefing looks at the changes coming, the implications for in-scope companies and shareholders and steps they should take. We also cover the report in further detail in the News section below.

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Legislation

Government publishes draft legislation to replace stamp duty and SDRT with a new Securities Transfer Tax

The Government has published draft legislation to introduce a new Securities Transfer Tax (STT) that would replace stamp duty and SDRT on the transfer of shares and certain other securities, together with a related policy paper.

The aim of the reform is to modernise and simplify the stamp tax regime by replacing two interdependent taxes with a single, clear, self-assessed tax on transactions in securities, the administration and payment of which will be fully digitised, thereby removing the need for non-electronic instruments and paper-based reporting and payment processes. 

A consultation on the draft legislation runs until 7 September. HMRC have not committed to an exact date for bringing the STT into force, beyond that it will be in 2027.

We have published a briefing that gives more detail about the reforms - see the Publications section.

Immigration and Asylum Bill: modern slavery reporting reforms will introduce mandatory content and significant financial penalties

The Immigration and Asylum Bill 2026 was introduced to the House of Commons on 30 June 2026 and proposes significant amendments to the modern slavery reporting regime under section 54 of the Modern Slavery Act 2015 (MSA) under which commercial organisations with an annual turnover of £36 million or more must prepare and publish an annual slavery and human trafficking statement. Key changes include:

  • Mandatory statement content: Annual statements will have to include mandatory content set out in a new Schedule to the MSA. The content is largely similar to the current (non-mandatory) content referred to in the MSA, but with a greater emphasis on accountability and the need to explain where an organization has not taken certain steps.
  • Accuracy declaration: In addition to the current requirement for the annual statement to be approved by the board and signed by a director, it will also need to include a declaration by the relevant signatory that the statement is accurate to the best of their knowledge and belief. Parent undertakings will be able to certify subsidiaries’ statements.
  • Submission to Secretary of State: The Bill enables regulations to be made requiring organisations to submit statements electronically, likely via the existing Modern slavery statement registry. The uploading of statements is currently encouraged but not mandatory.
  • Financial penalties: Failure to comply with the reporting requirements “without reasonable excuse” will result in penalties of up to the greater of £1 million or 1% of total turnover per financial year.

Corporates currently in scope under section 54 of the MSA should review their modern slavery statements against the proposed mandatory content requirements in preparation for the Bill passing.

It is worth noting that the Independent Anti-Slavery Commissioner has criticised the Bill for not going far enough to address forced labour in supply chains, and urges the government to require businesses to conduct human rights due diligence in their supply chains and ban the import of goods made by forced labour. The government is still considering whether to require human rights due diligence as part of its ongoing review.

Register of Overseas Entities regulations come into force

The Register of Overseas Entities (Protection and Trusts) and Limited Liability Partnerships (Application of Company Law) (Amendment) Regulations 2026 (SI 2026/778) have come into force as of 9 July 2026. The regulations seek to address a number of practical difficulties with the application process for requesting unpublished trust information held on the Register of Overseas Entities from the Trust Disclosure Service (Companies House) and were reported on in detail in our 30 April 2026 Corporate Update Bulletin. 

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News

DEMAT publishes implementation plan for removal of paper share certificates

The Dematerialisation Market Action Taskforce (DEMAT) has published its final report on the digitisation of UK‑traded shares in UK‑incorporated companies (in-scope shares). The Government has accepted DEMAT’s recommendations and will legislate to implement them.

DEMAT has set out three steps for the digitisation process. Step 1 will involve the withdrawal of paper share certificates as evidence of title and the establishment of digitised registers. For in‑scope shares:

  • Existing paper share certificates will cease to have legal significance.
  • Title will be evidenced solely by an electronic entry on a digital share register maintained by the company’s registrar (a digitised version of today’s certificated/non‑CREST register, with enhanced security features).
  • Companies will no longer be required to issue share certificates on issuance or transfer, regardless of what their articles currently say.
  • The share transfer processes will be modernised to allow fully digital execution (including electronic signatures on stock transfer forms and electronic transfer instructions).
  • Operational standards and security protocols for digital registers will be developed to guard against fraudulent transfers.
  • A government‑sponsored awareness campaign will explain the reforms to shareholders and the market.

