Wednesday, 29 March 2017

Latvia: corporate governance in Latvia - an OECD report

The OECD has published the review of corporate governance in Latvia that it undertook as part of Latvia's accession to OECD membership in 2016: see here.

Tuesday, 28 March 2017

UK: FCA orders compensation for market abuse

The Financial Conduct Authority has, for the first time, used powers given to it under section 384 ("Power of Authority to require restitution") of the Financial Services and Markets Act 2000, to require a listed company - Tesco plc - to pay compensation for market abuse in respect of a trading update that gave a false or misleading impression as to Tesco plc shares and certain Tesco group bonds. Compensation will be paid to purchasers of Tesco shares and bonds, equal to the 'inflated amount' for each share or bond. This amount has been determined by an independent expert appointed by the FCA. Further information is available in the final notice issued to Tesco plc (and Tesco Stores Ltd) by the FCA: see here (pdf). It is also available on the website setup by the firm, KPMG, administering the compensation scheme: see here.

Monday, 27 March 2017

India: IRDAI's Stewardship Code for Insurers

The Insurance Regulatory and Development Authority of India (IRDAI) has written to the chief executives of insurance companies to explain what is expected of insurers under IRDAI's new Stewardship Code for Insurers: see here. A draft Code was published earlier this year; IRDAI's letter suggests that a final version has been agreed but it has not yet been published on IRDAI's website.

Friday, 24 March 2017

UK: Banking Standards Board panel event on law, ethics and culture in banking

Earlier this week the Banking Standards Board organised a panel event titled 'Worthy of Trust?' Law, Ethics and Culture in Banking'. The Panel comprised the Governor of the Bank of England, the President of the New York Federal Reserve and the Lord Chief Justice of England and Wales. A recording of the event was made and is available below:

Thursday, 23 March 2017

UK: OECD report on the implementation of the OECD Anti-Bribery Convention

The OECD has published a report concerning the UK's implementation of the OECD Anti-Bribery Convention: see here (pdf). A summary of the report, produced by the OECD Working Group on Bribery, is available here. Whilst noting the strong progress that the UK has made, the report nevertheless highlights areas of concern including: the questions that remain regarding the role of the Serious Fraud Office in foreign bribery cases; and extent to which the UK is doing enough, working with the Crown Dependencies and Overseas Territories, to detect foreign bribery.

Wednesday, 22 March 2017

UK: England and Wales: FCA notices - third party rights and identification

The Supreme Court gave judgment earlier today in Financial Conduct Authority v Macris [2017] UKSC 19. A press summary is available here (pdf). At issue was whether an individual, Mr Macris, had been identified in penalty notices given to his former employer. Individuals identified in such notices are given certain 'third party' rights under section 393 of the Financial Services and Markets Act 2000, including receiving a copy of the notice and the right to make representations about its contents. Mr Macris had been JP Morgan's International Chief Investment Officer and whilst the notices did not name him they were critical of JP Morgan's Chief Investment Office in London and New York.

The Court of Appeal (see [2015] EWCA Civ 490) and Upper Tribunal (see [2014] UKUT B7 (TCC)) held that Mr Macris had been identified. The Supreme Court has held, by a majority of 4 to 1, that Mr Macris had not been identified. The lead judgment was delivered by Lord Sumption and he observed (at para. [11]):
In my opinion, a person is identified in a notice under section 393 if he is identified by name or by a synonym for him, such as his office or job title. In the case of a synonym, it must be apparent from the notice itself that it could apply to only one person and that person must be identifiable from information which is either in the notice or publicly available elsewhere. However, resort to information publicly available elsewhere is permissible only where it enables one to interpret (as opposed to supplementing) the language of the notice. Thus a reference to the “chief executive” of the X Company may be elucidated by discovering from the company’s website who that is. And a reference to “CIO London Management” would be a relevant synonym if it could be shown to refer to one person and that person so described was identifiable from publicly available information. What is not permissible is to resort to additional facts about the person so described so that if those facts and the notice are placed side by side it becomes apparent that they refer to the same person".

