Friday, 30 September 2016

Canada: when will a director's resignation be effective?

Earlier this month, in Canada v Chriss, 2016 FCA 236, the Federal Court of Appeal overturned the trial judge's finding that two individuals had resigned as directors. The directors' intention to resign was not enough and there had been no "written resignation received by the corporation" within the meaning of section 121(2) of the Business Corporations Act, RSO 1990, c B.16. Rennie JA observed (at paras. 19, 23 and 24):
A director’s belief that they have resigned has no correspondence or connection to the underlying purposes of subsection 121(2) ... and its emphasis on an objectively verifiable communication of a resignation to the corporation. To allow a subjective intention to suddenly spring to life, when, in the affairs of the corporation, or in the interests of the director, it is convenient to do so, would significantly undermine corporate governance. A reasonable belief that one has resigned must hew much closer to the requirements for an actual effective resignation. ... The requirement that the resignations be received by the corporation cannot be ignored ... The test applied by the judge in this case also set far too low a standard. He applied a test whereby a director who requests (orally) the executives of the corporation to arrange for counsel to prepare and draft a resignation can, by virtue of that act alone, reasonably believe that they have resigned. On this standard, a director need not ever sign a document or receive an indication to the effect that his or her resignation was delivered to the company. Directors must carry out their duties on an active basis. A director cannot raise a due diligence defence by relying on their own indifferent or casual attitude to their responsibilities. A reasonable director would insist on being satisfied that their intention to resign had been effected".

Malaysia: the Companies Act 2016 published in the Federal Gazette

The Companies Bill 2015 (Rang Undang-Undang Syarikat 2015) was passed by the Senate (Dewan Negara) earlier this year.  The King's Assent (Yang di-Pertuan Agong) came at the end of August and the new Act - known as the Companies Act 2016, and containing Malaysia's new company law framework - was Gazetted earlier this month: see here (pdf, 577 pages).

Thursday, 29 September 2016

India: SEBI to consult on remuneration rule changes

At its most recent meeting, SEBI - the Securities and Exchange Board of India - agreed that a consultation should be undertaken concerning remuneration in listed companies: see here. More specifically, the consultation will seeks view on possible amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, including adding new provisions designed to enhance the role of shareholders.

Wednesday, 28 September 2016

UK: Senior Managers and Certification Regime - PRA and FCA updates, consultations and discussion papers

The Financial Conduct Authority and Prudential Regulation Authority have this week published various consultation and discussion papers, as well as further updates, concerning the Senior Managers Regime and Certification Regime: see, respectively, here and here. The PRA has also published a policy statement concerning buy-outs of variable remuneration: see here.

Tuesday, 27 September 2016

Isle of Man: sharing tax information - guidance from Deemster Doyle

His Honour Deemster Doyle (First Deemster and Clerk of the Rolls), sitting in the High Court of Justice, gave judgment at the end earlier this month in Assessor of Income Tax v Holmcroft Properties Ltd. (Case 24 of 2016) The decision is an important one because of the guidance that has been provided by Deemster Doyle concerning the framework for the mutual exchange of tax information between the Isle of Man and the United Kingdom. It is also of interest because of what is said about the importance of sharing of tax information. To quote Deemster Doyle (para. 127):

"To survive in a meaningful and civilised way we must be a responsible member of the international community. We must facilitate bringing wrongdoers to justice. We must encourage compliance with the rule of law both on and off the Island. The Island does not and should not shelter those who do not comply with the law and pay their taxes. The Island does not and should not facilitate wrongdoers attempting to evade tax in their home jurisdictions. We should assist others in ensuring that legal obligations, including the payment of tax, are complied with worldwide".

Monday, 26 September 2016

Singapore: corporate governance developments

Mr Ong Chong Tee, Deputy Managing Director of the Monetary Authority of Singapore, delivered a speech today on corporate governance: see here. It contains much of interest including news of work being done to develop a set of best practice guidance on stewardship by institutional investors. Mr Tee also said that the time may well have come for a review of the 2012 Corporate Governance Code.

