Thursday, 18 April 2019

UK: CMA report and recommendations - statutory audit market

The Competition and Markets Authority has today published its final report followng its statutory audit market study: see here (pdf). A summary of the final report is available here (pdf) and a press release highlighting the recommendations is available here. The recommendations include:
  • An operational split within (initially) the 'Big Four', requiring separate governance and management structures (e.g., a separate CEO and board; separate financial statements for the audit practice).  If this does not deliver the anticipated benefits, the case for a structural split should be revisited.
  • Mandatory joint audits, with challenger firms working with the 'Big Four' and having joint liability.
  • Greater regulation of audit committees by the new Audit, Reporting and Governance Authority (ARGA), the proposed successor of the Financial Reporting Council. ARGA should have the power to request information from audit committees and to issue public reprimands; it should have the power to appoint an observer on the committee.
  • A review of progress in five years, by the ARGA.

Wednesday, 17 April 2019

UK: Transposition of the Fifth Money Laundering Directive

The Government has published a consultation paper concerning its transposition of the Fifth Money Laundering Directive (Directive (EU) 2018/843): see here (pdf). Implementation of the Directive will expand the scope of the current anti-money laundering framework within the UK, including with regard to crypto-assets.

Tuesday, 16 April 2019

UK: FRC/ARGA - first Government remit letter published

One of the recommendations made by Sir John Kingman, in his review of the Financial Reporting Council, was that the Government should issue the FRC (and its propopsed successor: the Audit, Reporting and Governance Authority) with a remit letter, at least once during the lifetime of each Parliament, setting out "those aspects of economic policy that the regulator should have regard to when advancing its objectives and discharging its duties". It was also recommended that the FRC/ARGA should respond publicly to the remit letter. The first of these exchanges took place in March and have now been published: see here (pdf) and here (pdf).

UK: The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019

The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 have been published in draft form: see here or here (pdf). The Regulations implement, in part, Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement.

More specifically, the Regulations will implement elements of articles 9a ("Right to vote on the remuneration policy") and 9b ("Information to be provided in and right to vote on the remuneration report") of the Directive to the extent that they are not already part of UK law. Further information is available in the explanatory memorandum accompanying the Regulations: see here (pdf).

Monday, 15 April 2019

UK: PRA statements - managing the financial risks from climate change

The Prudential Regulation Authority has published a policy statement and supervisory statement regarding banks' and insurers' approaches to managing the financial risks from climate change: see, respectively, here and here.

The supervisory statement explains, to quote directly from it (para. 3.2): "The PRA expects a firm’s board to understand and assess the financial risks from climate change that affect the firm, and to be able to address and oversee these risks within the firm’s overall business strategy and risk appetite"

It also adds (at para. 3.4): "The PRA expects firms to have clear roles and responsibilities for the board and its relevant sub-committees in managing the financial risks from climate change. In particular, the board and the highest level of executive management should identify and allocate responsibility for identifying and managing financial risks from climate change to the relevant existing Senior Management Function(s) ...".

Friday, 12 April 2019

Ireland: The Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies

The Companies Registration Office has provided an update on the creation of the Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies, following the making of the European Union (Anti-Money Laundering: Beneficial Ownership Of Corporate Entities) Regulations 2019: see here. These Regulations contain the obligations on companies to maintain beneficial ownership information as well as the framework for the operation of the new central register. They replace the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016.

The intention is that the Registrar of Companies will act as the Registrar of the beneficial ownership register and that online filing by companies will begin on 22 June 2019 (the date that Part 3 of the 2019 Regulations comes into force). The deadline for filing beneficial ownership information is five months after 22 June 2019, for companies incorporated before this date; companies incorporated on or after 22 June 2019 must file within five months of their incorporation.

Note

In the UK, the House of Commons Library has recently published a short briefing paper on beneficial ownership registers: see here. The paper describes the registers that exist in the UK as well as the position that exists in the British Overseas Territories and the Crown Dependencies. Relevant EU law is also discussed.

UK: Stewardship Code consultation - responses published

The Financial Reporting Council published a consultation paper earlier this year setting out proposed changes to the UK Stewardship Code: see here. The consultation closed at the end of March and the responses received have now been published: see here. When the consultation was launched, the expectation was that the new Code would be published in the summer; the FRC's draft plan and budget for 2019/20, published last month, states that the new Code will be published in 2019/20.

