Wednesday, 26 October 2016

UK: The Financial Conduct Authority sets out its mission

The Financial Conduct Authority has today published, for consultation, a document setting out its future mission: see here (pdf). The mission document is intended to provide a framework to explain how the FCA interprets its objectives and identifies its priorities. In the words of Andrew Bailey, the FCA's chief executive (here, pdf), the missoin is intended to distil what the FCA does and provide a framework for conduct regulation.

UK: The Small Business, Enterprise and Employment Act 2015 (Commencement No. 6 and Transitional and Savings Provisions) Regulations 2016

The Small Business, Enterprise and Employment Act 2015 (Commencement No. 6 and Transitional and Savings Provisions) Regulations 2016 were made on 19 October. The Regulations, which extend to England and Wales only, bring into force on 6 April 2017 various provisions of the Small Business, Enterprise and Employment Act 2015, including those relating to the requirement to hold creditor meetings in cases of company and individual insolvency. Explanatory notes for the 2015 Act are available here.

Tuesday, 25 October 2016

UK: The Insolvency (England and Wales) Rules 2016

The Insolvency (England and Wales) Rules 2016, which contain the procedural framework for the Insolvency Act 1986, were laid before Parliament today and come into force on 6 April 2017: see here (pdf). The purpose of the rules, and the changes that these Rules will introduce, is explained in the accompanying explanatory memorandum: see here (pdf). A short overview is also available in the announcement made today by the Insolvency Service.

Jersey: the reserve power of company shareholders

The decision of the Royal Court (Samedi division) in the case In the matter of Galasys plc [2016] JRC188 was published yesterday. The decison is noteworthy because of the discussion it contains regarding the shareholders' reserve power of management. The discussion was, strictly speaking, obiter but the decision appears to be the first appellate level Jersey authority to have considered these matters. As for the scope of the reserve power, the court inclined towards the view that the power extended to the taking of management of decisions and went, therefore, beyond the exercise of a power to appoint or replace directors to resolve deadlock or the inability to act.

Friday, 21 October 2016

UK: FRC publishes annual review of corporate reporting

The Financial Reporting Council has published its annual review of corporate reporting: see here (pdf). Whilst noting, in the report's executive summary, that the complexity and breadth of corporate reporting makes it impossible to assess the overall quality of corporate reporting in a single sentence, the FRC states that "[c]ompliance with the accounting framework, particularly by larger public companies, is generally good and the introduction of the strategic report has improved the quality of narrative reporting. However, there is room for further improvement, particularly as not all companies provide sufficient balance".

Thursday, 20 October 2016

Netherlands: new governance code expected by the end of 2016

Earlier this year, 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 with a single tier board: see here (pdf). The Committee has announced that the new Code will be published by the end of 2016, together with additional guidance for those companies choosing to have a single board: see here.

Wednesday, 19 October 2016

UK: HMRC's duty of confidentiality towards taxpayers - strong words from the Supreme Court

The Supreme Court gave judgment today in Ingenious Media Holdings plc, R (on the application of) v HMRC [2016] UKSC 54. The case concerned the duty of confidentiality owed by HM Revenue and Customs and the exemptions provided by section 18 of the Commissioners for Revenue and Customs Act 2005. The court unanimously held that the duty had been broken when the (then) Permanent Secretary for Tax, Mr David Hartnett, provided information "off the record" to two journalists about Ingenious Media and its founder and chief executive, Mr McKenna.

Lord Toulson (who retired from the Supreme Court last month) delivered the court's judgment and had this to say about the justifications for disclosure that HMRC had provided (paras. [34] and [35]):
As to the justifications put forward by HMRC, a general desire to foster good relations with the media or to publicise HMRC’s views about elaborate tax avoidance schemes cannot possibly justify a senior or any other official of HMRC discussing the affairs of individual tax payers with journalists. The further suggestion that the conversation might have led to the journalists telling Mr Hartnett about other tax avoidance schemes, of which HMRC knew nothing, appears to have been no more than speculation, and is far too tenuous to justify giving confidential information to them.

The fact that Mr Hartnett did not anticipate his comments being reported is in itself no justification for making them. The whole idea of HMRC officials supplying confidential information about individuals to the media on a non-attributable basis is, or should be, a matter of serious concern. I would not seek to lay down a rule that it can never be justified, because “never say never” is a generally sound maxim. It is possible, for example, to imagine a case where HMRC officials might be engaged in an anti-smuggling operation which might be in danger of being wrecked by journalistic investigations and where for operational reasons HMRC might judge it necessary to take the press into its confidence, but such cases should be exceptional". 