Friday, 23 September 2016

Europe: Commission Communication on the Capital Markets Union

The European Commission has published a Communication on the Capital Markets Union titled Accelerating Reform: see here (pdf). A press release, and FAQs, were published alongside the Communication. The Communication notes, amongst other things, that a legislative proposal on business restructuring and insolvency will be published very soon (following a consultation earlier this year).

Thursday, 22 September 2016

USA: SEC enforcement action - close personal relationships and auditor independence

Earlier this week the Securities and Exchange Commission published details of the first enforcement action it had taken in respect of auditor independence failings resulting from close personal relationships: see here. To quote directly from the SEC's press release, "Ernst & Young has agreed to pay $9.3 million to settle charges that two of the firm’s audit partners got too close to their clients on a personal level and violated rules that ensure firms maintain their objectivity and impartiality during audits".

Wednesday, 21 September 2016

UK: HM Treasury consultation - transposing the Fourth Money Laundering Directive and the Fund Transfer Regulation

HM Treasury has published a consultation paper seeking views and evidence to inform the transposition of the Fourth Money Laundering Directive and the Fund Transfer Regulation: see here (pdf). The consultation does not consider the proposed amendments to the Directive announced in the summer (about which, see here, pdf). Chapter 10 of the consultation paper considers beneficial ownership and, in particular, what changes may be required in respect of the PSC register. There is also discussion of beneficial ownership as it relates to trusts and the record keeping and reporting requirements that should be required.

Tuesday, 20 September 2016

UK: HM Treasury consultation - amending the definition of financial advice

HM Treasury has published a consultation paper in which it sets out its plan to amend the definition of financial advice contained within Article 53 ("Advising on Investments") of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001: see here. It is proposed, in order to achieve greater clarity and certainty, to bring the Article 53 definition in line with the definition of advice within the Markets in Financial Instruments Directive (MiFID).

Friday, 16 September 2016

UK: Parliamentary committee launches corporate governance inquiry

The House of Commons Business, Innovation and Skills Committee has today launched a wide ranging corporate governance inquiry. The terms of reference, available here, identify three core areas for attention (accompanied by more precise questions and background information): directors' duties; executive pay; and the composition of boards. The Committee is accepting written submissions and these should be submitted by 26 October using the web based submission form available here.

Thursday, 15 September 2016

Ireland: Central Bank guidance - cyber risk in financial firms

The Central Bank has stated that the risks associated with information technology and cyber security are a key concern and has called on firms to increase their resilience to IT failures and cyber security incidents: see here. Guidance for firms has been published - see here (pdf) - and this makes clear that IT risk should be considered as part of the board's responsibility for setting and overseeing strategy and risk appetite. Moreover, the Central Bank expects, to quote directly from its guidance document, that firms "... develop and document a Board approved comprehensive IT strategy that is aligned with the overall business strategy. IT strategy objectives should include maintaining the capacity to effectively anticipate, detect and recover from cybersecurity attacks on the firm so as to ensure overall IT resilience".

Wednesday, 14 September 2016

Singapore: shareholder's standing to bring an oppression claim

The High Court has, with reference to several English authorities, recently considered whether a shareholder had standing to bring an oppression claim under section 216 of the Companies Act (Cap 50, 2006 Rev Ed) where the shareholder had, since starting the claim, ceased to be a member of the company. The trial judge, in Lim Seng Wah v Han Meng Siew [2016] SGHC 177, held that the shareholder did not have standing but did note one important exception:
I agree with the statement that 'where a registered shareholder has freely disposed of his shares … he will no longer have locus standi once he has ceased to be registered as a member'. As a matter of principle, this must be correct. After all, it is trite that the matters complained of under s 216 must affect the applicant qua shareholder and that the court’s powers under s 216(2) are to be exercised 'with a view to bringing to an end or remedying the matters complained of'. With one exception, it is difficult to see how a plaintiff would still be entitled to a remedy under s 216 if he has ceased to be a shareholder. In such circumstances, it seems to me quite pointless to allow the plaintiff to carry on with the action. The one exception is where the events which caused the plaintiff to cease to be a shareholder are also the subject matter of the complaint under s 216."