Ireland: The Companies (Amendment) Act 2019

The Companies (Amendment) Act 2019 was signed into law yesterday by the President: see here. The Act will be published shortly on the Irish Statute Book website: see here. Meanwhile, further information - and a copy of the Bill that became the Act - is available on the Oireachtas website: see here. The Act is short and has a single principal purpose: to extend, in certain circumstances, the time permitted for the filing of an annual return; this is achieved by amending section 343 of the Companies Act 2014.

UK: The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) (No. 2) Regulations 2019

The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) (No. 2) Regulations 2019 were made yesterday: see here or here (pdf). They have amended section 20 of the European Union (Withdrawal) Act 2018 in order to provide a new date for the UK's departure from the European Union (exit day): 31 October 2019 at 11.00 pm. Further information is available in the accompanying explanatory memorandum: see here (pdf).

Thursday, 11 April 2019

UK: England and Wales: accessory liability for breach of trust or fiduciary duty

A quick note, a little late in the day. The Court of Appeal gave judgment earlier in LLB Verwaltung (Switzerland) AG v Group Seven Ltd & Ors [2019] EWCA Civ 614 and held, amongst other things, that "In the light of [Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67], it must in our view now be treated as settled law that the touchstone of accessory liability for breach of trust or fiduciary duty is indeed dishonesty, as Lord Nicholls so clearly explained in [Royal Brunei Airlines v Tan [1995] 2 AC 378], and that there is no room in the application of that test for the now discredited subjective second limb of the Ghosh test [[1982] QB 1053]" (para. [57]).

Update (15 April 2019) - the ICLR has published a summary: see here.

Germany: consultation on a revised Corporate Governance Code - an update

Last November, the Corporate Governance Code Commission published for consultation a revised edition of the German Corporate Governance Code: see here (German, pdf) or here (English, pdf). Further supporting materials were published at the time: see here (in German) or here (in English).

Earlier this month an update on the consultation and new Code was given in a speech by the Commission's chairman (Prof. Nonnenmacher). A copy of the speech was published a few days later on April 8: see here (pdf). An (official) English translation is not (so far) available.

My interpretation of the speech suggests that there may be a delay in the coming into force of new Code - originally planned for 10 June 2019 - should there be a delay in the coming into force of the legislation - ARUG II - implementing the Shareholder Rights Directive (2017/828). Depending on the delay in implementing ARUG II, the Commission is considering publishing a final draft of the new Code in May 2019, highlighting the changes it proposes to the draft published last year. This is not intended to open a second period of consultation, although Prof. Nonnenmacher has indicated the Commission's willingness to accept further feedback.

Wednesday, 10 April 2019

UK: Brydon Review launches 'call for views' regarding audit quality and effectiveness

Earlier this year, the terms of reference for Sir Donald Brydon's review of the quality and effectiveness of the UK audit market were published: see here (pdf). These have been followed today by a 'call for views': see here (pdf). In very general terms, the review is seeking "views, supported by evidence wherever possible, on the extent of assurance that audit currently provides to the users of financial statements, and how it might develop to meet better those users’ needs and to serve the interests of other stakeholders and the wider public interest". It is stressed that attention should focus on the audit process and audit product. Views are particularly invited on how the statutory audit of public interest entities could be improved to provide greater assurance to shareholders and other stakeholders.

UK: England and Wales: parent company liability in tort for subsidiary company actions or omissions

The UK Supreme Court gave judgment today in Vedanta Resources PLC v Lungowe [2019] UKSC 20: see here (pdf). A summary of the judgment is available here (pdf). Of particular interest is that part of the judgment in which Lord Briggs (with whom Lady Hale, Lord Wilson, Lord Hodge and Lady Black agreed) considered the potential liability of a parent company in tort for the actions (or omissions) of its subsidiary companies.

