Wednesday, 12 May 2021

UK: The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill

The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill received its first reading in the House of Commons today. A copy of the Bill, as introduced, is available here (pdf).

The accompanying explanatory notes - available here (pdf) - explain that the purpose of the Bill is to address "public concerns about the abuse of limited liability, by extending the powers of the Secretary of State and, in Northern Ireland, of the Department for the Economy to investigate the conduct of company directors to include former directors of dissolved companies, to commence disqualification proceedings against them where public interest criteria are met, and to seek compensation where their conduct has caused loss to creditors". 

Further information is also available in a press release from the Insolvency Service

UK: FRC report - the UK Corporate Governance Code 2018 and remuneration reporting

The Financial Reporting Council has published the results of research exploring remuneration reporting following the introduction of the UK Corporate Governance Code 2018: see here (pdf). While noting improvements in the quantity of disclosure, the research did not assess the quality of disclosure; the authors observed, nevertheless, repetition of the wording from the Code in companies' reporting.

Tuesday, 11 May 2021

Ukraine: OECD review of the corporate governance of state-owned enterprises

The OECD has today published the results of its review of the corporate governance of state-owned enterprises in Ukraine: see here (pdf). The review describes corporate governance reforms as being "nascent" and "fragile" and, while gradual progress has taken place, changing priorities have led to "reform stagnation and setbacks". 

Australia: NSW Court of Appeal considers the reflective loss principle

Judgment was delivered several days ago by the New South Wales Court of Appeal in Central Coast Council v Norcross Pictorial Calendars Pty Ltd [2021] NSWCA 75. The decision is noteworthy because of the discussion it contains of what is often described as the reflective loss principle, also recently considered by the UK Supreme Court in Marex Sevilleja v Marex Financial Ltd (Rev 1) [2020] UKSC 31.

Chief Justice Bathurst (Macfarlan JA and Gleeson JA concurring) stated (paras. [118] - [119]): 
In the present case, neither of the parties contended that the approach of Lord Sales in Marex should be adopted. However ... the Council contended that the exception to the principle, namely that the shareholder could recover for loss to the value of his shares in the company as a result of damage suffered by the company where the shareholder had a cause of action but the company did not ... should not be accepted.

I am unable to agree. There seems to be no reason for the principle to apply to circumstances where the company has no cause of action to recover the loss. This is so regardless of the rationale of the principle. If the purpose is to prevent double recovery, there is no prospect of double recovery where the company has no cause of action. If is as I conceive it, the principle is based on the rule in Foss v Harbottle that only the company can sue for a wrong done to the company, the principle is not outflanked because there is no actionable wrong done to the company, the company having no cause of action. If ... it is associated with the doctrine of maintenance of capital, there is no reduction of capital if a shareholder recovers funds that the company as a matter of law cannot recover. Finally, there is no policy reason not to impose such an exception". 

Monday, 10 May 2021

Singapore: MAS consultation - Guidelines on Corporate Governance for Designated Financial Holding Companies, Banks, Direct Insurers, Reinsurers and Captive Insurers

The Monetary Authority of Singapore is consulting on proposed changes to the Guidelines on Corporate Governance for Designated Financial Holding Companies, Banks, Direct Insurers, Reinsurers and Captive Insurers which are incorporated in Singapore: see here

UK: FCA consultation - a new authorised fund regime for investing in long term assets

The Financial Conduct Authority has begun a consultation seeking views on a new authorised fund regime - LTAFs or long-term asset funds - to facilitate investment in long-term, illiquid assets: see here (pdf). 

UK: HM Treasury consultation outcome - supporting the wind-down of critical benchmarks

HM Treasury has announced, following a consultation earlier this year (see here, pdf), that legislation will be brought forward, when Parliamentary time allows, to reduce the disruption that might arise in respect of contracts that have been unable to move from LIBOR to another benchmark ("tough legacy" contracts): see here.

Friday, 7 May 2021

UK: Financial Services Regulatory Initiatives Forum - Regulatory Initiatives Grid published

The third regulatory initiatives grid has been published by the chairs of the Financial Services Regulatory Initiatives Forum: see here. The grid provides a timeline for current initiatives - over 120 - from organisations including HM Treasury, the Bank of England, Financial Conduct Authority and Financial Reporting Council.  

Thursday, 6 May 2021

Pakistan: SECP consults on legal framework for SPACs

The Securities and Exchange Commission of Pakistan has published for consultation proposed Regulations the purpose of which is to introduce a framework for the formation and operation of special purpose acquisition companies (SPACs). For further information about the Regulations, which will amend the Public Offering Regulations 2017, see: press release (pdf) | Draft Regulations (pdf) |. 

