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.

Wednesday, 8 February 2017

Denmark: Stewardship Code (copy in English now available)

Towards the end of last year, the Committee on Corporate Governance published recommendations regarding active ownership by institutional investors (aka a stewardship code): see here (Danish, pdf). The recommendations - there are seven of them - seek to promote long-term value creation; they came into effect at the start of last month and a copy of them in English is now available: see here (pdf).

Tuesday, 7 February 2017

UK: FRC best practice guidance notes on audit tendering

The Financial Reporting Council has published updated best practice guidance notes on the audit tendering process: see here (pdf).

Monday, 6 February 2017

Netherlands: Governance Monitoring report now available in English

The Dutch Corporate Governance Code Monitoring Committee published its annual governance code monitoring report at the end of December. A copy of the report, which found compliance with the code high, is now available in English: see here (pdf).

Friday, 3 February 2017

UK: insurance linked securities - FCA consults on Handbook changes

The Financial Conduct Authority is consulting on proposed changes to the FCA Handbook in respect of the new regulatory framework for insurance linked securities: see here (pdf). It is proposed, amongst other things, that insurance special purpose vehicles should be subject to SYSC 3 and that the Principles for Businesses should be amended to include activities directly arising out of the new regulated activity of insurance risk transformation.

Thursday, 2 February 2017

India: IRDA consults on Stewardship Code for Insurers

The Insurance Regulatory and Development Authority of India has published for comment a Stewardship Code for Insurers. The Code contains several principles, the purpose of which (to quote the IRDA) is to "strengthen the role of insurers as stewards on behalf of the policyholders". For further information, and a link to the Code, see here. Like many (if not all) of the Stewardship Codes that have been developed in recent years, the emphasis is on the disclosure of information. Under the proposed Code, insurers' boards are required to approve a policy based upon the Code's principles.

Wednesday, 1 February 2017

USA: ISG publishes governance and stewardship principles

The Investor Stewardship Group, comprising some of the largest USA based institutional investors and global asset managers, was formed to establish a framework of basic standards for investment stewardship and boardroom conduct. The Group yesterday published its Stewardship Principles and Corporate Governance Principles for US Listed Companies: see, respectively, here and here.

Tuesday, 31 January 2017

UK: FCA imposes largest ever penalty for anti-money laundering control framework failings

The Financial Conduct Authority has fined Deutsche Bank AG just over £163 million for its failure to maintain an adequate anti-money laundering (AML) control framework from the start of 2012 to the end of 2015. This is the largest penalty for AML control failings imposed by the FCA or its predecessor (the FSA). A copy of the FCA's decision notice is available here (pdf).

Monday, 30 January 2017

OECD Survey of Corporate Governance Frameworks in Asia

The OECD has published a survey of corporate governance frameworks in Asia: see here (pdf). The survey presents information for 14 jurisdictions and is based on questionnaire responses from organisations including securities regulators, institutes of directors, stock exchanges and governance centres. The jurisdictions included in the survey are Bangladesh, China, Chinese Taipei, Hong Kong, India, Indonesia, Korea, Malaysia, Mongolia, Pakistan, Philippines, Singapore, Thailand and Vietnam. The survey reports on a variety of matters including ownership structure, shareholder rights and board structure.