Lord Briggs stated (at para. [49]) that parent company liability for the activities of subsidiary companies was not, of itself, a distinct category of liability in common law negligence.  He rejected the argument that a parent company could never incur a duty of care in respect of its subsidiaries' activities merely by the adoption of group-wide policies and guidelines and the expectation that the management of each subsidary would comply (para. [52]).  He further stated (at para. [53]):
Even where group-wide policies do not of themselves give rise to such a duty of care to third parties, they may do so if the parent does not merely proclaim them, but takes active steps, by training, supervision and enforcement, to see that they are implemented by relevant subsidiaries. Similarly, it seems to me that the parent may incur the relevant responsibility to third parties if, in published materials, it holds itself out as exercising that degree of supervision and control of its subsidiaries, even if it does not in fact do so. In such circumstances its very omission may constitute the abdication of a responsibility which it has publicly undertaken".

Tuesday, 9 April 2019

UK: England and Wales: director liability for inducing breach of contract by their company

Judgment was given yesterday in Antuzis & Ors v DJ Houghton Catching Services Ltd & Ors [2019] EWHC 843 (QB).The judgment is noteworthy because of the discussion it contains of what has become known as the rule in Said v Butt [1920] 3 KB 497 - that a director will not be liable for inducing breach of contract by their company if they act bona fide within the scope of their authority - and the linked discussion of the duty imposed on directors to promote the success of the company under section 172 of the Companies Act 2006. It is also noteworthy in providing an example of a company secretary being found in breach of duty.

The facts of this and an earlier case have been well publicised by the media and involved, in the UK, the exploitation of people from Lithuania: see here. Employed by a company, DJ Houghton Catching Services Ltd, the Lithuanian workers - the claimants in the case - received less than the statutory minimum prescribed wages, worked extremely long hours, had payments withheld as a form of punishment, did not receive holiday pay and were subject to other unlawful deductions.

The trial judge (Mr Justice Lane) found, as a preliminary issue, that the director and company secretary were jointly and severally liable to the claimants for inducing the breaches of contract by the company. With regard to Said v Butt, Lane J. held that it was "the officer's conduct and intention in relation to his duties towards the company - not towards the third party - that provide the focus of the 'bona fide' enquiry" (para. [114]). The director and company secretary had, in the judge's view, acted in breach of section 172 and section 174 of the Companies Act 2006.

Monday, 8 April 2019

UK: The Small Business, Enterprise and Employment Act 2015 (Commencement No. 7, Consequential, Transitional and Savings Provisions) Regulations 2019

The Small Business, Enterprise and Employment Act 2015 (Commencement No. 7, Consequential, Transitional and Savings Provisions) Regulations 2019 were made last week: see here or here (pdf). These bring into force, in Scotland, certain provisions of the 2015 Act including section 122 (abolition of requirements to hold meetings: company insolvency), section 124 (ability for creditors to opt not to receive certain notices: company insolvency), and section 126 (sections 122 to 125: further amendments) and Part 1 of Schedule 9. The Regulations are accompanied by a short explanatory note: see here.

Friday, 5 April 2019

UK: Scotland: leave to act as a director while disqualified

Section 17 of the Company Directors Disqualification Act 1986 provides that an individual disqualifed from acting as a director may nevertheless seek the court's leave to act as a director. In a recent Scottish decision - Re Joseph Meng Loong Lee [2019] ScotSC 27, available here (pdf) - Sheriff Peter J. Braid granted leave for a disqualified director to act as a director of six companies. This number makes the decision unusual (leave had originally been sought to act in respect of 13 companies). The decision is also worth noting because of the discussion it contains about enforcement and, in particular, the lack of monitoring in respect of any conditions that are imposed as part of the grant of leave. In this regard, Sheriff Braid stated (para. [28]):
.... while the undertakings and conditions appear stringent, there is in fact no means of policing them. The pursuer is willing to undertake to comply with the conditions but it seems to me that does not add anything because he requires to comply with the order of the court in any event. While it is the Secretary of State who suggested the conditions, he has no intention of monitoring compliance, and to that extent the insistence on conditions may on one view be seen as something of a cosmetic exercise, with no teeth attached in the event of non compliance. ... it was previously the Secretary of State’s practice to ask the court to include in any order granting leave, a formula of words to the effect that in the event of any of the conditions attached to the order being breached, the permission granted by the court would immediately cease. However, Lady Wolffe declined to approve such wording in Buckley v Secretary of State for Business, Energy and Industrial Strategy [2017] CSOH 105 on the grounds that it would lead to uncertainty.  I respectfully agree with that approach, and the Secretary of State no longer requests that such wording be inserted into any interlocutor, but the consequence of that is that one possible theoretical safeguard which may have existed if such wording had been adopted, is no longer there.  The fact is that the effect of a breach of any of the conditions remains unclear". 