UK: PRA discussion paper - the prudential framework for non-systemic banks and building societies

The Prudential Regulation Authority has published a discussion paper the purpose of which is to start exploring options for the creation of a simpler prudential framework for banks and building societies that are neither systemically important nor internationally active: see here (pdf).

Wednesday, 5 May 2021

Australia: Treasury consultation - greater transparency of proxy advice

The Australian Treasury has published a consultation paper seeking views on various reform options including those designed to ensure independence, facilitate engagement between companies and proxy advisers, and provide for an appropriate licensing regime. The paper is available here here (pdf).

UK: FCA consultation - SPACs and the Listing Rules

The Financial Conduct Authority has published a consultation paper - CP21/10, available here (pdf) - in which it seeks views on proposed amendments to the Listing Rules in respect of SPACs. The proposals are intended to enable a SPAC's listing to continue, subject to there being appropriate investor protection, where an acquisition target is identified. Such a change was one of the recommendations made in the recent UK Listing Review conducted by Lord Hill. Whether there should be a separate listing category for SPACs is something the FCA will consider - and consult upon - at a later date.

Tuesday, 4 May 2021

Latvia: corporate governance code - new edition published

A little belatedly, I note the publication of a new edition of Latvia's corporate governance code: see here (pdf).

Monday, 3 May 2021

Europe: ecoDa publishes new edition of its governance guidance and principles for unlisted companies

The European directors organisation - ecoDa - has published an updated edition of its Corporate Governance Guidance and Principles for Unlisted Companies in Europe: see here (pdf).

Sunday, 2 May 2021

Iceland: sixth edition of the Corporate Governance Guidelines

A new edition - the sixth - of Iceland's Corporate Governance Guidelines was published earlier this year and comes into effect on 1 July. A copy of the Guidelines in English is available here (pdf).

Norway: NUES consults on revisions to the Norwegian Corporate Governance Code

The Norwegian Corporate Governance Board (NUES) is currently consulting on proposed changes to the Norwegian Corporate Governance Code for Listed Companies. A copy of the consultation paper, in English, is available here (pdf). In addition to the proposed changes, which include those relating to the composition of the nomination committee, views are sought on any aspect of the Code.

Saturday, 1 May 2021

UK: Financial Services Bill receives Royal Assent

The Financial Services Bill received Royal Assent last Thursday thereby becoming the Financial Services Act 2021.  A copy of the Act is available here (pdf). The accompanying explanatory memorandum has not yet been published; reference can, instead, be made to the briefing paper provided by the House of Commons Library: see here (pdf). 

Hong Kong: consultation on the Governance Code and related Listing Rules

The Hong Kong Exchange has begun a consultation in respect of proposed changes to the Hong Kong Corporate Governance Code, including related Listing Rules: see here (pdf). 

Nigeria: new edition of the Corporate Governance Guidelines for Insurance and Reinsurance Companies

Earlier this year the National Insurance Commission published a new edition of its Corporate Governance Guidelines for Insurance and Reinsurance Companies: see here (pdf). 

Malaysia: Securities Commission publishes new edition of Malaysian Code on Corporate Governance Code

At the end of last month (on the 28th to be precise) the Securities Commission published a new edition of its Corporate Governance Code. A copy of the Code is available here (pdf), with further information available in the accompanying FAQs (pdf) and press release

Japan: new governance and stewardship codes

The Council of Experts, set-up to review Japan's governance and stewardships codes, has published, in draft form, new editions of both codes: see, in English, here (pdf) and here (pdf). 

Friday, 26 March 2021

IFIAR publishes ninth annual inspection findings survey

The International Forum of Independent Audit Regulators has published its ninth annual (audit) inspection findings survey: see here. IFIAR members from 50 jurisdictions took part in the survey. The survey reports that 34% of the audits of public interest entities inspected by members had at least one "finding" (generally understood to be a significant deficiency in satisfying the requirements of auditing standards) - hence the observation that there continues to be a lack of consistency in the execution of high quality audits.

IOSCO statement on going concern assessments and disclosures during the Covid-19 pandemic

The IOSCO has published a statement on going concern assessments and disclosure during the COVID-19 pandemic: see here (pdf). Within the statement, the IOSCO has taken the opportunity to remind issuers, audit committees and external auditors of their important roles in providing investors with high-quality, reliable, timely, and transparent financial information - especially during times of uncertainty.

Thursday, 25 March 2021

Japan: Council of Experts to consider revisions to governance and stewardship codes

The Council of Experts, set-up to review Japan's governance and stewardships codes, will meet on March 31 to consider revisions to the codes: see here.