Friday, 27 January 2017

UK: England and Wales: parent company liability for subsidiary company actions

In HRH Emere Godwin Bebe Okpabi v Royal Dutch Shell Plc [2017] EWHC 89 (TCC) the High Court has once more considered the circumstances in which a parent company may owe a duty of care in tort in respect of the actions (or omissions) of subsidiary companies. The decision is noteworthy because of the discussion it contains of the Court of Appeal decision Chandler v Cape Plc [2012] EWCA Civ 525 as well as the significance of statements made in public documents relating to corporate groups. To quote the trial judge (at paras. [95] and [96]):
... even if passages in public documents that state the policies of a group of companies could be construed as being sufficient to establish the presumption of a duty of care on the part of a parent for the acts of its subsidiary, then the words which appear in the Shell documents effectively disclaiming that interpretation would negate that presumption ... [moreover] I do not consider that such a presumption would operate in any event on the basis of such statements. The London Stock Exchange is a Recognised Investment Exchange under UK law, and operates a regulated market. The Exchange must ensure that all securities admitted to trading on its markets, and the dealing in those securities, are conducted in accordance with the relevant legislation (both primary and secondary). That includes complying with certain disclosure standards. It is highly unlikely in my judgment that compliance with such disclosure standards could of itself be characterised as an assumption of a duty of care by a parent company over the subsidiary companies referred to in those statements. There is certainly no authority to this effect and in the absence of any, I would hold that such compliance cannot in itself be a sufficient factor to found a duty of care on the part of a parent holding company."

Update (2 February 2017) - the ICLR has provided a summary of the case: see here.

Thursday, 26 January 2017

UK: Finance Bill 2017 - corporate interest and relief for carry forward losses

Draft legislation, part of the Finance Bill 2017, has been published in respect of the Government's proposals to introduce restrictions on [1] the amount of interest (and other financing amounts) that companies can deduct when calculating their profits for corporation tax purposes; and [2] the availability of relief for losses carried forward. For further information see, respectively, here and here.

Wednesday, 25 January 2017

UK: England and Wales: restoration of companies to the register and the scope of court directions

Judgment was given yesterday by the Court of Appeal in Pickering v Davy [2017] EWCA Civ 30. At issue was the scope of the directions the court is able to make under section 1032(3) of the Companies Act 2006 where a company has been restored to the register of companies. Section 1032(3) provides that the court "may give such directions and make such provision as seems just for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck of the register".

The court's decision is important for two reasons. First, it provides guidance on the granting of limitation directions (e.g., directions of the court concerning the running of limitation periods). The court held that the making of a limitation direction under section 1032(3) required the applicant to show a clear causal link between the dissolution and the failure to bring proceedings within the applicable limitation period. The court therefore rejected as being too low the test that the trial judge had adopted: that there should be a "window of opportunity" in which proceedings might have been brought. Second, the court has confirmed (in what appears to be the first authority where such a direction has been sought) that it has the discretion under section 1032(3) - albeit one that should be exercised with extreme caution - to grant a direction that a petition that had not yet been presented for winding-up the company would be regarded as having been presented on the day the company was struck off.

Update (26 January 2017) - the ICLR has published a summary of the decision: see here.

Tuesday, 24 January 2017

Pakistan: an update on the Companies Bill 2016

The Companies Bill 2016, drafts of which were published for consultation last year, became law (as the Companies Ordinance 2016: see herepdf) late 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 repealed by a vote in the Senate in December (see herepdf) and the Bill subsequently introduced in the National Assembly. A sub-committee of the National Assembly has been considering the Bill this month and has made various amendments: see here (pdf).

Nigeria: suspension of the national code of corporate governance

Last October the Financial Reporting Council published the new National Code of Corporate Governance, consisting of three separate codes: one for the private sector; one for not-for-profit entities; and one for the public sector. The not-for-profit code proved controversial and the FRC has now confirmed that the Code has been suspended following a directive from the Federal Government; a new Executive Secretary/Chief Executive Office of the FRC has also been appointed: see here.

Monday, 23 January 2017

UK: reviewing limited partnership law - a call for evidence

A review of the law of limited partnerships is underway and has begun with a call for evidence: see here (pdf). The review extends to England, Wales, Scotland and Northern Ireland (there are some legal differences between limited partnerships in these jurisdictions; in Scotland, for example, the limited partnership has separate legal personality). The review is wide-ranging, although it has been motivated in large part by the significant increase in the registration of Scottish limited partnerships and concerns that this may be linked to criminal activity. Between 2000/01 and 2009/10 there was a 63% increase in the number of limited partnerships registered in Scotland; between 2010/10 and 2015/16, the increase was 239%.