Thursday, 4 April 2019

UK: Takeover Panel Instrument - The UK's Withdrawal from the EU

Last month, the Takeover Panel Code Committee published Response Statement 2018/2: The UK's withdrawal from the EU (here, pdf), explaining the Committee's proposed changes to the City Code on Takeovers and Mergers. At that time, the Instrument making these amendments had not been made. It has now been made - see here (pdf) - and the changes within it will take effect on exit day* should the UK leave the EU without a withdrawal agreement including a transition period.

* - Exit day

See Section 20 of the European Union (Withdrawal) Act 2018.

IOSCO final report - 'The Application of Behavioural Insights to Retail Investor Protection'

The International Organisation of Securities Commissions has published a (final) report titled The Application of Behavioural Insights to Retail Investor Protection: see here (pdf). The report contains a literature review as well as a survey of the 'behavioural insights' initiatives being undertaken by regulators. It notes, for example, the tendency of individuals to make different decisions when using an online interface as opposed to face to face interaction with another human being. It is also reported that regulators’ behavioural insights initiatives are at very different stages of development.

Singapore: a presumption of discount?

The Court of Appeal delivered judgment in Thio Syn Pyn v Thio Syn Kym Wendy [2019] SGCA 19 at the end of last month: see here (pdf). This is an important decision - and now leading authority - on an important aspect of the oppression remedy. More specifically, the court was required to consider, where oppression is established and a buy-out order is the remedy, whether there existed a presumption that the shares would be valued on a discounted basis where the company was not a quasi-partnership. The existence of such a presumption was rejected, the court stating (para. 33):
In our view, there does not appear to be an overarching principle or legal policy that justifies (as a general rule) the raising of a presumption of a discount in the context of non-quasipartnerships. None is to be found in the relevant case law or legal literature. Indeed, the latter strongly suggests otherwise. The question may be raised as to whether the proposition that the court concerned ought simply to look at all the facts and circumstances of the case in arriving at its decision as to whether a discount ought or ought not to be applied in the context of non-quasipartnerships is a viable principle to begin with. There is no conceptual objection to this proposition being a viable principle simply because it would have normative force inasmuch as it would be an objective universal or general starting-point for each court. Indeed, even if there were a presumption of a discount (which we hold is not the legal position), the court concerned would still be required to consider all the facts and circumstances of the case in order to decide whether such a presumption ought to be rebutted – in which case no discount would be applied". 

Wednesday, 3 April 2019

UK: England and Wales: the power of the court to order a meeting

Judgment was given earlier this week in Schofield v Jones [2019] EWHC 803 (Ch). The case concerned an application under section 306 of the Companies Act 2006, which provides that where it is impracticable to call a meeting of a company, a director or shareholder can apply to the court for an order calling such a meeting. The directions that the court can make in such circumstances include, as stated by section 306(4), a direction that "one member of the company present at the meeting be deemed to constitute a quorum".

In the current case, a company had two shareholders: one a majority shareholder and also a director; the other a minority, and also a director. The quorum for shareholder meetings was two. Attempts by the majority shareholder to remove the other director by a resolution under section 168 of the 2006 Act were thwarted by that director's failure, qua shareholder, to attend shareholder meetings. The majority shareholder sought an order under section 306, including a direction that the quorum at the meeting should be one shareholder; this direction would enable the section 168 resolution to be passed. The order was granted and, in doing so, Judge Sally Barber stated (paras. [37] and [38]):

.... shareholders have a statutory right to remove a director by ordinary resolution under section 168 of the 2006 Act. Section 168 reflects a statutory policy that shareholders should be able to remove a director by ordinary resolution. This is not a case where there are any class rights at play. This is a case where the will of majority shareholder is being thwarted by the refusal of the minority to attend meetings of the Company so as to render the meetings inquorate. The statutory policy reflected in section 168 must, in my judgment, be afforded considerable weight in determining whether to grant relief under s306 to enable a meeting to be called for the purposes of removing a director.