Tuesday, 13 September 2016

UK: 'failure to prevent' offences and corporate governance

The Attorney General, the Rt Hon Jeremy Wright QC MP, delivered a speech earlier this month in which he spoke about the existing and proposed 'failure to prevent' offences: see here. Here is an extract from the speech, in which the Attorney General makes the link between improved corporate governance and the introduction of new 'failure to prevent' offences:

The Government has just consulted on draft legislation and guidance for the new criminal offence of corporate failure to prevent the criminal facilitation of tax evasion ... In addition, the Government will soon consult on plans to extend the scope of the criminal offence of a corporation 'failing to prevent' offending beyond bribery to other economic crimes, such as money laundering, false accounting and fraud.

The current 'failure to prevent' bribery legislation has put companies of all sizes on a level playing field where in the past, the reliance on the identification doctrine may have made it easier to prosecute smaller companies, than to prosecute larger, more complex ones. The identification doctrine that currently exists for other economic crime has made it difficult to attribute criminal liability to large corporations where one cannot demonstrate the 'controlling mind' of the individuals involved. This has meant that it has not always been possible to bring corporate bodies to justice for the criminal acts of those who act on their behalf and for their benefit. The new bribery offence has also encouraged better governance within large corporations and this is something that we would seek to encourage further through additional 'failure to prevent' offences.

Our current system of limited corporate liability incentivises a company’s board to distance itself from the company’s operations. In this way, it operates in precisely the opposite way to the Bribery Act 2010, one of whose underlying policy rationales was to secure a change in corporate culture by ensuring boards set an appropriate tone from the top. The threat of conviction is greater under ‘failure to prevent’ and as a result, companies might be more likely to not just enter into deferred prosecution agreements but also, crucially, to take the actions necessary to discourage such offending within the organisation in the first place ... An extension of the failure to prevent offence can enhance the UK’s reputation in the fight against fraud and help to promote improved corporate governance".

Monday, 12 September 2016

UK: Law Commission proposals for the reform of bills of sale legislation

The Law Commission today published proposals for the reform of the law governing bills of sale. The Commission is proposing the repeal of the Bills of Sale Act 1878 and the Bills of Sale Act (1878) Amendment Act 1882, and the introduction of new legislation providing more protection for borrowers and fewer burdens on lenders. The Commission's report and recommendations, which apply to England and Wales but not Scotland, are available here (pdf). The Commission found that logbook loans account for the great majority of bills of sale, with most of these loans secured against a vehicle already owned by the borrower.

Friday, 9 September 2016

UK: Scotland: the Gender Balance on Public Boards Bill

The Scottish Government has published its 2016 programme for Government: see here. Among the proposed Bills is one, the Gender Balance on Public Boards Bill, which (to quote the Government directly) will require positive action to be taken to redress the gender imbalances on public sector boards, focusing in particular on non-executive appointments: see here.

Thursday, 8 September 2016

Ireland: a revised Code of Practice for the Governance of State Bodies

A revised edition of the Code of Practice for the Governance of State Bodies was published last month by the Department of Public Expenditure and Reform: see here. Updated audit and risk committee guidance has also been published: see here.

Wednesday, 7 September 2016

Europe: risks and vulnerabilities in the financial system

The Joint Committee of the European Supervisory Authorities (European Banking Authority, European Securities and Markets Authority and European Insurance and Occupational Pensions Authority) today published its second 2016 risk assessment report for the EU financial system: see here (pdf). An overview is available here. As well as noting the legal and political uncertainty caused by the UK referendum on EU membership, the report also notes the growing interconnectedness between the financial sector outside of the banking, insurance and pension fund industries with the wider financial system.