Tuesday, 21 March 2017

Monday, 20 March 2017

UK: reporting on payment practices and performance - secondary legislation made

Section 3 of the Small Business, Enterprise and Employment Act 2015 gave the Secretary of State the power, through secondary legislation, to require certain companies to publish information regarding their payment practices and policies, together with their performance in respect of those policies and practices. Secondary legislation was made last week and comes into force on 6 April.

Two statutory instruments were made, one for companies and one for limited liability partnerships: see, respectively, the Reporting on Payment Practices and Performance Regulations 2017 (here or herepdf) and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 (here or herepdf). Further information is available in the explanatory memorandums accompanying the Regulations: see here (pdf) and here (pdf). The Regulations contain the threshold conditions that must be met before a company, or limited liability partnership, becomes subject to these new reporting obligations.

UK: culture in financial institutions - a speech by the chief executive of the Financial Conduct Authority

Andrew Bailey, the Chief Executive of the Financial Conduct Authority, delivered a speech last week at the Hong Kong Monetary Authority's inaugural conference for independent non-executive directors: see here. The speech is interesting not least because of Mr Bailey's comments on the development of corporate governance over the past 25 years. This period began with the dominance of agency theory in shaping the role and definition of governance; governance is now being shaped by a substantial broadening of the public interest in the behaviour of firms.


The HKMA has recently written to bank chief executives setting out further expectations regarding culture and governance: see here (pdf).

Friday, 17 March 2017

Europe: a statute for social and solidarity based enterprise

A report exploring the legal frameworks within Member States governing social and solidarity based enterprises has been published: see here (pdf). The study was commissioned by the European Parliament’s Committee on Legal Affairs. The report recommends the introduction of legislation in order to permit the recognition of entities called European Social Enterprises (or ESEs).  Such entities would be those meeting qualifying conditions, and would include companies, cooperatives and foundations. The suggested conditions include having an exclusive (or dominant) community or social purpose as well as constraints on profit distribution.

Europe: the 'right to be forgotten' and company registers

The Court of Justice of the European Union gave judgment earlier this month in Camera di Commercio, Industria, Artigianato e Agricoltura di Lecce v Salvatore Manni (C-398/15). The court held that there was no 'right to be forgotten' in respect of information in company registers. It was, however, open to Member States to provide for restricted access to such data after a sufficiently long period has elapsed from the date of the company's dissolution. A summary of the decision is available here (pdf).

Thursday, 16 March 2017

UK: OPBAS and updated Money Laundering Regulations

The Government yesterday announced the creation of a new organisation: the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), as part of work updating the Anti-Money Laundering (AML) supervisory regime: see here. OPBAS will be hosted by the Financial Conduct Authority and will be funded through a fee paid by professional body supervisors. In general terms, the role of OPBAS will be to work with the supervisors to ensure compliance with the Anti-Money Laundering Regulations. The Government is seeking views on the precise mandate and powers of OPBAS: see here (pdf). It is also seeking views on draft Money Laundering Regulations 2017 that were also published yesterday: see here.

Wednesday, 15 March 2017

Europe: Parliament approval for Shareholders' Rights Directive

The European Parliament, in a Plenary session yesterday, approved the proposed Shareholders' Rights Directive: see here. The resolution was passed by 646 votes to 39 (there were 13 abstentions). The Directive now requires approval by the EU Council of Ministers. Further information about the Directive, in the form of FAQs published by the European Commission following the vote, is available here. The Directive contains provisions designed to make it easier for shareholders to exercise their voting rights; it also sets out a framework for a shareholder 'say on pay' vote in respect of remuneration; and it also sets out provisions for greater disclosure by institutional shareholders and asset managers (largely reflecting the provisions found in the stewardship codes that are being introduced across the world, including the UK).

Update (17 March 2017) - the European flag now appears; the UK flag inadvertently appeared at first.

Tuesday, 14 March 2017

UK: The Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017

The Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017 were made earlier this month and come into force on 31 March: see here or here (pdf). The Regulations have several purposes including the extension of new gender pay gap reporting to the public authorities specified in Schedule 2 of the Regulations. Further information is available in the accompanying explanatory memorandum: see here (pdf).

Monday, 13 March 2017

UK: The Insolvency (England and Wales) (Amendment) Rules 2017

The Insolvency (England and Wales) (Amendment) Rules 2017 were laid before Parliament today and come into force on 6 April: see here or here (pdf). Their purpose is to amend the Insolvency (England and Wales) Rules 2016 in order to make minor corrections and clarifications. Further information is available in the accompanying explanatory memorandum is available here (pdf).

