Wednesday, 2 December 2020

UK: Court of Appeal considers Part VII insurance business transfers

The Court of Appeal has, for the first time, considered the approach that should be taken when considering whether to sanction the transfer of an insurance business under Part VII of the Financial Services and Markets Act 2000: see Re Prudential Assurance Company Ltd and Rothesay Life Plc [2020] EWCA Civ 1626, handed down today and for which a summary (prepared by the court) is available here (pdf).

Monday, 30 November 2020

UK: The Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2020

The Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2020, made by the Scottish Ministers under the power granted to them by section 483 of the Companies Act 2006, came into force on 26 November: see here or here (pdf). The accompanying policy note is available here. The effect of the Order is to provide for the accounts of Scottish National Investment Bank plc to be audited by the Auditor General for Scotland.

Friday, 27 November 2020

UK: FRC expresses disappointment with the overall quality of corporate governance reporting

In a report published yesterday, the Financial Reporting Council has expressed its disappointment with the overal quality of corporate governance reporting: see here (pdf). While noting some examples of good quality reporting in respect of the Corporate Governance Code 2018, the FRC nevertheless found - based on a sample drawn from companies of various size, as well research from other organisations - that "the objective of too many companies is to claim full compliance with the Code, which has led to the 'tick-box' practices we have tried to discourage ... We are concerned that an unexpectedly high number of companies in our sample claimed full compliance but could not demonstrate this in their reports ... We were surprised that in many cases corporate governance reporting was not coherent and cohesive".

Wednesday, 25 November 2020

UK: The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020 were laid before Parliament today and come into force tomorrow: see here or here (pdf). An accompanying explanatory memorandum is available: see here (pdf). Briefly put, the Regulations extend certain measures introduced earlier this year in response to the Covid pandemic including those relating to the potential liability of directors for wrongful trading under section 214 of the Insolvency Act 1986 and the manner in which company meetings are held. 

Monday, 23 November 2020

Germany: board gender diversity proposals announced

Several proposals regarding the gender diversity of company boards have been announced.  For companies where the Federal Government is the majority shareholder, the supervisory board will need to contain at least 30% female directors.  For listed companies with co-determination, there must be at least one female director on the management board where that board contains 4 or more directors. A copy of the formal ministerial announcement, in German, is available here. Media reports in English are available here and here

UK: the accounting and audit framework from 1 January 2021 - letters to firms

The Department for Business, Energy and Industrial Strategy and the Financial Reporting Council have written to accounting and audit firms explaining the key changes that will arise, in respect of the accounting and audit frameworks, from the start of 2021 (and when the transition period ends): see, respectively, here (pdf) and here (pdf). 

Thursday, 19 November 2020

UK: The UK Listings Review - terms of reference and call for evidence

The terms of reference, and a call for evidence, for the recently announced review of the UK listings regime were published today: see, respectively, here and here.

The review, which is being led by Lord Hill of Oareford, has been asked, to quote directly from the terms of reference, to propose recommendations "for how to boost the UK as a destination for IPOs and optimise the capital raising process for companies seeking to list on the main UK markets". 

The call for evidence invites views on a number of matters such as free float requirements, dual class structures, track record requirements, prospectuses and dual and secondary listing. Various questions are asked including whether dual class share structures should be permitted in the Premium Listing segment of the London Stock Exchange and should the current free float requirement of 25% be changed. 

Wednesday, 18 November 2020

Guernsey: the scope of section 426 of the Companies (Guernsey) Law 2008

The Royal Court (Ordinary division) gave judgment last month in Re Canargo Ltd [2020] GRC064. A copy of the judgment is available here (registration required). The judgment is noteworthy because it provides guidance on the operation of section 426 of the Companies (Guernsey) Law 2008, which provides that "The liquidator of a company may seek the Court's directions in relation to any matter arising in relation to the winding up of the company and upon such an application the Court may make such order as it thinks fit".

The Lieutenant Bailiff, Her Hon. Hazel Marshall QC, set out certain principles with regard to section 426, the first of which was that the section was "...wide enough in its scope to include an application to the court to approve a liquidator’s intended course of action, either by persuasive analogy with the English decision on the equivalent English companies jurisdiction as exemplified in Re Nortel Networks UK Limited [2016] EWHC 2769 (Ch) or, if necessary, under the court’s inherent jurisdiction" (para. [138]).