A written summary of the judgment is available is here (pdf). Lady Hale provided a spoken summary of the court's judgment this morning: see the below video (also available here).

Sweden: Corporate Governance Board publishes annual report 2016

The Swedish Corporate Governance Board has published, in English, a copy of its annual report for 2016: see here (pdf). The report explains the Board's activities as well as the results of a survey exploring how companies have applied the Swedish Corporate Governance Code.

Pakistan: Principles of Corporate Governance for Non-Listed Companies

The Securities and Exchange Commission has published a set of governance principles for non-listed companies: see here (pdf). The principles are voluntary.

Tuesday, 18 October 2016

Philippines: SEC publishes revised governance code for publicly listed companies

The Securities and Exchange Commission has published for public comment a revised edition of its Corporate Governance Code for Publicly Listed Companies: see here (pdf).

Nigeria: company law reform and the new national code of corporate governance

The Corporate Affairs Commission is proposing to repeal and replace the Companies and Allied Matters Act 1990, the Act that contains the core provisions of Nigeria's company law framework. The Act will be replaced by a new Act - the Companies and Allied Matters Act 2016 - a draft of which was published earlier this year (see herepdf).

Also published in draft form earlier this year, and now released in final form, is the new National Code of Corporate Governance. Produced by the Financial Reporting Council, the National Code in fact contains three separate codes: one for the private sector; one for not-for-profit entities; and one for the public sector. The private sector code applies to all public companies whether listed or not and compliance with its provisions is mandatory. It took effect yesterday. The not-for-profit code operates on the basis of 'comply or justify non-compliance'. It also took effect yesterday. The public sector code has not yet come into force: it will do so once an executive directive has been secured from the Federal Government.

Monday, 17 October 2016

Taiwan: amended edition of the governance best practice principles

The Taiwan Stock Exchange has published an amended edition of its Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies. News of the new edition was contained in a press release published in English last Friday: see here. The press release provides an overview of some of the amendments made in the new edition. The new edition - not yet published in English - follows the publication earlier this year of the new Stewardship Principles for Institutional Investors.

Ireland: the company register and the powers of the registrar

Last Thursday, sitting in the Court of Appeal, Ms Justice Finlay Geoghegan (sitting with Peart J and Hogan J) delivered the judgment of the court in Independent Trustee Company Ltd v Registrar of Companies [2016] IECA 274. The judgment is an important one concerning the power of the Registrar of Companies and the information provided in the publicly accessible online register of companies. At issue, in particular, was the Registrar's power to record on the register the status of a company as 'receivership' where a notice had been received that a receiver had been appointed over property held on trust by the company and legally owned by it. In addition to the label 'receivership', other descriptions used by the Registrar included 'strike off list', 'liquidation', 'ceased following cross border merger', 'dissolved' and 'normal'.

The court held that the Registrar's use of the designation 'receivership' was ultra vires the powers provided under the Companies Act. The designation was unclear and apt to mislead because it incorrectly implied that that there had been a change in the corporate status of the company by reason of the receiver's appointment to part of the company's property.  But no such change in status had taken place or would inevitably take place.

The court recognised, however, that the Registrar had the power and duty to organise the information on the electronic register in a clear, organised and accessible manner. This permitted the Registrar to summarise the fact that it had received certain statutory notifications, including the appointment of a receiver to all or part of the company's property, but this could not be done in a manner that implied that a receiver's appointment had changed (or would change) a company's status.

Friday, 14 October 2016

UK: The Criminal Finances Bill introduced in Parliament

The Criminal Finances Bill was introduced in the House of Commons yesterday and received its first reading: see here. A copy of the Bill, as introduced, is available here or here (pdf). Explanatory notes are available here or here (pdf). Part 3 of the Bill contains the provisions that will introduce the new corporate offence (applying also to partnerships) of the failure to prevent the facilitation of tax evasion. Further background information about this new offence is available here. Draft Government guidance is also available: see here (pdf).

Thursday, 13 October 2016

UK: FRC reviewing governance principles

The chairman of the Financial Reporting Council, Sir Winfried Bischoff, delivered a speech earlier this week at the UK Financial Services BREXIT summit: see here. With regard to corporate governance, Sir Winfried explained: "The government’s interest in making business work for everyone, means we are considering how our governance principles best meet the wider demands of all stakeholders or need to be amended".

The question that Sir Winfried asks is certainly an important one but it's not clear if a wide-reaching public consultation is intended: much will no doubt depend on what emerges from the Government's corporate governance consultation later this year and the inquiry currently being conducted by the Business, Innovation and Skills Committee.