Friday, 10 March 2017

UK: Criminal Finances Bill - second reading in the House of Lords

The Criminal Finances Bill was introduced in the House of Commons last year and is now proceeding through the House of Lords. Yesterday the Bill received its second reading: see here. The Bill contains, amongst other things, provisions that will introduce a new corporate offence 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).

Second reading provided an opportunity for general debate and one topic dominated: the transparency of beneficial ownership information in the Crown Dependencies and British Overseas Territories, and the extent to which the Government should through legislation take action to bring about more rapid improvements in the information that is publicly available.

Thursday, 9 March 2017

UK: the governance of charities - updated HMRC guidance on the 'fit and proper test' for charity trustees and directors of corporate charities

The Finance Act 2010 (section 30 and schedule 6) introduced a definition for tax purposes of charities and other organisations entitled to UK charity tax reliefs, including a 'management condition' that is satisfied where the managers of a body of persons or trust are 'fit and proper persons to be managers of the body or trust'. The legislation does not define or explain what is meant by 'fit and proper'. HMRC does, however, provide guidance and an updated version of this guidance was published today: see here.

Wednesday, 8 March 2017

Mauritius: launch of new corporate governance code

The National Committee on Corporate Governance officially launched Mauritius's new corporate governance code last month. A copy of the code, which operates on the basis of 'apply and explain', is available here (pdf).

Tuesday, 7 March 2017

UK: England and Wales: the Bhullar family derivative claim litigation

In the early summer of 2015, Mr Justice Morgan, in Bhullar v Bhullar [2015] EWHC 1943 (Ch), granted permission to continue certain parts of a derivative claim under Part 11 of the Companies Act 2006.  The case involved a family well known to company lawyers (see [2003] EWCA Civ 424). The claim was heard in January this year and the next episode in the story - the judgment Bhullar v Bhullar [2017] EWHC 407 (Ch) - published a few days ago. The trial judge held that the claim for equitable compensation for breach of fiduciary duty was successfully made.

Monday, 6 March 2017

UK: FCA consults on reforms to the availability of information in the UK equity IPO process

The Financial Conduct Authority has published a consultation paper titled Reforming the availability of information in the UK equity IPO process: see here (pdf). A key objective of the proposed reforms is to restore the centrality of the prospectus document in the IPO process.

Friday, 3 March 2017

UK: The Companies Documentation (Transgender Persons) Bill 2016-17

The Companies Documentation (Transgender Persons) Bill 2016-17 was introduced in Parliament earlier this week under the Ten Minute Rule procedure by the Rt Hon Nicky Morgan MP and received its first reading: see here. The purpose of the Bill, to quote directly from the Parliament website, is to "... enable transgender persons to apply to the registrar of companies for England and Wales for documentation relating to their change of name to be treated as protected information under the Gender Recognition Act 2004; and for connected purposes". A copy of the Bill is not yet available, but will be published closer to the time of its second reading.

Thursday, 2 March 2017

UK: FRC calls for improvements in audit firms' quality control systems

The Financial Reporting Council has published the results of a thematic review considering selected aspects of audit firms' quality control systems: see here (pdf). The FRC is calling on firms to improve their quality control systems, having found that one third of the audits sampled required more than limited improvements.

Wednesday, 1 March 2017

Europe: access to companies' beneficial ownership registers [updating the 4th AML Directive]

Earlier this week the Economic and Monetary Affairs Committee and the Civil Liberties, Justice and Home Affairs Committee agreed amendments to a proposed Directive the purpose of which is to amend the Fourth Anti-Money Laundering Directive. The agreed amendments would permit EU citizens much greater access to companies' beneficial ownership registers (the need to demonstrate a 'legitimate interest' would be removed). The Committees also agreed that trusts (and similar structures) should be subject to greater transparency requirements. For further information: see here.

Tuesday, 28 February 2017

UK: The Prudential Regulation Committee

Tomorrow, on March 1, the Prudential Regulation Committee comes into existence: see here. The functions of the Committee are set out in section 30A of the Bank of England Act 1998 (as inserted by section 13 of the Bank of England and Financial Services Act 2016). It is responsible for the Bank's prudential regulation functions and replaces the PRA Board.