It is anticipated that Step 1 will be completed by late 2027. The report highlights certain preparatory actions for listed companies ahead of Step 1 and further reform:

  • Engage with registrars – to understand how non‑CREST registers will be digitised, the registrar’s proposed security and transfer protocols and any changes needed to registrar terms of engagement.
  • Communicate with certificated shareholders – consider targeted communications explaining the reforms, encouraging certificated holders to:
    • move their holdings to an intermediary of their choice; and
    • provide bank details and electronic contact details to facilitate dividend payments and electronic communications.
  • Review and, where appropriate, amend articles – to remove or update provisions that assume the issue of paper certificates or otherwise conflict with the forthcoming legislative changes. GC100 is expected to convene an industry group to develop model wording and guidance.
  • Consider cross‑border issues – companies with an overseas branch register or shares held in the Depositary Trust Company (DTC) should engage with their registrars and, where relevant, DEMAT or any industry working group to understand how the future intermediated model (later steps) will interact with their existing arrangements and what bespoke solutions may be needed.

Steps 2 and 3 involve a transition towards a fully intermediated system, whereby all in‑scope shares will ultimately be held via intermediaries in CREST or another Central Securities Depositary (CSD).

  • Step 2: Improvements will be made to the intermediated system, particularly to make it easier for ultimate beneficial owners (UBOs) to exercise the voting rights attached to their shares, if they wish to; to speed up and streamline the process for transferring payments from the issuer to UBOs and for passing information up and down the intermediated chain. Non-CREST shareholders will be encouraged to transfer their shares into the name of their chosen intermediary before Step 3 occurs. The timing of Step 2 is to be confirmed.
  • Step 3: All in-scope shares will be moved to the improved intermediated model. Shares which have not already been transferred into the name of an intermediary are likely to be forcibly transferred to a “default” intermediary, which may be a Government-sponsored nominee, and then held on trust or sold. It is anticipated that Step 3 will start by July 2029.

FCA consults on UK regime for alternative investment fund managers

The FCA has published Consultation Paper CP26/28: The UK AIFM Regime, proposing new rules for alternative investment fund managers (AIFMs). The FCA’s proposals aim to make requirements more proportionate to firms’ size and activities, remove unnecessary complexity and administrative burden, and maintain high standards where they matter most for consumer protection and market integrity. Proposals include updating the size thresholds and introducing a new 3-tier structure – small, medium and large – with a graduated application of the rules, and a new sourcebook, the Alternative Investment Funds sourcebook (ALTS), to bring most AIFM rules together in one place.

Alongside the FCA consultation paper, HM Treasury has published a policy note and draft regulations (The Alternative Investment Fund Managers Regulations 2026). The draft regulations propose the establishment of a new legislative framework for the regulation of managers of AIFs. Most of the firm-facing requirements will not be restated in legislation, and the FCA will be empowered to put in place rules to create a new AIFM regime.

Responses to CP26/28 are requested by 14 October 2026 for the main consultation and by 18 September 2026 for the enclosed discussion chapters (except the discussion chapter on prudential reforms, which also closes on 14 October 2026). Technical comments on the Treasury’s draft statutory instrument are also invited by 14 October 2026.

Takeover Panel consults on miscellaneous amendments to the Takeover Code

The Takeover Panel has published Public Consultation Paper 2026/1, which proposes miscellaneous amendments to the Takeover Code. The changes are generally of a minor nature, and are intended to clarify and simplify various Code provisions and codify aspects of the Panel Executive's practice. However, the changes to Note 5 of the definition of “acting in concert” may have implications for companies with existing relationship or settlement agreements with a shareholder. The changes proposed in the PCP include:

  • Definition of “acting in concert” – Note 5:
    • The Note (as amended) is aimed at situations where a shareholder agrees with a company or its directors not to sell its shares, to preserve the status quo on the board (resulting in what is known as a “defensive” concert party between the shareholder and the directors). The amended Note would apply only to agreements restricting a person from reducing its shareholding (e.g. lock-ups), and not standstill agreements more generally. To avoid concert party status, the lock-up must permit the shareholder to accept any offer (and not only a board-recommended offer).
    • A new provision would be added to Note 5 to codify the Executive’s existing practice of treating a shareholder as acting in concert with the directors where it has agreed to vote on resolutions to appoint and remove directors in line with the board’s recommendation, on the basis that this will also preserve the status quo on the board. Importantly, this would even catch relationship or settlement agreements between the company and an activist shareholder that contain this sort of provision, irrespective of any previously contentious relationship between the parties. However, the Panel will not treat the shareholder and the directors as acting in concert if the agreement contains a carve-out permitting the shareholder to abstain (rather than vote in line with the directors' recommendation) on such resolutions. A practical takeaway point is that parties to existing relationship or settlement agreements may want to review those agreements and even modify them if necessary to include such a carve-out, so that they are not deemed to be acting in concert.
  • “Reverse takeover”: The definition would be amended to include any acquisition by a Code company for which more than 100% of the Code company’s voting equity share capital may need to be issued, including acquisitions of non-Code companies or of businesses/assets. Rule 21.3 (equality of information to competing offerors) would also apply in these scenarios.
  • “Put up or shut up” deadlines – Rule 2.6(c): The factors the Panel considers when consenting to extensions to PUSU deadlines, and the requirement for the Target board to comment on them, would be deleted. In practice, PUSU extensions are routinely granted where the offeree board requests them and extension announcements often do not contain this detail anyway, so this is a pragmatic acknowledgement that the only thing that matters for a PUSU extension (and its announcement) is the consent of the Target board.
  • Investment research – Rule 28.7: Connected investment research would no longer need to be removed from a party’s website at the start of an offer period. Where a consensus forecast includes a forecast by a connected firm, that relationship must be disclosed.

FCA concerns about unclear DTR 5 disclosures and non-compliant significant transaction announcements

The FCA has published Primary Market Bulletin 64, setting out (i) its findings from its 2025 review of total voting rights (TVR) disclosures under the Disclosure Guidance and Transparency Rules (DTRs) and (ii) its observations on announcements by listed companies under the reformed significant transactions regime under UKLR 7.3:

  • Issuers must make sure that disclosures explicitly confirm TVR figures as required by DTR 5.6.1R, and where possible, should categorise the announcements with headline category ’Total Voting Rights’ when uploading to the NSM. Where TVR information is included within broader disclosures, issuers may use a headline other than ‘Total Voting Rights’ to reflect the main subject, but the disclosure should explicitly refer to ‘total voting rights’ so the information can be easily located via keyword search.
  • In significant transaction announcements, the FCA observed differing approaches to the number and presentation of risks to the company and noted that some announcements have moved away from the structured format of class 1 circulars – where each risk was stated and briefly explained – towards more high-level descriptions and a less defined structure. While issuers have more flexibility under the new regime, they are encouraged to consider how risks are presented and ordered in the context of each transaction.
  • The FCA notes that some significant transaction announcements reviewed included generic explanations of risk and reminds issuers that risk disclosures must not be generic and must instead be tailored to the company and the specific transaction and must clearly articulate the risk the transaction poses to the company.
  • The mandatory board statement that the “transaction is, in the board’s opinion, in the best interests of security holders as a whole” must track the prescribed wording under UKLR 7 Annex 2, Part 1, 1.1R(16). Similarly, in related party transaction notifications the statement by the board that the transaction or arrangement is fair and reasonable as far as the security holders of the company are concerned and that the directors have been so advised by a sponsor, must also follow the text required by UKLR 8.2.2 R (4). 

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Case law

Supreme Court confirms duty of good faith under section 172(1) Companies Act 2006 applies to objective conduct, rather than merely subjective belief

In Saxon Woods Investments Ltd v Costa [2026] UKSC 21, a director was found to have breached his duty under section 172 of the Companies Act 2006 to act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole.