Wednesday, 24 March 2021

UK: The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 were laid before Parliament today and come into force on Friday (March 26th): see here or here (pdf). The accompanying explanatory memorandum - available here (pdf) - explains the purpose of the Regulations as follows (para. 2):

... to further extend the duration of some of the temporary measures introduced by the Corporate Insolvency and Governance Act 2020 ... beyond their current expiration dates ... [including] suspending liability for wrongful trading in the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020 (S.I. 2020/1349) ... from the current expiry date of 30 April 2021 to 30 June 2021"
.

European Union: the Statutory Audit Directive - Article 22 - "Employment by audited entities of former statutory auditors or of employees of statutory auditors or audit firms"

The Court of Justice of the European Union delivered its judgment today in A (Company law - Statutory audit of annual and consolidated accounts - Judgment) [2021] EUECJ C-950/19. The case concerned - as its name suggests - the Statutory Audit Directive 2006/43/EC (as amended by Directive 2014/56/EU), more specifically Article 22a which imposes a time-based bar on a statutory auditor, or key audit partner, taking up a position with a former audit client. The court held that a position for the purposes of Article 22(a)(1)9a) would be regarded as being held from the point at which the employment contract was agreed and not from when the duties associated with the position had begun to be performed.

Tuesday, 23 March 2021

UK: England and Wales: LLP members and disqualification

An important judgment of the High Court was delivered earlier today: Secretary of State for Business, Energy And Industrial Strategy v Geoghegan [2021] EWHC 672. The decision of Mr Justice Michael Green is noteworthy because it confirms that all members of a limited liability partnership can be disqualified under section 6 of Company Directors Disqualification Act 1986. The judge held, moreover, that [a] there is no requirement that such members should be on the management board (or at a level equivalent to a director of a company); [b] the conduct that can be relied on for the purposes of disqualification is anything done in the capacity of a member of a LLP; and [c] the test for unfitness is the same as in relation to companies.

Thursday, 18 March 2021

UK: Government consultation - audit and governance reform

A quick note. The Government has, this morning, published a press release announcing the start of a consultation on "wide-ranging reforms to modernise the country’s audit and corporate governance regime": see here. At the time this post was originally posted, the consultation document (a white paper, I believe) had not been published - it ought to appear here later today (most likely after the Secretary of State for Business, Energy and Industrial Strategy has delivered a statement about the reforms in Parliament - as is expected according to the order paper for today).

Friday, 12 March 2021

UK: FTSE100 boards and ethnic minority directors

The Financial Times reports (here, paywall) that "[a]lmost a fifth of FTSE 100 boards lack any ethnic minority representation, with less than a year to hit a key target of at least one non-white director, according to a government-backed review into corporate diversity".

Update (12 March): The data cited by the FT are contained in a progress report, available here, published by the Parker Review Committee.

Thursday, 11 March 2021

UK: First Review of the Insolvency (England and Wales) Rules 2016 - call for evidence

The Insolvency Service has published a call for evidence in respect of its first review of the Insolvency (England and Wales) Rules 2016: see here. These Rules, to quote from the opening paragraph of the call for evidence, "... set out the detailed procedure for the conduct of company and individual insolvency proceedings under the Insolvency Act 1986, providing the framework giving effect to the regime specified in the Act. They represent the single most significant piece of legislation in respect of the insolvency regime operating in England and Wales, after the Insolvency Act itself; and the largest, with over nine hundred rules in the main body and numerous additional schedules covering specific topics".

Wednesday, 10 March 2021

UK: The Accounts and Audit (Amendment) Regulations 2021

The Accounts and Audit (Amendment) Regulations 2021 were laid before Parliament yesterday and come into force on 31 March: see here or here (pdf). The purpose of the statutory instrument - to quote directly from its explanatory memorandum (here, pdf) - is to "amend... the Accounts and Audit Regulations 2015 (S.I 2015/234) ... by delaying the dates for certain public and local bodies to publish, and make available for inspection, their annual accounts and supporting documents" (para. 2.1).

Tuesday, 9 March 2021

OECD: ACI Guidelines - implemenation guide published

The OECD has this week published an implementation guide in respect of its Guidelines on Anti-Corruption and Integrity in State-Owned Enterprises: see here (pdf). 

Monday, 8 March 2021

UK: FCA announcement on the ending of LIBOR

The Financial Conduct Authority has published a further update in respect of the ending of LIBOR: see here. This follows the publication by ICE, the benchmark administrator, of a feedback statement in respect of its consultation on the ending of LIBOR: see here (pdf).