Monday, 27 February 2017

UK: Purposeful Company Task Force publishes its final report

The Purposeful Company Task Force was formed within the Big Innovation Centre under the direction of the Purposeful Company Steering Group. It was set up to consider how the UK governance and capital markets environment could be improved to support the development of value generating companies, acting with purpose to the long-term benefit of all stakeholders. The Task Force has published its final report - see here (pdf) - and this contains 22 recommendations within six policy areas: (i) company law and reporting; (ii) accounting for purpose; (iii) repurposing the investment management industry; (iv) blockholding; (v) finance for purpose; (vi) and executive remuneration.

In area (i) it is, for example, recommended that directors should be required to report on how they fulfill their obligations under section 172 ("Duty to promote the success of the company") of the Companies Act 2006. In area (iii) it is said that investors' responsibilities concerning stewardship should be clarified and oversight strengthened (and, more specifically, it is recommended that the FRC should set-up a review to investigate mechanisms for independently reviewing stewardship quality, to build upon the current tiering activities in relation to the Stewardship Code).

Singapore: MAS forms council to review corporate governance code

The Monetary Authority of Singapore has formed a council to review the Code of Corporate Governance: see here. The Code was last reviewed in 2012. The council's members - they are listed here (pdf) - have been asked, amongst other things, to consider how to make the 'comply or explain' framework more effective (including the quality of companies' disclosures) and how best to monitor companies' progress in implementing governance best practices.

Thursday, 23 February 2017

Australia: Treasury consultation - the beneficial ownership of companies

Earlier this month the Treasury published a consultation paper seeking views on the reforms needed to increase transparency in respect of the beneficial ownership of companies: see here (pdf). Amongst the questions asked are those concerning the definition of beneficial owner, the creation and responsibility for a central register of beneficial ownership, and the obligations imposed on companies and beneficial owners. Responses to the consultation should be made here.

Wednesday, 22 February 2017

UK: Criminal Finances Bill - third reading in the Commons

The Criminal Finances Bill was introduced in the House of Commons last year and yesterday received its third reading: see here. The Bill now proceeds to the House of Lords for its first reading. The Bill contains, amongst other things, provisions that will introduce a new corporate offence 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).

UK: The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017

A copy of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 is now available: see here or here (pdf). The Regulations come into force on 6 April 2017 and will require employers with at least 250 employees to publish annually four separate measures, based on employee data on 5 April, including the difference between the average (mean and median) hourly rate of pay for male and female employees.  Further information is available in the accompanying explanatory memorandum: see here (pdf).  It is also available in the joint guidance published today by the Government Equalities Office and the Advisory, Conciliation and Arbitration Service: see here, here, here and here.

Tuesday, 21 February 2017

Pakistan: update on the Companies Bill 2016

A copy of the Companies Bill 2016, as passed earlier this year by the National Assembly, is now available: see here (pdf). The Bill now requires Senate approval.

Monday, 20 February 2017

UK: England and Wales: the fraudulent director and attribution of knowledge to the company

The ICLR has provided a summary for a decision of the High Court - Singularis Holdings Ltd v Daiwa Capital Markets Europe Ltd [2017] EWHC 257 (Ch) - handed down last week: see here. To quote from the summary of the court's decision: "There was no principle of law that in any proceedings where the company was suing a third party for breach of duty owed to it by that third party, the fraudulent conduct of a director was to be attributed to the company if it was a one-man company. The answer to any question whether to attribute the knowledge of the fraudulent director to the company was always to be found in consideration of the context and the purpose for which the attribution was relevant".

Friday, 17 February 2017

UK: FCA review of the effectiveness of primary markets

The Financial Conduct Authority has begun a review exploring the effectiveness of the UK's primary markets. Two papers have been published.  The first, a consultation paper, seeks views on proposed changes to the Listing Rules: see here (pdf). The second is a discussion paper and its purpose is to begin more general discussion. Amongst the issues explored in this second paper, available here (pdf), is the boundary between premium and standard listings and whether a new market segment should be developed for overseas companies wishing to list in the UK (and the governance standards that they should meet).