The background to the case was as follows. A shareholders’ agreement required the company and its investors to work in good faith towards the sale of the company by 31 December 2019. The conduct of the sale process was delegated exclusively to one director, Mr Costa. Believing a later sale would achieve a better price, Mr Costa covertly pursued his own timetable, excluding other directors, misleading the board about the company’s adherence to its agreed exit strategy and issuing instructions to advisers that undermined the aim of a 2019 exit.  No exit occurred before 2019, and the Covid-19 pandemic subsequently destroyed the prospect of a profitable sale from 2020 onwards. Saxon Woods, as a minority shareholder, petitioned for relief from unfair prejudice on the basis of a breach by Mr Costa of his section 172 duty. At first instance, the judge found no breach, given the director's genuine belief in his strategy, but the Court of Appeal reversed this.  Both parties then appealed.

The Supreme Court dismissed the director’s appeal, holding that the “good faith” requirement in section 172(1) governs not merely a director’s thought process but also his conduct. A genuine belief in acting in the company’s best interests is not sufficient if the director’s conduct is objectively disloyal. The director’s covert tactics – subverting the board’s agreed strategy and misleading fellow directors – constituted bad faith and breached section 172.

The judgment has implications for how boards approach collective decision-making and for director’s personal conduct, particularly when that director genuinely disagrees with his or her fellow directors as to the best way forward for achieving success for the company or when the conduct of a process is delegated to him or her:

  • While the court will generally respect a director’s business judgment when acting in what they consider to be the best interests of the company, subjective belief alone will not justify a director’s conduct where they objectively behave in a dishonest, covert and deceptive manner.
  • Section 172 imposes a communal obligation on the board to promote the success of the company. The duty of good faith must be understood as requiring each director to act in good faith with the other directors because to conclude otherwise would fatally undermine the collegiality of the board.
  • For the board to discharge its responsibility effectively, each individual director must bring their independent view on the best way to promote the success of the company to the attention of the board. A director who disagrees with the board’s agreed strategy should raise that disagreement through the company’s governance processes, and not covertly pursue an alternative course when using delegated powers.

The section 172 duty is wide and depending on the circumstances may encompass other specific duties (such as a duty to make full and candid disclosure of one’s conduct to the rest of the board).  Furthermore, the section 172 duty is closely related to the other general duties, and a director who acts in breach of the other general duties will also often be in breach of section 172 as well. In this case, Mr Costa’s conduct might have been characterized as a breach of both limbs of section 171 (the duty to act in accordance with the company’s constitution and only to exercise powers for the purposes for which they are conferred), but that does not exclude it from the ambit of section 172.

Worker status prevents third party enforcement of restrictive covenants

In AFH Independent Financial Services Ltd & another v Baker & another [2026] EWHC 1674 (Comm), the High Court held that group companies of the contracting party could not enforce restrictive covenants preventing dealings with former customers against a self-employed financial adviser either under the Contracts (Rights of Third Parties) Act 1999 (CRTPA) or by way of a trust of a promise. This was despite the fact that there were express clauses stating that the covenants were intended for the benefit of each group company.

Section 6(3) of CRPTA provides that the Act does not confer any rights on a third party to enforce a term of an employment contract against an employee, or a term of a worker’s or agent’s contract against the worker or agent. The defendant’s status as a “worker” prevented the third-party group companies enforcing the contract under s.6(3) of the CRTPA.

As an alternative, the claimant argued that the clauses created a trust of a promise for group companies. However, the trust of promise argument also failed: the relevant clauses did not indicate an intention to create a trust, and the courts have so far only applied the trust device to promises to pay money or transfer property, not to restrictive covenants.

The ruling is a reminder about the legal limits on enforcing third party rights against employees and self-employed workers.

Unauthorised operation of director's loan account held to be fraudulent breach of fiduciary duty

In McCarthy v Marshall & Anor [2026] EWHC 1585 (Ch), the High Court held that a director's unauthorised operation of a director's loan account, through which he used company funds to pay personal expenses, constituted a fraudulent breach of fiduciary duty (even where he intended to repay the sums drawn). The defendant used company funds via a director’s loan account to fund his personal expenditure, without the knowledge of fellow directors and without the required shareholder approval. The judge confirmed that the subjective intent to pay the money back does not negate the unlawful nature of using company assets for personal use without proper authorisation.

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