Friday, 20 January 2017

Egypt: the Egyptian code of corporate governance

The codes and principles directory maintained by the European Corporate Governance Institute was updated earlier this month with a copy, in Arabic, of the Egyptian Code of Corporate Governance published last year: see here.

Thursday, 19 January 2017

UK: PLSA publishes updated Corporate Governance Policy and Voting Guidelines

The Pensions and Lifetime Savings Association has published an updated edition of its Corporate Governance Policy and Voting Guidelines: see here (pdf). Important changes have been made in respect of remuneration: the new guidelines recommend, for example, that where shareholders vote against a company's remuneration policy they should also oppose the re-election of the remuneration committee chair as a company director.

Wednesday, 18 January 2017

Gibraltar: the Private Foundations Bill 2017

A copy of the Private Foundations Bill 2017 has been published in the Gibraltar Gazette: see here (pdf). The Bill sets out the framework for the creation of private foundations in Gibraltar including the definition of foundations, the purposes for which they can be created, registration and accounting requirements and the duties of councillors.

Tuesday, 17 January 2017

UK: introducing the Private Fund Limited Partnership (PFLP) structure

Several days ago a draft of the Legislative Reform (Private Fund Limited Partnerships) Order 2017 was laid before Parliament together with an accompanying explanatory document: see, respectively, here (pdf) and here (pdf). An impact assessment has also been published: see here (pdf). The Order will be considered by the Parliamentary Regulatory Reform Committee and the Delegated Powers and Regulatory Reform Committee.

The purpose of the Order is to amend the Limited Partnerships Act 1907 to introduce a Private Fund Limited Partnership (PFLP) structure. The structure is intended for private investment funds (i.e., those not authorised to be promoted to retail consumers and structured as limited partnerships).

Monday, 16 January 2017

UK: Ministry of Justice seeks views on the case for new corporate economic crime offences

The Ministry of Justice published a press release last week titled "New crackdown on corporate economic crime" but all was not what it seemed at first sight, the opening line of the press release saying that "[a] call for evidence seeks views on whether further reform is needed...". The call for evidence, which focuses on criminal offences designed to punish and prevent economic crimes including fraud, false accounting and money laundering when committed by companies, is available here. Views are sought on the identification doctrine and, if needed, various reform options including the creation of new 'failure to prevent' offences adopting the model found in section 7 of the Bribery Act 2010.

Friday, 13 January 2017

India: SEBI guidance note on board evaluation

According to the Securities and Exchange Board of India, board evaluation in India is at a "nascent stage". For this reason, and against the background of the requirements in the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements)Regulations, 2015, SEBI has issued a guidance note on the nature and operation of board evaluation: see here (pdf).

Update (15 January 2017) - governance matters were discussed at the most recent meeting of SEBI's International Advisory Board: see here.

Thursday, 12 January 2017

Switzerland: Ethos publishes updated proxy voting guidelines and corporate governance principles

Ethos, the Swiss Foundation for Sustainable Development comprising Swiss pension funds and institutions, has published an updated edition of its proxy voting guidelines and corporate governance principles. An overview of the changes in the new edition is available in English here. A copy of the new guidelines and principles is available in English here (pdf).

Wednesday, 11 January 2017

UK: FRC report - developments in corporate governance and stewardship [and what next for the FRC?]

The Financial Reporting Council - the organisation responsible for the UK's Corporate Governance and Stewardship Codes (amongst many other things) - has published its annual report on developments in corporate governance and stewardship: see here (pdf).

It is reported that compliance with the UK Corporate Governance Code is high: 90% of FTSE 350 companies report that they comply with all, or all but one of the Code's 54 provisions. Full compliance has risen from 57% to 62% this year. The provision most frequently not complied with is B.1.2, which states that at least half the board, excluding the chairman, should comprise non-executive directors determined by the board to be independent.

