In its annual results yesterday, Resolution Limited (the Guernsey-incorporated, London-listed “financial services restructuring company”) announced that it is ending the arrangements by which it outsources its management to an external company, Resolution Operations LLP:
“The Company and Resolution Operations LLP (“ROL”) continue to focus on the ways in which value can best be delivered to shareholders. The Board and ROL believe that whilst the current structure of the Group was appropriate to launch the Company, shareholder value can now best be delivered by moving from an externally advised project based structure to a more conventional, simplified governance structure…The boards of the Company and Friends Life Group plc will be streamlined and conventional governance adopted to include individuals, to maintain continuity, from both current boards. The Company and ROL have agreed that the Operating Agreement under which ROL has provided mergers and acquisitions, strategic and oversight services and skills to the Company will end at the latest on 10 December 2013, which is the earliest date on which the Operating Agreement could be ended in accordance with its original and current terms.”
In January 2012 the FSA, in its guise as the UK Listing Authority, started a consultation that proposes removing the premium listing of such externally-managed companies. As we noted at the time:
“The UKLA has observed the development of a new corporate structure – which involves the outsourcing of significant management functions to an offshore advisory firm that the UKLA has termed ‘externally managed companies’. This structure places the offshore advisory company beyond many of the key controls within the listing regime and lessens the ability of shareholders to hold the real management of the company to account. The CP proposes to make the management of the advisory company responsible for any prospectus issued by the listed company and subject to existing rules about dealing in the shares of the listed company. In addition, externally managed companies would not be eligible for a premium listing, but they would still be eligible for a standard listing.”
That consultation seems to have achieved its main aim before being enacted in the Listing Rules.