Monday, 16 November 2020

UK: FCA review - corporate governance disclosures by listed issuers

The Financial Conduct Authority has recently published a short report explaining the results of a review of a sample of annual reports - for accounting periods ending in 2016, 2017 and 2018 - in respect of corporate governance disclosures: see here (pdf). The FCA has identified several areas where, in its opinion, governance disclosures need improving; it has asked, for example, companies to consider whether their statements of compliance with the UK Corporate Governance Code permit shareholders to evaluate how the Code's Principles have been applied. The FCA also expressed its concern that in "certain cases" the disclosures provided were boilerplate in nature and did not change significantly from year to year.

Friday, 13 November 2020

UK: FRC - developments in audit | company reporting expectations

The Financial Reporting Council has, this week, published: [1] the end of year letter sent to CEOs, CFOs and Audit Committee Chairs summarising key developments for 2020/21 annual reports (here, pdf); and [2] Developments in Audit 2020 (here, pdf).

Amongst the matters of note in the FRC's letter are comments relating to section 172 statements: based on a review, the FRC explains that many companies have failed to explain sufficiently how directors discharge their section 172 duty (under the Companies Act 2006), in particular with regard to the consequencess of their decisions in the long-term. In the audit publication, the FRC notes that, in 49 out of the 130 audits inspected as part of its 2019/20 inspection cycle, improvements were required (key issues related primarily to insufficient challenge of management in areas of complexity and forward looking judgements).

Thursday, 12 November 2020

UK: The NHF Code of Governance 2020

The National Housing Federation has today published a new edition of its corporate governance code for housing associations. Further information about the new code is available here, where it is explained that in order to obtain a copy of the code, free of charge, a registration process must be completed. It is 25 years since the publication of the NHF's first governance code, an anniversary noted here.

UK: The Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) (No. 2) Regulations 2020

The Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) (No. 2) Regulations 2020 were laid before Parliament a couple of days ago: see here or here (pdf). The accompanying explanatory memorandum - available here (pdf) - explains the purpose of the Regulations as follows (para. 2.1): to "make amendments to previously made legislation to prepare the United Kingdom’s ... audit regulatory regime for the end of the Transition Period. It will grant states of the European Economic Area (the EEA States) and Gibraltar approval as equivalent third countries and their audit regulatory authorities status as 'approved third country competent authorities' on account of the adequacy of their arrangements for the transfer of audit working papers and investigation reports".

Wednesday, 11 November 2020

UK: Law Commission - a couple of developments: intermediated securities; corporate criminal liability

A belated return to updating this blog, with apologies for my absence. Has it really been several months since the last post? Perhaps that question is best not answered. I will, instead, move quickly on to note a couple of initiatives from the Law Commission: [1] Today, the publication of a scoping paper as part of the project on intermediated securities, outlining problems and potential solutions; and [2] Earlier this month, the start of a new project on corporate criminal liability (see the terms of reference here, pdf).

Thursday, 27 August 2020

UNPRI consultation on human rights framework

A PRI consultation on a new human rights framework has begun. A paper has been published - see here (pdf) - the purpose of which is to set out a framework for institutional investors on the implementation of respect for human rights in their investment activities.

Tuesday, 25 August 2020

UK: England and Wales: the equitable remedy of rectification, tax returns and electronic documents

Judgment was given today by Master Kaye in Re Webster [2020] EWHC 2275 (Ch), a case concerning a taxpayer's claim for the rectification of an electronically submitted tax return. The claim was refused. Master Kaye found that, even if a tax return were a unilateral document capable of rectification, it would be "an odd and a surprising result and contrary to public policy" if the statutory regime that applied to the particular circumstances of the case (a claim for Gift Aid relief) could be circumvented by the use of the equitable remedy of rectification (see para. [77]).  It was also held, in principle, that documents or instruments created electronically were susceptible to rectification. 

Monday, 24 August 2020

UK: England and Wales: unfair prejudice and the removal of directors

Written judgment was delivered today by the Court of Appeal in Loveridge v Loveridge [2020] EWCA Civ 1104. The case centred on allegations of unfair prejudice, under section 994 of the Companies Act 2006, and interim orders that had been granted by the trial judge pending a trial.  Unlike the trial judge, the Court of Appeal found that the petitioning shareholder-director had failed to demonstrate an arguable case under section 994 based on the existence of an equitable constraint on the exercise of legal powers. Such a case had been based, in part, on the petitioner's role as the "driving force" behind the development of various businesses. Lord Justice Floyd observed (paras. [52] and [53]): 

It is not the law that progressive and energetic managers, however well they perform their duties to the benefit of the company, acquire entrenched rights not to be removed from their positions if the constitution of the company permits their removal. Such a principle would act as a significant but unjustified restriction on countless companies with dynamic executives from operating their companies in accordance with their constitutions .... the fact that an individual has had such a role [as 'driving force'] is not a sufficient indication that he is entitled to maintain it in the face of constitutional rules which permit it to be terminated".