Wednesday, 12 October 2016

BCBS final standard - TLAC holdings

The Basel Committee on Banking Supervision has today published a final standard on the regulatory capital treatment of banks' holdings of total loss-absorbing capacity (TLAC) instruments: see here (pdf). A short overview of the standard is available here.

UK: FRC guidance - year end advice for preparers of accounts

The Financial Reporting Council has, ahead of the 2016 reporting season, written to around 1,200 large and smaller listed companies with guidance on those aspects of annual reports that companies should aim to improve: see here (pdf). The FRC's letter notes, amongst many things, the increased scrutiny by stakeholders of companies' tax strategies, and states that companies should describe any material risks relating to the sustainability of their strategies relating to tax. The letter states that the FRC will soon publish its annual review of corporate reporting (for 2015/16).

Tuesday, 11 October 2016

Canada: governance reforms - Bill introduced in Parliament

A Bill that will, when enacted, make changes to the governance framework by amending the Canada Business Corporations Act, the Canada Cooperatives Act, and the Canada Not-for-profit Corporations Act, was introduced in the House of Commons last month and received its first reading: see here. The text of the Bill is available here and further information is available here and here. Among the changes proposed are those relating to the election of directors (including annual elections and votes for individual directors), the disclosure of information regarding board diversity and communications with shareholders.

Monday, 10 October 2016

Zimbabwe: public sector governance and a new Companies Act

The fourth session of the eighth Parliament began last week. Amongst the legislation promised by the President, in his opening speech, was a new Companies Act and an Act on the governance of public sector entities: see here (pdf).

Friday, 7 October 2016

Brazil: the fifth edition of the Código das Melhores Práticas de Governança Corporativa

The codes and principles directory maintained by the European Corporate Governance Institute was updated earlier this week and now includes a copy of the fifth edition of the Código das Melhores Práticas de Governança Corporativa (Code of Best Practice of Corporate Governance) published by the Brazilian Institute of Corporate Governance: see here.

Thursday, 6 October 2016

UK: England and Wales: partners and the forfeiture of profits

Judgment was given yesterday in Hosking v Marathon Asset Management Llp [2016] EWHC 2418 (Ch). This is an important authority on the liability of fiduciaries and, in particular, partners and members of limited liability partnerships. At issue was whether the principle that a fiduciary acting in breach of fiduciary duty may lose his right to remuneration applied also to the right to a share in the profit of a partnership. Mr Justice Newey held that the right to profit was potentially subject to forfeiture and noted that whilst the principle had mainly been invoked in relation to agents, its rationale extended more widely; he noted also that the absence of a provision for forfeiture in the contractual documentation did not mean there was no scope for its operation.

Spain: CNMV annual reports on corporate governance and directors' remuneration

The Comisión Nacional del Mercado de Valores (CNMV) has published its annual reports on corporate governance and directors' remuneration for 2015. The reports are currently only available in Spanish (see, respectively, here and here) with copies in English published later. The reports provide information on compliance with the recommendations in the Good Governance Code of Listed Companies issued last year. Overall compliance with the recommendations is said to be high.

Italy: the Italian Stewardship Principles

The codes and principles directory maintained by the European Corporate Governance Institute was updated earlier this week and now includes a copy of the Italian Stewardship Principles for the Exercise of Administrative and Voting Rights in Listed Companies: see here.

Wednesday, 5 October 2016

UK: FRC consults on changes to its corporate reporting review procedures

The Financial Reporting Council is consulting on proposed changes to its corporate reporting review procedures: see here.

Thailand: SEC consultation on new governance codes - briefing documents (in English) available

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 Investment Governance Code for Institutional Investors. Public hearings were held earlier this year and briefing documents published. Copies of these documents, in English, are now available and these contain the draft Codes: see, respectively, here (pdf) and here (pdf).

Tuesday, 4 October 2016

India: SEBI consultation: corporate governance issues in compensation agreements

The Securities and Exchange Board of India has published a a short consultation paper titled Corporate Governance Issues in Compensation Agreements, seeking views on a proposal to amend the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015: see here (pdf).

Monday, 3 October 2016

IOSCO Report on Corporate Governance

The Growth and Emerging Markets Committee of the International Organization of Securities Commissions today published a report highlighting measures and regulatory approaches that may assist emerging market regulators to strengthen corporate governance within their jurisdictions: see here (pdf). The report focuses on board composition, remuneration and incentive structures, risk management and internal controls.

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."