The existence of concurrent s994 proceedings is not necessarily a bar to the grant of an order under s306 ... A fortiori, the mere fact that s994 proceedings have been threatened by the Respondent [the minority] does not preclude the granting of relief under s306. It is merely a factor to be weighed in the balance".

Tuesday, 2 April 2019

UK: Brexit - list of made financial services statutory instruments

HM Treasury has updated its list of made financial services statutory instruments - secondary legislation - under the European Union (Withdrawal) Act 2018: see here.

UK: BEIS Committee proposes wide-ranging audit reforms

The Parliamentary Business, Energy and Industrial Strategy Committee has published its 'future of audit' report and recommendations: see here or here (pdf). A summary of the report's conclusions and wide-ranging recommendations can be found here. These were also outlined this morning in a speech by the Committee's chair, Rachel Reeves MP: see here.

The recommendations include: requiring auditors to present at company annual general meetings; encouraging the Competition and Markets Authority (CMA), as part of its statutory audit market study, to aim for the full legal separation of audit and non-audit services; if other remedies and reforms fail, the independent appointment of auditors should be considered; and the frequency of audit rotation should be increased by introducing a seven year, non-renewable, period of engagement.

The Committee also made recommendations concerning the creation of the proposed new regulator - the Audit, Reporting and Governance Authority (ARGA) - to replace the Financial Reporting Council (FRC). Current FRC board members, the Committee stated, should have no meaningful role in the reform process or management of ARGA. The Committee also stated its expectation that the new chair of the FRC (and subsequently ARGA), currently being recruited, would not be appointed until they had appeared before the Committee and the Committee had given its opinion.

Monday, 1 April 2019

UK: BEIS publishes environmental reporting guidelines

The Department for Business, Energy and Industrial Strategy has published updated environmental reporting guidelines, to reflect new reporting obligations coming into force today: see here. The guidelines are intended principally for those companies and limited liability partnerships subject to the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 and the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.

Thursday, 28 March 2019

UK: The International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019

The International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 were made earlier this week and, in accordance with regulation 1(2), come into force on exit day*: see here or here (pdf). The accompanying explanatory memorandum is available here (pdf) and this explains that the Regulations set out a new framework for the endorsement and adoption of IFRS after the UK's departure from the EU.

* - Exit day.

Exit day was originally set for tomorrow, 29 March, at 11.00pm: see section 20 ("Interpretation") (as enacted) of the European Union (Withdrawal) Act 2018. However, the European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) Regulations 2019, made today, change this date to either 22 May 2019, 11.00 p.m., or 12 April 2019, 11.00 p.m. The Government has published a short document explaining this legislative process: see here (pdf). An explanatory memorandum has also been prepared for the Regulations: see here (pdf).

Wednesday, 27 March 2019

UK: Independent review of the prudential supervision of the Co-Operative Bank plc

A little over a year ago, the Government directed the Prudential Regulation Authority to undertake a review of the supervision of the Co-operative Bank between 2008 and 2013: see here and hereMark Zelmer, a former Deputy Superintendent of the Office of the Superintendent of Financial Institutions in Canada, was appointed to complete the review. The findings of that review, which makes recommendations for the Bank of England and the Prudential Regulation Authority designed to enhance the current supervisory regime, were published today by HM Treasury: see here (pdf). The Bank and PRA have resonded - see here (pdf) - as has the Financial Conduct Authority: see here.

UK: The Uncertificated Securities (Amendment and EU Exit) Regulations 2019

The Uncertificated Securities (Amendment and EU Exit) Regulations 2019 were made yesterday: see here or here (pdf). Further information about the purpose of the Regulations and the changes they will introduce is available in the explanatory memorandum: see here (pdf). Regulation 1 provides that Parts 1, 2, 3 and 4 come into force today (and are unconnected with the UK's withdrawal from the EU); Part 5 (connected with the UK's withdrawal from the EU) comes into force on exit day.*

* Exit day

The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) Regulations 2019 were laid in draft form before Parliament on Monday and will be debated today in the House of Commons and House of Lords under the draft affirmative procedure: see, respectively, here and here. The purpose of these Regulations is to amend section 20 ("Interpretation") of the European Union (Withdrawal) Act 2018 in order to replace the exit day currently specified therein - 29 March 2019 at 11.00 p.m. - with either 22 May 2019, 11.00 p.m., or 12 April 2019, 11.00 p.m. The Government has published a short document explaining this legislative process: see here (pdf).