IOSCO research report on financial technologies

The International Organisation of Securities Commissions has published a research report on financial technologies: see here (pdf). The report highlights the impact on investors and financial services of financial technology as well as indicating how regulators across the world are responding. A summary of the report is available here (pdf).

Thursday, 16 February 2017

UK: FRC plans for a 'fundamental' review of the UK's Corporate Governance Code

The Financial Reporting Council has today formally announced (having already indicated what was to come) its plans for a 'fundamental review' of the UK Corporate Governance Code: see here. The FRC has also provided information about its newly formed Stakeholder Advisory Panel. The Panel will have a role in guiding the FRC's review of the Code, although it's not yet clear what this will precisely entail (for example, will the Panel have primary responsibility for determining the terms of reference of the FRC's review?).

It is, perhaps, surprising that nothing is said about the Stewardship Code in the FRC's announcement. Can a fundamental review of the UK's Governance Code be complete without also considering an important aspect of its enforcement through 'comply or explain' and what is expected of investors? These matters were mentioned in a speech yesterday by the FRC's chairman, Sir Winfried Bischoff, but it appears that they are not to be considered. To quote Sir Winfried: "In pursuing any changes [to the Code], the current strengths of UK governance, the unitary board, strong shareholder rights, the role of stewardship and the “comply or explain” approach, must be preserved we believe".

Wednesday, 15 February 2017

Germany: Commission publishes revised Corporate Governance Code

Last year the Corporate Governance Code Commission consulted on proposed amendments to the German Corporate Governance Code. The consultation period has ended and the Commission has now published the final amendments it will make to the Code: see here (in English).  A copy of the new Code, in German, is available here. A copy of the new Code, in English, has not yet been published.

Of interest are the amendments being made to the Code's preamble. The revised preamble explains that good governance, based upon a social market economy, requires more than adherence to the law: it requires ethical behaviour from the 'honourable business person' (Ehrbarer Kaufmann). The preamble also stresses what is expected from institutional investors: they should exercise their rights actively and responsibly, respecting the concept of sustainability.

Tuesday, 14 February 2017

UK: FRC publishes update on developments in audit

The Financial Reporting Council has today published an update in relation to its audit work (and its role as the competent authority for audit): see here (pdf). The update notes that some investors have raised concerns that not all audit firms serve investor interests in dealing with perceived conflicts of interest. It is also explained that in 2017/18 the FRC will review the effectiveness of the governance and culture of the eight firms adopting the Audit Firm Governance Code.

Monday, 13 February 2017

UK: Work and Pensions Committee advocates governance reforms

The House of Commons Work and Pensions Committee has published a report, based on its BHS inquiry, in which it responds to the Government's corporate governance green paper: see here. The Committee's report contains three principal recommendations, including extending the reach of the UK Corporate Governance Code (on a comply or explain basis) to large private companies and adding pension scheme trustees to the list of matters to which directors must have regard in the context of their duty to promote the success of the company under section 172 of the Companies Act 2006.

Friday, 10 February 2017

Taiwan: corporate governance best practice for TWSE/TPex listed companies

Last year the Taiwan Stock Exchange published an amended edition of its Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies. A copy of the new edition is now available in English: see here.

Thursday, 9 February 2017

Pakistan: a further update on the Companies Bill 2016

The Companies Bill 2016 became law very briefly last year when it was promulgated by the President in the exercise of a power provided by Article 89 of the Constitution. However, the Ordinance was subsequently repealed by a vote in the Senate in December (see herepdf) and the Bill subsequently introduced in the National Assembly. The Securities and Exchange Commission reports that the National Assembly approved the Bill earlier this week: see here (pdf). A copy of the Bill as passed should be available here soon.

Hong Kong: consultation on a register of beneficial ownership for companies

Earlier this year the Financial Services and the Treasury Bureau published a consultation paper on proposed reforms to the Companies Ordinance that would require all companies incorporated in Hong Kong (including unlimited companies, those limited by shares and by guarantee) to obtain and maintain beneficial ownership information for public inspection: see here (pdf). The intention is that listed companies should be exempt from these new requirements because they are already subject to a requirement under the Securities and Futures Ordinance to keep a register of interests in shares.