Tuesday, 6 September 2016

UK: Finance Bill amendment on country by country reporting accepted by the Government

The Finance Bill 2015-16 to 2016-17 completed Report stage in the House of Commons yesterday: see here. Among the amendments accepted by the Government, and therefore incorporated into the Bill, was one tabled by the Rt Hon. Caroline Flint MP. This amendment, number 145, provides the Treasury with power, through Regulations, to require the new group tax strategy report - a public document, which certain large businesses will be required to publish - to include a country by country report (as defined by the Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016, which do not currently provide for public disclosure).

Monday, 5 September 2016

UK: 'Tackling corporate irresponsibility' - Government consultation this autumn

In a press conference this morning, at the end of the G20 summit in Hangzhou, the Prime Minister, the Rt Hon Theresa May MP, said that the Government would publish a consultation this autumn on proposals to tackle 'corporate irresponsibility': see here. This follows the speech that Mrs May delivered, shortly before becoming prime minister, in which she highlighted weaknesses in the governance framework and proposed various reforms: see here.

Update: a copy of the Prime Minister's press conference speech has been published: see here. With regard to the consultation paper, here is what the Prime Minister said:

.... to restore greater fairness, we will bring forward a consultation this autumn on measures to tackle corporate irresponsibility – cracking down on excessive corporate pay and poor corporate governance, and giving employees and customers representation on company boards".

Friday, 2 September 2016

Thailand: SEC consultation on new Governance and Institutional Investor Codes

The Securities and Exchange Commission has begun a consultation on the introduction of two new codes: a Corporate Governance Code, to replace the Principles of Good Governance for Listed Companies 2012, and a new Code for Institutional Investors. Further information is available here. A public hearing on the new Governance Code was held last month.

Thursday, 1 September 2016

UK: Law Commission project on technical issues in charity law - supplementary consultation paper

The Law Commission, as part of its technical issues in charity law project, today published a supplementary consultation paper seeking views on two areas - cy-près and trust corporation status - that have arisen from its initial consultation: see here (pdf). In particular, the Commission seeks views on proposals to (1) make consistent across all charity types the powers for changing a charity's purpose, and (2) simplify the process for seeking trust corporation status.

Wednesday, 31 August 2016

Vietnam: The development of a corporate governance code

The International Finance Corporation, part of the World Bank Group, has published details of the work it is doing with the State Securities Commission in Vietnam to develop a corporate governance code: see here. The new code is expected to be launched by mid 2017.

New Zealand: Review of the NZX Corporate Governance Code

NZX has published a consultation paper seeking views on proposed updates to its corporate governance code: see here (pdf). These will be the first substantive updates to the Code since 2003. An updated copy of the Code is available here (pdf).

Tuesday, 30 August 2016

OECD working paper - the corporate governance of financial groups

The twentieth paper in the OECD Corporate Governance Working Paper series, titled Corporate Governance of Financial Groups, has been published: see here.

Monday, 29 August 2016

Australia: the director's duty of care and diligence - a private and public duty?

Towards the end of last month, judgment was given by Edelman J. in Australian Securities and Investments Commission v Cassimatis (No 8) [2016] FCA 1023. The decision is interesting and noteworthy for several reasons, including the discussion of the operation of the director's duty to act with care and diligence in section 180(1) of the Corporations Act 2001 and, in particular, whether a breach of this duty gives rise to both a private and public wrong.

Friday, 26 August 2016

UK: Can 'accounts' be 'accounts' if they are not reliable?

The First-tier Tribunal (Tax Chamber) decision Grint v HMRC [2016] UKFTT 537 (TC) has attracted much attention because of the identity of the taxpayer. The decision is noteworthy for other reasons, not least the discussion of what is meant by the term 'accounts'. The issue arose in a dispute concerning the effectiveness of a change in accounting date. The relevant legislation defined 'period of account' and 'accounting date', concepts that referred to 'accounts' but no definition of 'accounts' was provided: see section 217 of the Income Tax (Trading and Other Income) Act 2005 and section 989 of the Income Tax Act 2007.