 

Friday, 21 August 2020

Basel Committee consultation: Principles for the Sound Management of Operational Risk

The Basel Committee has published, for consultation, an updated edition of its Principles for the Sound Management of Operational Risk: see here. In the press release accompanying the consultation, the Committee states: "...the growth of technology-related threats has increased the importance of banks' operational resilience. The Covid-19 pandemic has made the need to address these threats even more pressing".

EU: Commission report - directors' duties and sustainable corporate governance

The European Commission has published a study on directors' duties and sustainable corporate governance: see here. The study found that, to "some extent", regulatory frameworks and market practices, contribute to corporate short-termism; and various options for reform our outlined. 

Ireland: The Companies (Miscellaneous Provisions) (COVID-19) Act 2020

A copy of the Companies (Miscellaneous Provisions) (COVID-19) Act 2020 is now available on the electronic Irish Statute Book website: see here or here (pdf). A summary of the Act's provisions, which include permitting the postponement of annual general meetings and the holding of certain meetings electronically, is available here.

Friday, 14 August 2020

UK: The Charitable Incorporated Organisations (Insolvency and Dissolution) (Amendment) (No. 2) Regulations 2020

The Charitable Incorporated Organisations (Insolvency and Dissolution) (Amendment) (No. 2) Regulations 2020 were laid before Parliament yesterday and came into force today: see here or here (pdf). As the accompanying explanatory memorandum explains (here, pdf), these Regulations have been made for somewhat embarrassing reasons: to revoke and supersede a first set of Regulations - the Charitable Incorporated Organisations (Insolvency and Dissolution) (Amendment) Regulations (S.I. 2020/710) - which, due to an "administrative error", were made in a form containing drafting errors and omissions. The purpose of the new Regulations remains, nevertheless, the same: to ensure the effective application to CIOs of the new moratorium provisions within Part A1 of the Insolvency Act 1986 (as inserted by the Corporate Insolvency and Governance Act 2020). 

Thursday, 6 August 2020

UK: England and Wales: winding-up companies on public interest grounds

The Court of Appeal gave judgment several days ago in Secretary of State for Business, Energy And Industrial Strategy v PAG Asset Preservation Ltd [2020] EWCA Civ 1017. A summary of this important decision, which concerned section 124A of the Insolvency Act 1986, has now been published by the ICLR: see [2020] WLR(D) 451.

Section 124A provides that where it appears to the Secretary of State that it would be expedient in the public interest that a company should be wound-up, the court may permit a winding-up petition to be presented where it concludes that it would be just and equitable to do so.  At first instance the trial judge declined, on the Secretary of State's application, to wind-up two companies that operated what was described as a business rates avoidance (or mitigation) scheme: see Secretary of State for Business, Energy and Industrial Strategy v PAG Asset Preservation Ltd [2019] EWHC 2890 (Ch)). The Court of Appeal affirmed that decision and noted (at para. [61]): 
.... when determining whether it is just and equitable to wind up a company under section 124A, the court is required to identify for itself the aspects of the public interest which would be promoted by making a winding up order. In this case, however, there is no challenge to the judge's finding that there was no evidence of harm to the public and in oral submissions before us, Mr Chaisty was unable to identify any class of the public who were or might be harmed. An essential element, therefore, is missing".
 

Wednesday, 5 August 2020

Ireland: the Companies (Miscellaneous Provisions) (COVID-19) Bill 2020

The Companies (Miscellaneous Provisions) (COVID-19) Bill 2020 completed its journey through the Dáil Éireann at the end of July: see here. A day or two later it received the assent of the President and became law: see here. A copy of the Act will appear on the electronic Irish Statute Book website soon: see here. A summary of the Act's provisions, which include permitting the postponement of annual general meetings and the holding of certain meetings electronically, is available here.

Australia: Victoria Court of Appeal reasserts that fiduciary duties may survive end of the relationship that gave rise to them

The Victoria Court of Appeal gave judgment several days ago in Schmidt v AHRKalimpa Pty Ltd [2020] VSCA 193. The decision is of note because of the discussion it contains concerning whether, and in what circumstances, fiduciary duties may survive the end of the relationship that gave rise to them. The court stated (at para. [142]): 
We acknowledge that there is authority in jurisdictions outside Victoria to the effect that a fiduciary duty does not survive the termination of the relationship that gave rise to it. However, in our view, in the absence of a contrary decision by the High Court, the law in Victoria is as stated by this Court in Edmonds [[2005] VSCA 27]. That is, depending on the circumstances of a particular case, fiduciary duties may survive the termination of the relationship that first called those duties into being".