Friday, 5 March 2021

Australia: board meetings and differences in recollection

A recent decision of the New South Wales Court of Appeal - ET-China.com International Holdings Ltd v Cheung [2021] NSWCA 24 - is worth noting because of the discussion it contains, albeit brief, regarding differences of recollection in respect of board meetings. To quote Bell P (with whom Bathurst CJ and Leeming JA agreed) (at para. [197]):
It is not unknown, still less uncommon, for disputes to arise as to what may have been said at meetings of boards of companies ... Sometimes, the differences may be substantial; sometimes, they may go to matters of emphasis or the extent of detail recorded about particular issues discussed. The mere fact that there may be competing versions of minutes does not mean, moreover, that one of the different versions is necessarily false: recollections of events may differ. Obviously it is desirable that directors reach accord as to the accuracy of minutes but that may not always be possible."

Thursday, 4 March 2021

OECD: Working Paper 22 - the governance of company groups

The latest addition to the OECD working paper series on corporate governance has been published: number 22, the governance of company groups. This paper, to quote from its abstract, "presents a comparative overview of the regulation of groups in company law ... [and] also discusses how different corporate governance codes make recommendations on issues relevant to the boards in company groups". 
 

Wednesday, 3 March 2021

UK: The UK Listing Review - recommendations published

The UK Listing Review, chaired by Lord Hill, published its recommendations today: see here (pdf). As has been widely predicted, the Review is recommending that premium listed companies should be permitted dual class share structures (subject to certain conditions); that HM Treasury should conduct a fundamental review of the prospective regime, including the liability rules relating to forward-looking information; and free float requirements should be reviewed, lowering the minimum absolute requirement to 15%.

Tuesday, 2 March 2021

India: SEBI consultation - independent directors

Noting that concerns remain regarding the efficacy of independent directors as part of the governance framework, SEBI - the Securities and Exchange Board of India - has published for consultation various reform proposals including, most notably, new procedures for appointment and removal: see here

Monday, 1 March 2021

Hong Kong: Foss v Harbottle, 'fraud on the minority', and the common law derivative action

A recent decision of the Court of Appeal concerning the common law derivative action, Wang Pengying v Ng Wing Fai [2021] HKCA 100, will be of interest beyond Hong Kong - and in particular in England because of the discussion it contains about whether Harris v Microfusion 2003-2 LLP [2016] EWCA Civ 1212 was wrongly decided in holding that, for the purposes of the 'fraud on the minority' exception to what is known as the rule in Foss v Harbottle(1843) 2 Hare 461, personal benefit by the wrongdoers was required in cases of breach of duty not involving fraud.   

Two of the three appellate judges - Kwan VP and Yuen JA - expressed a view, albeit obiter: in their opinion, the appropriate test for the purposes of the 'fraud on the minority' exception was not personal benefit by the wrongdoers, or in loss to the company, but in the lawfulness of the majority vote releasing the defaulting director from liability. Yuen JA stated that the requirement for personal benefit by the wrongdoers, as set out in Microfusion, was "difficult to justify, because if ... not met, even the most egregious breach of duty cannot be brought to court" (para. 86.1). 

Friday, 26 February 2021

UK: FRC guidance - improving the quality of 'comply or explain' reporting

The Financial Reporting Council has today published guidance designed to help companies improve the quality of their 'comply or explain' reporting in respect of the UK Corporate Governance Code: see here (pdf). In the guidance document, it is noted:
One of the most concerning findings from our review [here, pdf]was that many companies were not transparent about their compliance with the Code. Several companies in our sample, including some that claimed full compliance with the Code, on further investigation had not acknowledged departure from one or more Provisions of the Code .... We were disappointed with the quality of the explanations provided by companies for non-compliance with the Provisions of the Code and struggled to find robust explanations. Our sample identified 74 cases of non-compliance with the Code, but we found only four explanations that we considered high quality and offered an insight into the companies’ approach to good governance. The majority of explanations were inadequate, and in one instance, not given at all".

UK: Administration - pre-pack sales to connected parties - draft legislation before Parliament

A draft of the secondary legislation - The Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 - that will introduce mandatory, independent scrutiny for certain pre-pack administration sales, is currently before Parliament. The (draft) explanatory memorandum, available here (pdf), states (para. 6.1): 
This instrument imposes conditions that must be satisfied before an administrator of a company in administration is able to make a substantial disposal of company property to a person who has a connection with the company. The conditions are that the company’s creditors must have considered and approved the proposed disposal, or, alternatively, that an independent and suitably-qualified person has provided a report to the administrator which considers whether the proposed disposal is reasonable in the circumstances. The instrument also requires that, if the report concludes that the proposed disposal is not reasonable, this must be disclosed to the company’s creditors".

The Regulations are subject to the draft affirmative procedure and their progress can be followed here