The Tribunal held that 'accounts' for the purposes of section 217 referred to the company's general purpose trading accounts and did not include accounts drawn up solely for tax purposes. The Tribunal also rejected the argument advanced by HMRC that 'accounts' could not be regarded as such if they were wrong or unreliable. The Tribunal concluded, on the basis of expert evidence, that accounts (as understood by accountants): (a) must relate to an entity; (b) must be considered by, and intended by, the entity to be its accounts, by some kind of approval or adoption or otherwise; and (c) must represent (however accurately or otherwise) its past transactions over a set period of time.

Thursday, 25 August 2016

Ireland: The Companies (Accounting) Bill 2016

The Companies (Accounting) Bill 2016 was introduced in the Dáil Éireann earlier this month: see here. The main purpose of the Bill is to amend the Companies Act 2014 in order to implement the new EU Accounting Directive (2013/34/EU). A copy of the Bill is available here (pdf) and an explanatory memorandum is available here (pdf).

Wednesday, 24 August 2016

UK: Scotland: Review of the Scottish Code of Good Higher Education Governance

A review of the 2013 edition of the Scottish Code of Good Higher Education Governance is underway: see here. An important question for those conducting the review (and on which views are sought) will be to what extent, and how, the Code should be changed to reflect the passing of the Higher Education Governance (Scotland) Act 2016 earlier this year.

Tuesday, 23 August 2016

New Zealand: Court of Appeal upholds parent company's liability for debt of subsidiary company

The Court of Appeal gave judgment earlier this month in Steel & Tube Holdings Limited v Lewis Holdings Limited [2016] NZCA 366, on appeal from [2014] NZHC 3311. The case concerned a parent company that had placed one of its wholly-owned subsidiaries into liquidation. The liquidators of the subsidiary disclaimed a lease under section 269 ("Power to disclaim onerous property") of the Companies Act 1993. The lessor sought damages as well as an order that the parent company should be liable for those damages under section 271 ("Pooling of assets of related companies") of the 1993 Act.  Section 272 sets out the guidance the court is required to consider under section 271, including the extent to which the related company took part in the management of the company in liquidation and the extent to which the businesses of the companies were combined.

The trial judge held that it was just and equitable, as section 271 requires, for liability to be imposed on the parent company. The Court of Appeal upheld this decision.  Its judgment is important, not least because there are few authorities considering section 271. The first instance decision, which contains more analysis than the court of appeal judgment, remains a leading authority and its message remains clear: the separate legal personality of companies in groups will be respected where each company is conducted and governed as a separate entity.  To disregard the separate legal status of the companies will be to run the risk of liability being imposed under section 271 even where, as in the current case, the company's constitution permitted directors of the subsidiary to prefer the interests of the parent company (note also section 131(2) of the 1993 Act). Indeed, as the trial judge observed, provisions of this kind do not mean that the interests of both companies can be conflated or the subsidiary company's interests ignored.

Monday, 22 August 2016

Netherlands: consultation on Code principles, provisions and guidance for companies with a single tier board

Earlier this month, the Dutch Corporate Governance Code Monitoring Committee published for consultation the principles, best practice provisions and guidance it proposes to include in the revised edition of the Dutch Corporate Governance Code in respect of companies that choose to have a single tier board: see here (pdf). At this stage the Committee has decided not to publish a completely separate Code for companies with a single board. The option of having a single board was introduced several years ago.

Friday, 19 August 2016

Australia: ASIC report finds improvement in market cleanliness

The Australian Securities and Investments Commission has published a report titled Review of Equity Market Cleanliness: see here (pdf). The report found an improvement in market cleanliness for the ten year period ending 31 November 2015. The report draws upon two measures of market cleanliness: one new and developed by ASIC; and another more established measure used by the predecessor of the UK's Financial Conduct Authority. ASIC has published a podcast in which the report is discussed: see below (or here if the audio player is not displayed).