The report is published in the year in which the twenty-fifth anniversary of the publication of the Cadbury Committee Code and Report will be marked; it was the Cadbury Committee that gave us 'comply or explain' that has since been a central pillar - indeed, foundation - of the UK's governance framework for large, listed companies since the early 1990s. A great deal has happened since the publication of the Cadbury Report and much has changed in the past year: a new prime minister in the UK who placed governance reform as part of her personal manifesto; a vote to leave the European Union; and two governance reviews are underway (see here and here), instigated for reasons that challenge the effectiveness of aspects of the UK's governance framework and, indeed, the role and effectiveness of the FRC in this regard. It is not, therefore, surprising to see today's FRC development report adopt a tone quite different from the developments report published last year.

Consolidation was the message last year - it was stated that no substantial changes were proposed to the UK Governance Code for the next three years - and no hint was given that the FRC sought wider powers. But from today's report we learn that the FRC "stands ready" to revise the Code; that it has established a Stakeholder Panel to "bring a broader range of perspectives into [its] ... policy-making and work" (the FRC's website does not, however, provide any information about the Panel, its members and the selection/recruitment process); and that the market model's "checks and balances" require reassessment and revitalisation. This is very welcome, against the background of debate about how best to achieve appropriate standards of governance and the extent to which the ethos of encouragement and reflection that 'comply or explain' seeks to promote can (and/or should) coexist with a stronger and wider enforcement role for the FRC.

Tuesday, 10 January 2017

Ireland: new code for community, voluntary and charitable organisations

Towards the end of last year an updated governance code for community, voluntary and charitable organisations was published by the Governance Code Working Group: see here (pdf). The new code, which is divided into versions for three types of organisation (small, medium and large), is accompanied by a set of stewardship guidelines: see here (pdf).

Monday, 9 January 2017

Singapore: MOF/ACRA consultation - AGMs, beneficial ownership and foreign companies seeking domicile

The Ministry of Finance and the Accounting and Corporate Regulatory Authority are consulting on proposed amendments to the legislation governing companies and limited liability partnerships. Amongst the proposals are the following: introducing a new regime for foreign companies wishing to be domiciled in Singapore; removing the requirement for private companies to hold an annual general meeting; and requiring companies and LLPs to hold and maintain beneficial ownership information and to make this available, on request, to law enforcement agencies. For further information is available here.

Friday, 6 January 2017

Denmark: recommendations on active ownership by institutional investors

The Committee on Corporate Governance has published recommendations regarding active ownership by institutional investors (aka a stewardship code): see here (Danish, pdf). The recommendations - there are seven of them and they have not yet been published formally in English - seek to promote long-term value creation; they came into effect at the start of the year.

Update (8 February 2017) - a copy of the recommendations in English is now available: see here (pdf).

Thursday, 5 January 2017

Netherlands: Commission report finds high compliance with code

The Dutch Corporate Governance Code Monitoring Committee published its annual governance code monitoring report at the end of December: see here (pdf). A summary is available here. The report found that compliance with the code by listed companies was high.

Wednesday, 4 January 2017

UK: England and Wales: substantial property transactions and the meaning of 'non-cash asset'

The Court of Appeal gave judgment last month in Granada Group Ltd v The Law Debenture Pension Trust Corporation Plc [2016] EWCA Civ 1289 and affirmed the first instance decision ([2015] EWHC 1499 (Ch)). A summary of the court's decision has been published by the ICLR: see [2016] WLR(D) 686.

The case concerned the operation of the rules requiring shareholder approval for certain transactions between companies and their directors (or those connected with the directors) involving non-cash assets . The meaning of "non-cash asset" was central and, in this regard, the court held (to quote the opening sentences from the ICLR summary):
As established by the authorities, section 739(2) of the Companies Act 1985 [now section 1163 of the Companies Act 2006, which defines "non-cash asset"] extended to rights that were not proprietary rights, provided that they could still be properly described as rights in or over property. An “interest in property” for the purposes of section 739(1) meant a proprietary interest ... An “interest” in property under section 739 was one that could be defined by reference to proprietary concepts, or at least by concepts that were legally recognisable and enforceable".