Monday, 3 August 2020

New Zealand: Court of Appeal - fiduciary duties and shareholders

The Court of Appeal gave judgment last Friday in Dold v Murphy [2020] NZCA 313: see here (pdf). The decision is of note because of the discussion it contains concerning the circumstances in which a shareholder (or shareholders) would owe fiduciary duties to each other. The President stated (at para. [59]): 
... the proposition that shareholders owe fiduciary duties generally to one another would represent a surprising development, and one we think contrary to principle. With certain statutory exceptions — most notably relief against oppression under s 174 of the Companies Act 1993 — shareholders are entitled to act selfishly in their dealings with one another. That is the antithesis of fiduciary obligation. The fact that one shareholder’s actions may diminish the value of another’s shareholding does not mean there is a fiduciary obligation: impact on another’s worth is not enough ... The shareholder-shareholder relationship is not inherently fiduciary".
 

Friday, 31 July 2020

Malaysia: the conduct of directors of listed companies and their subsidiaries

The Securities Commission yesterday published guidelines on the conduct of directors of listed companies and their subsidiaries: see here (pdf). The Commission explains, in the accompanying press release, that the new guidelines "take into account the evolving Malaysian corporate governance landscape, lessons learnt from the [Commission's] regulatory work in enforcing corporate governance breaches and the need to ensure that Malaysia’s framework remains relevant and effective".

Australia: the role, responsibilities and duties of the company chairman

Judgment was delivered today by Beach J, sitting in the Federal Court, in Australian Securities and Investments Commission v Mitchell (No 2) [2020] FCA 1098: see here or here (pdf). I note the decision because of the important and lengthy discussion it contains (relative to other Commonwealth decisions) concerning the role, responsibilities and duties of the chairman of the board of directors (see, in particular, paras. [1398] to [1429]).

Thursday, 30 July 2020

UK: The Re Duomatic principle, ostensible authority and the consent of beneficial owners

The Judicial Committee of the Privy Council delivered its opinion today in Ciban Management Corporation v Citco (BVI) Ltd & Anor (British Virgin Islands) [2020] UKPC 21: see here or here (pdf). The Board found, amongst other things, that the principle of informal, unanimous shareholder consent - often referred to as the Re Duomatic principle - could operate to confer ostensible authority. This operated subject to recognised exceptions or qualifications: where there is dishonesty; where the shareholder had not consented to the relevant act; and where the transaction would jeopardise the company's solvency or cause loss to creditors.

The Board also referred to what it called a further "possible" qualification in the operation of the principle: where the consent is that of the beneficial owners rather than the registered shareholders. But it stated: "... the correct view is that, at least as here where the ultimate beneficial owner and not the registered shareholder is taking all the decisions in the relevant transactions, the Duomatic principle applies as regards the consent of (and authority given by) the ultimate beneficial owner" (para. [47]).

UK: England and Wales: a member's right to inspect the register of members

The Court of Appeal gave judgment yesterday in Houldsworth Village Management Company Ltd v Barton [2020] EWCA Civ 980, a case concerning the right given to each member of a company (and any other person) under section 116 of the Companies Act 2006 to inspect the company's register of members and request a copy.  The decision is an important one, not least because of the strong endorsement it provides for the role performed by section 116 in helping shareholders to hold directors accountable. A summary has been published by the ICLR: see [2020] WLR(D) 445.

UK: England and Wales: companies, freezing orders and the pursuit of a fledgling business

Earlier this week the Court of Appeal gave judgment in Organic Grape Spirit Ltd v Nueva IQT, SL [2020] EWCA Civ 999, an important decision on the scope of a freezing order and the extent to which it permitted within "the ordinary and proper course of businesses" - or should be amended to permit - a company to invest in a fledgling business. A summary of the decision has been published by the ICLR: see [2020] WLR(D) 443.