Thursday, 18 August 2016

Pakistan: Limited Liability Partnership Bill introduced in the National Assembly

The Limited Liability Partnership Bill 2016 was introduced in the National Assembly earlier this month: see here. A copy of the Bill is available here (pdf). The Bill will, once enacted, provide for the incorporation, regulation and winding-up of limited liability partnerships in Pakistan. The LLP is not currently available in Pakistan.

Wednesday, 17 August 2016

UK: HMRC consultation - strengthening tax avoidance sanctions and deterrents

Her Majesty's Revenue and Customs published a discussion document today titled Strengthening Tax Avoidance Sanctions and Deterrents: see here (pdf). The document has attracted much media attention, in particular the penalties proposed for those involved in advising on aggressive tax avoidance schemes: see here or here. What is arguably more interesting is the potential reach of the proposed liability regime, which would operate in respect of defeated tax avoidance arrangements: it would encompass 'enablers', described as including "anyone in the supply chain who benefits from an end user implementing tax avoidance arrangements and without whom the arrangements as designed could not be implemented" (para. 2.7).

Whilst company formation agents and those providing the infrastructure through which the avoidance takes place (e.g., nominee services; company director services) are obvious examples of enablers, the discussion document states (in case study 2.1) that companies would also fall within the new penalty regime where they have been used to enable the defeated tax avoidance arrangements.

Tuesday, 16 August 2016

UK: gender pay gap reporting - bringing section 78 into force

The Equality Act 2010 (Commencement No.11) Order 2016 was made earlier this month and published yesterday on the website: see here. The Order brings into force, on the 22nd of August, section 78 of the Equality Act 2010. Section 78 provides the power to make, through regulations, the framework for gender pay gap reporting.

Monday, 15 August 2016

UK: public company holds electronic annual general meeting

A couple of months ago, on June 15th to be precise, something rather unusual happened: a UK public company, Jimmy Choo plc, held its annual general meeting electronically. The company's articles of association were amended in 2015 to make this possible. Further information about the AGM is available in the press release from Equiniti: see here. The AGM results are available here.

Friday, 12 August 2016

Indonesia: OECD report - tackling backdoor listings

The OECD has published a report titled Improving Corporate Governance in Indonesia - Policy Options and Regulatory Strategies for Tackling Backdoor Listings: see here. The report identifies four regulatory strategies, for the attention of policymakers in Indonesia, to help improve listing and corporate governance standards.

Thursday, 11 August 2016

South Africa: introducing the twin peaks financial regulatory framework - an update

The National Treasury has provided an update on the introduction of the twin peaks financial regulatory framework: see here (pdf). Legislation - the Financial Sector Regulation Bill (herepdf) - is already before Parliament (its progress can be followed here). Revisions are proposed and are shown in an annotated copy of the Bill available here (pdf). An impact study has also been published: see here (pdf). Regulations concerning the over-the-counter derivatives market have also been published: see here. Further background information is available here.

Wednesday, 10 August 2016

FSB peer review - implementation of the G20/OECD Corporate Governance Principles

The Financial Stability Board has begun a peer review concerning the implementation by FSB member jurisdictions of the G20/OECD Principles of Corporate Governance: see here. Views are being sought on the scope of the review and should be sent to by 9 September.

Tuesday, 9 August 2016

Ireland: the removal of a liquidator by the court

The Court of Appeal (Finlay Geoghegan, Irvine and Hogan JJ) gave judgment at the end of last month in Revenue Commissioners v Fitzpatrick [2016] IECA 228 (on appeal from [2015] IEHC 477). The judgment, which draws heavily upon English authorities, is now the leading Irish authority on the court's power to remove a liquidator from office (under section 277 of the Companies Act 1963 or section 638 of the Companies Act 2014). Irvine J noted, in particular (at para. [61]):

I fully accept that the removal of a liquidator is a serious matter for any court and the relief should not to be granted lightly. In particular, I would endorse the sentiments expressed by Neuberger J. in AMP Music Box Enterprises Ltd [2003] 1 BCLC 319 that the Court should not remove a liquidator merely because it can be shown that in one or possibly more than one respect his conduct has fallen short of the ideal"