IOSCO work programme for 2019

The International Organisation of Securities Commissions has published its work programme for 2019: see here (pdf). The following priority areas identified: (1) Crypto-assets; (2) Artificial Intelligence and Machine Learning; (3) Market Fragmentation; (4) Passive Investing and Index Providers; and (5) Retail Distribution and Digitalization.

Tuesday, 26 March 2019

UK: BEIS Committee report - 'Executive Rewards: paying for success'

The Business, Energy and Industrial Strategy Committee published its report 'Executive Rewards: paying for success' today: see here or here (pdf). The report is critical of the role played by institutional investors, remuneration committees and the Financial Reporting Council (FRC). The Committee calls for the simplifcation of pay, advocating a structure based on fixed salary plus deferred shares that would vest over a long period (and subject to provisions designed to prevent 'rewards for failure'). It also calls for remuneration committees to have at least one employee representative. 

The Committee is strongly supportive of the creation of the new Audit, Reporting and Governance Authority (ARGA), to replace the FRC, and states that the ARGA should be "a more empowered, aggressive and proactive regulator that has the ability to take decisive action, where necessary, on executive pay and its reporting" (para. 11). Many of the Committee's recommendations are directed at the ARGA, particularly with regard to the revised Stewardship Code and its enforcement, as well as the expectations placed on asset owners. The Committee also recommends that the ARGA should become responsible for monitoring the impact of the new Wates Principles of Corporate Governance for Large Private Companies.

UK: Commons approve the draft International Accounting Standards and European Public Limited-liability Company (Amendment etc) (EU Exit) Regulations 2019

It was, perhaps, easy to miss. Hansard reports that yesterday, at the end of the day, the House of Commons approved the draft International Accounting Standards and European Public Limited-liability Company (Amendment etc) (EU Exit) Regulations 2019: see here. Further information about the Regulations, which set out the framework for the adoption of International Financial Reporting Standards after the UK leaves the European Union, is available in the accompanying explanatory memorandum: see here (pdf). When made, the Regulations will be published here.

UK: The Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2019

The Investment Exchanges, Clearing Houses and Central Securities Depositories (Amendment) (EU Exit) Regulations 2019 were made yesterday: see here or here (pdf). Regulation 1 provides that it, and Part 2, come into force today; the remaining regulations come into force on exit day*. Further information is available in the accompanying explanatory memorandum and impact assessment: see, respectively, here (pdf) and here (pdf).

* Exit day

The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) Regulations 2019 were laid in draft form before Parliament yesterday and will be debated in the House of Commons and House of Lords under the draft affirmative procedure. The purpose of these Regulations is to amend section 20 ("Interpretation") of the European Union (Withdrawal) Act 2018 in order to replace the exit day specified therein - 29 March 2019 at 11.00 p.m. - with either 22 May 2019, 11.00 p.m., or 12 April 2019, 11.00 p.m. The Government has published a short document explaining this legislative process: see here (pdf).

UK: The Securitisation (Amendment) (EU Exit) Regulations 2019

The Securitisation (Amendment) (EU Exit) Regulations 2019 were made yesterday: see here or here (pdf). Regulation 1 provides that the Regulations come into force on exit day*, with the exception of Part 3 which comes into force immediately after Part 10 of the Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019. Further information about the Regulations is available in the accompanying explanatory memorandum: see here (pdf). An impact assessment has also been published: see here (pdf).

* Exit day

The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) Regulations 2019 were laid in draft form before Parliament yesterday and will be debated in the House of Commons and House of Lords under the draft affirmative procedure. The purpose of these Regulations is to amend section 20 ("Interpretation") of the European Union (Withdrawal) Act 2018 in order to replace the exit day specified therein - 29 March 2019 at 11.00 p.m. - with either 22 May 2019, 11.00 p.m., or 12 April 2019, 11.00 p.m. The Government has published a short document explaining this legislative process: see here (pdf).

UK: The Mortgage Credit (Amendment) (EU Exit) Regulations 2019

The Mortgage Credit (Amendment) (EU Exit) Regulations 2019 were made yesterday: see here or here (pdf). In accordance with regulation 1, they come into force on exit day*. Further information about the Regulations is available in the accompanying explanatory memorandum: see here (pdf).