Wednesday, 29 July 2020

UK: Supreme Court decision: the fiduciary position of the members of charitable companies

The Supreme Court gave judgment today in Lehtimaki v Cooper [2020] UKSC 33: see here or here (pdf). A summary of the judgment is available here (pdf). The court held, amongst other things, that members of charitable companies owed fiduciary duties but, in contrast to the position adopted by the Court of Appeal, these did not apply to every exercise of a power to act. A summary of the decision was given by Lady Arden in the following video recording:

Tuesday, 28 July 2020

UK: The Finance Act 2020 receives Royal Assent

The Finance Act 2020 received Royal Assent a few days ago and has now been published: see here or here (pdf). The Act includes - in section 100 and schedule 13 - provisions making directors jointly and severally liable, in certain circumstances involving insolvency or potential insolvency, for amounts owing by companies to HMRC. Background information, published to accompany the (then) Bill's parliamentary passage, is available here.

Monday, 27 July 2020

UK: Law Commission consultation on draft legislation - consumer sales contracts and the transfer of ownership

The Law Commission for England and Wales has published a consultation paper and draft legislation designed to reform the law concerning the transfer of ownership in consumer sales contracts, following the report, Consumer Prepayments on Retailer Insolvency, it published several years ago (here, pdf). Views are sought on proposed transfer of ownership rules for contracts of sale between consumers and retailers.

While the Commission's remit is with England and Wales, the legislative changes would be made to the Consumer Rights Act 2015, which has UK wide application; the Commission hopes that the Government will implement its proposed changes throughout the UK. 

The consultation paper is available here (pdf). The draft Bill is available here (pdf). A summary of the proposal is available here (pdf). A Government press release is available here.

Friday, 24 July 2020

UK: Charity Commission regulatory alert - the importance of transparent and accountable governance

The Charity Commission for England and Wales issues a handful of regulatory alerts each year. These have, increasingly in recent years, focused on the threat of fraud. In its most recent alert, addressed to large charities, the Commission has, however, focused on the importance of governance: see here. The alert follows an investigation by the Commission into RNIB which found evidence of "ineffective and dysfunctional governance" and, according to the Commission's chief executive, other "grave governance failings in some household name charities".

Singapore: ACRA consults on Companies Act amendments

The Accounting and Corporate Regulatory Authority is consulting on proposed amendments to the Companies Act (and subsidiary legislation): see here. Included is a provision to abolish the requirement - currently found in section 174 of the Act - that "Every public company that is a limited company and has a share capital shall, within a period of not less than one month and not more than 3 months after the date at which it is entitled to commence business, hold a general meeting of the members of the company to be called the 'statutory meeting'".

Thursday, 23 July 2020

UK: Supreme Court judgment next week - charitable companies, members' powers and the court's jurisdiction

The UK Supreme Court will give judgment next Wednesday in Lehtimäki v The Children's Investment Fund Foundation (UK), on appeal from [2018] EWCA Civ 1605, [2018] WLR(D) 423. The issue before the court, to quote directly from its summary, was this: "Does the court have jurisdiction to direct members of a charitable company on how to exercise their powers absent a breach of fiduciary duty?"

Japan: revised Stewardship Code published

Rather belatedly I note that a revised edition of Japan's Stewardship Code was published earlier this year: see here.

Wednesday, 22 July 2020

Spain: CNMV publishes new edition of the Good Governance Code for Listed Companies

The Comisión Nacional del Mercado de Valores (CNMV) has published a new edition of the Good Governance Code for Listed Companies. A copy of the new Code, in Spanish, is available here (pdf). A summary of the changes contained in the new edition, in English, is available here (pdf).

UK: Expanding the Trust Registration Service

HM Treasury has published a document summarising the responses received in respect of its technical consultation on the Fifth Money Laundering Directive and, in particular, the expansion of the UK's Trust Registration Service (TRS) to include a wider range of express trusts (not just those with tax consequences, as is currently the case): see here. Draft Regulations - The Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020 - have also been published: see here.

The Government has set a registration deadline of 10 March 2002 for existing trusts to register (or update their records if they are already registered on the TRS).

UK: HM Treasury consultation on new economic crime levy

HM Treasury has published a consultation paper seeking views on the design of the new economic crime levy, the purpose of which is to raise funds (approximately £100 million from entities regulated for anti-money laundering purposes) to support (and enhance) the Government's work in addressing money laundering: see here.

Tuesday, 21 July 2020

UK: Company reporting and Covid-19 - a review by the FRC

The Financial Reporting Council has published its first thematic review of company reporting following the start of the Covid-19 pandemic: see here (pdf). The FRC found that most companies in the sample reviewed had provided sufficient information to enable users to understand Covid-19's impact on performance, position and prospects. There was, however, room for improvement by many companies, in particular with regard to going concern disclosures.