* Exit day

The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) Regulations 2019 were laid in draft form before Parliament yesterday and will be debated in the House of Commons and House of Lords under the draft affirmative procedure. The purpose of these Regulations is to amend section 20 ("Interpretation") of the European Union (Withdrawal) Act 2018 in order to replace the exit day specified therein - 29 March 2019 at 11.00 p.m. - with either 22 May 2019, 11.00 p.m., or 12 April 2019, 11.00 p.m. The Government has published a short document explaining this legislative process: see here (pdf).

UK: The Benchmarks (Amendment and Transitional Provision) (EU Exit) Regulations 2019

The Benchmarks (Amendment and Transitional Provision) (EU Exit) Regulations 2019 were made yesterday: see here or here (pdf). They come into force on exit day* and are accompanied by an explanatory memorandum and an impact assessment: see, respectively, here (pdf) and here (pdf). The Regulations contain the framework for benchmarks that will apply on exit day should the UK leave the European Union without an implementation period. Further information has also been published by the Financial Conduct Authority, in particular concerning the UK Benchmarks Register: see here.

* Exit day

The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) Regulations 2019 were laid in draft form before Parliament yesterday and will be debated in the House of Commons and House of Lords under the draft affirmative procedure. The purpose of these Regulations is to amend section 20 ("Interpretation") of the European Union (Withdrawal) Act 2018 in order to replace the exit day specified therein - 29 March 2019 at 11.00 p.m. - with either 22 May 2019, 11.00 p.m., or 12 April 2019, 11.00 p.m. The Government has published a short document explaining this legislative process: see here (pdf).

Monday, 25 March 2019

UK: England and Wales: the service of documents on directors, secretaries and others

Section 1140 of the Companies Act 2006 provides, broadly put, that a document may be served on a company director by leaving it at, or sending it by post to, the director's registered address. Decisions concerning this provision are sparse; this said, the operation of section 1140 was one of several matters considered by the High Court in a judgment handed down today - Arcelormittal USA LLC v Essar Steel Ltd [2019] EWHC 724 (Comm) - in the context of a challenge made to the grant of search orders.

The trial judge, Mr Justice Jacobs, rejected the argument that it was impermissible for search orders to be served under section 1140, finding that the section was (a) "wide in scope"; (b) expressly permitted the service of "a document"; and (c) applied whatever the purpose of the document in question (para. [130]). He also accepted as correct the view "...that there was 'no requirement under the statute that the director be resident or otherwise present in the jurisdiction in order to be served here'." (para. [132]). This latter point was, in fact, confirmed in an earlier decision of the High Court not cited by Jacobs J: Key Homes Bradford Ltd & Ors v Patel [2014] EWHC B1 (Ch).

OECD study: resolving foreign bribery cases with non-trial resolutions

The OECD has published a study titled Resolving Foreign Bribery Cases with Non-Trial Resolutions: see here. The study covers 27 of the 44 countries to the OECD Anti-Bribery Convention and describes the non-trial resolution mechanisms (often called settlements) available to resolve foreign bribery cases.  It notes that, of the 23 countries to have successfully concluded a foreign bribery action, 15 have used a non-trial mechanism at least once to resolve a foreign bribery case.

Friday, 22 March 2019

UK: England and Wales: the definition of 'managed service company provider'

The Court of Appeal gave judgment earlier this week in Christianuyi Ltd & Ors v Revenue And Customs [2019] EWCA Civ 474. The decision is an important one - now the leading authority - on the definition of managed service companies (MSCs) and MSC providers within the tax anti-avoidance framework, following decisions of the Upper and First-tier Tribunals (see, respectively: [2018] UKUT 10 (TCC) and [2016] UKFTT 272 (TC)).

Specifically, the court considered the definition of MSC provider within section 61B of the Income Tax (Earnings and Pensions) Act 2003 and rejected the argument that, in order for a company to be a MSC provider, it was necessary for that company - in addition to being in the business of promoting or facilitating the use of companies through which individuals provide their services to clients - also to promote or facilitate the services provided by those companies.

Update (25 March 2019) - a summary of the case has been published by the ICLR: see here.

Thursday, 21 March 2019

India: National Guidelines on Responsible Business Conduct published

In 2011, the National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business were published. These has now been replaced by the National Guidelines on Responsible Business Conduct, dated 2018, and recently published online by the Ministry of Corporate Affairs: see here (pdf).

The Guidelines set out nine principles, each supported by a short description and what are called 'core elements'. For example, the first principle - that "[b]usinesses should conduct and govern themselves with integrity, and in a manner that is ethical, transparent, and accountable" - has nine core elements, the first of which is: "The governance structure should develop and put in place structures, policies and procedures that promote this Principle, prevent its contravention and effect prompt and fair action against any transgressions".

Canada: regulators consult on new regime for benchmark regulation

The Canadian Securities Administrators are consulting on the introduction of a new framework for the regulation of benchmarks. The proposed framework is contained in National Instrument 25-102 Designated Benchmarks and Benchmark Administrators: see here or here (pdf). There is, at present, no specific regulatory framework for benchmarks. The proposed new framework is intended to be equivalent to the EU regime (see EU Regulation 2016/1011).

Wednesday, 20 March 2019

UK: Supreme Court to hear appeal in charity governance case

Earlier this week the Supreme Court published its permision to appeal decisions for February: see here (pdf). Among the cases for which an appeal has been granted is Lehtimäki v The Children's Investment Fund Foundation (UK) & Ors [2018] EWCA Civ 1605, [2018] 3 WLR 1470, [2018] WLR(D) 423.

The decision considered important aspects of the governance of charities, in the context of a one charity - CIFF - that was a company limited by guarantee. The court held that CIFF's members owed a duty corresponding with that owed by members of charitable incorporated organisations under section 220 of the Charities Act 2011: to exercise their powers in the way that they decide, in good faith, would be most likely to further the purposes of the organisation. The court also held that its inherent jurisdiction in relation to charities did not permit it to order a member of CIFF to exercise his powers in a particular way where there was no breach of duty. As the court put it: "Important though its role in relation to charities is, the Court is not entitled, absent a breach of duty, to substitute its view for that of the fiduciary" (para. [62]).

The court therefore concluded that the Chancellor, Sir Geoffrey Vos, had been wrong, at first instance ([2017] EWHC 1379 (Ch)), to order one of CIFF's members to vote to approve a resolution under section 217 of the Companies Act 2006 in the absence of clear evidence of breach of fiduciary duty by that member.

Tuesday, 19 March 2019

Australia: directors' duties, distributions and creditor interests

Last week I noted an English decision in which the directors' failure to adopt a dividend policy was regarded as a breach of duty: see here. Today I note an Australian decision - Termite Resources NL (in liq) v Meadows, in the matter of Termite Resources NL (in liq) (No 2) [2019] FCA 354 - also from last week, but one in which the trial judge (White J.) held that directors had acted in breach of duty in adopting, and failing to review and revise, a distribution policy.

The decision contains a useful review of directors' duties and is noteworthy because of the discussion it contains of the circumstances in which directors are required to consider the interests of creditors. Regarding the latter, the trial judge rejected a narrow interpretation and stated (paras. [209], [708]):
...I do not accept the submission ... to the effect that the directors or officers of a company are required to consider the specific interests of creditors only when their actions are likely, on a balance of probabilities, to lead to the insolvency of the company. That was so, the defendants submitted, because it is only at that point that their decisions are effectively managing assets which belong to the creditors and not to the shareholders. I agree ... that that is one circumstance in which directors and officers of a company will be obliged to consider the interests of the company’s creditors, but the authorities .... indicate that it is not the only circumstance...

.... the authorities ... indicate that test is broader than 'nearing insolvency' or 'doubtful solvency'. They indicate that the duty of directors to consider the interests of creditors is enlivened when there is a 'real and not remote risk of insolvency' and when the objective circumstances require consideration of the interest of creditors".

Note:

Some of the authorities cited by White J. were considered recently at appellate level in England: see BTI 2014 LLC v Sequana S.A. & Ors [2019] EWCA Civ 112, [2019] WLR(D) 68. The Court of Appeal unanimously rejected the view that the creditor interests duty (to adopt its description) should apply in English law where there was a "real risk" of insolvency; the court nevertheless accepted that the duty could be triggered where a company's circumstances fell short of actual insolvency.