Wednesday, 20 February 2019

Australia: Treasury publishes ICO issues paper

The Treasury has published an issues paper in which views are sought on initial coin offerings: see here (pdf). More specifically, views are sought on the following:
the opportunities and risks posed by ICOs; the extent to which the regulatory framework is positioned to allow these opportunities to be taken while managing risks; and the actions that could be taken to permit Australia to exploit the new opportunities.

Tuesday, 19 February 2019

UK: The Market Abuse (Amendment) (EU Exit) Regulations 2019

The Market Abuse (Amendment) (EU Exit) Regulations 2019 were made yesterday (18 February): see here or here (pdf). Regulations 1, 2, 3 and 6 came into force today (19 February) and the remaining regulations come into force on exit day. The explanatory memorandum accompanying the Regulations is available here (pdf). The purpose of the instrument, to quote directly from the explanatory memorandum, is as follows (para. 2.1):
This instrument is being made in order to address deficiencies in retained EU law in relation to market abuse arising from the withdrawal of the United Kingdom (UK) from the European Union (EU). This instrument amends retained EU law relating to market abuse, including the EU Market Abuse Regulation No 596/2014 (MAR), the tertiary legislation made under MAR, and the UK legislation which complemented MAR, to ensure that the relevant legislation continues to operate effectively at the point at which the UK leaves the EU".

Monday, 18 February 2019

UK: England and Wales: equitable considerations and the unfair prejudice remedy

Judgment was given last Friday in Waldron v Waldron [2019] EWHC 115 (Ch). Although first instance, the decision is an important one on the operation of the unfair prejudice remedy within Part 30 of the Companies Act 2006. The trial judge, HHJ Eyre QC, was required to consider the circumstances in which equitable considerations would make it unfair for those conducting the affairs of the company to rely on their strict legal rights. More specifically, was it necessary for all of the company's shareholders to be party to the relevant understandings in order for the equitable considerations to apply? No, answered HHJ Eyre QC, observing that "the presence of third-party rights is a potent factor in determining the existence of the equitable constraints on the majority rather than an absolute bar to such constraints" (para. [41]).

Friday, 15 February 2019

UK: England and Wales: "some elementary principles of corporate governance"

Judgment was given today in Stobart Group Ltd v Tinkler [2019] EWHC 258 (Comm): see here or here (pdf). The litigation concerned, to quote the trial judge, HHJ Russen QC, "some elementary principles of corporate governance" (para. [4]) in respect of a company incorporated in Guernsey and listed on the London Stock Exchange. The facts were many but included the removal from office of a director (Mr Tinkler) by the board of directors the day after his election to the board at the company's annual general meeting.

What makes the decision of particular note is the discussion of directors' duties in the context of board dissent, including what is expected of individual directors in light of the proper functioning of the board of directors. Guernsey company law applied but heavy reliance was placed on English authorities, it being recognised (with reference to Carlyle Capital Corporation Limited (In Liquidation) and others v Conway and others, Royal Court of Guernsey, 38/2017) that the duties owed by directors under Guernsey law were "fundamentally the same" as those under the English common law before the introduction of the UK's Companies Act 2006.

Amongst other findings, it was held that a director, Mr Tinkler, had breached his fiduciary duties under Guernsey law where he held private discussions with shareholders in which he criticised the board's management and advocated for the removal of a fellow director. The trial judge found ample evidence for Mr Tinkler's "briefing against the board" (para. [735]). These findings were reached by the judge following earlier analysis of the law in which the "collegial function" of the board was stressed (para. [388]) and where it was stated that the director's duty to exercise independent judgment "is one that operates upon each director in the context of him operating as a member of the board of directors ... [it] exists in order to support the board's management of the company's business in an efficient and competent manner." (paras. [413] and [414], emphasis in the original).

UK: Brydon Review - terms of reference published

The terms of reference for Sir Donald Brydon's review of the quality and effectiveness of the UK audit market were published yesterday: see here (pdf). The review is wide ranging and will include the needs and expectations of stakeholders, the scope of the audit and assurance. Perhaps surprisingly for a review described as being independent, the terms of reference note that one of the accountancy professional bodies - the ICAEW - has agreed to provide £500,000 towards the cost of the review. It is, however, stressed that all of the organisations supporting the review have recognised the unconditional nature of their contributions.

Sir Donald recently gave evidence before the Parliamentary future of audit inquiry. A transcript of his evidence is available here. All of the evidence - whether oral or written - received by this inquiry can be found here.

UK: The Financial Conglomerates and Other Financial Groups (Amendment etc.) (EU Exit) Regulations 2019

The Financial Conglomerates and Other Financial Groups (Amendment etc.) (EU Exit) Regulations 2019 were made yesterday (February 14): see here or here (pdf). The Regulations come into force on exit day (see reg. 1). They are accompanied by an explanatory memorandum and an impact assessment: see, respectively, here (pdf) and here (pdf). To quote directly from the explanatory memorandum:
2.2 The EU Financial Conglomerates Directive (FICOD – No. 2002/87/EC) was originally adopted in 2002 and subsequently amended in 2011. It was developed to address the lack of specific prudential treatment for financial conglomerates – groups with activities in more than one of the insurance, banking, or investment services sectors. The directive therefore contributes to greater financial stability and consumer protection.

2.3 FICOD applies specifically to a group with at least one entity in the insurance sector, and at least one entity in the banking or investment services sector. One of these entities, according to the EU definition, must be located in the European Economic Area (EEA), while the other(s) may be located anywhere in the world (including the EEA). 

2.4 FICOD sets out specific requirements on solvency to prevent the same capital being used more than once as a buffer against risk in different entities in the same conglomerate. It also sets out requirements related to conglomerates’ management, risk management, and requirements for information sharing with relevant regulators. 

2.5 The UK subsequently implemented FICOD through the Financial Conglomerates and Other Financial Groups Regulations 2004 (FICOR - 2004 No. 1862). This instrument therefore identifies and amends deficiencies in the EU text to ensure that FICOR will remain operative in a UK-only context post-exit".

Thursday, 14 February 2019

UK: The Credit Rating Agencies (Amendment etc.) (EU Exit) Regulations 2019

The Credit Rating Agencies (Amendment etc.) (EU Exit) Regulations 2019 were made yesterday (February 13): see here or here (pdf). Part 1 ("General Provision") and Part 8 ("Transitional Provisions") of the Regulations come into force today (February 14) and Parts 2 to 7, 9 and 10 come into force on exit day (see reg 1(2) and (3). The Regulations are accompanied by an explanatory memorandum and an impact assessment: see, respectively, here (pdf) and here (pdf). To quote directly from the explanatory memorandum (para. 2.3):
After exit, CRAs established in the UK would not be covered by the EU regulatory regime under CRAR [Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009]. If this instrument is not in place by exit day, CRAR – which will be transferred to the UK statute book by the European Union (Withdrawal) Act 2018 (EUWA) – will not operate effectively in the UK. Amending CRAR to establish a UK regime for regulation and supervision of CRAs is therefore necessary. Furthermore, if the instrument establishing this regime is not in place by exit day, there would be a significant cliff edge risk, as credit ratings would not be able to be used for regulatory purposes in the UK and there would be no regulatory oversight of CRAs. If credit ratings in the UK were invalid, the capital requirement for the entities or assets they previously rated would increase as a greater risk weighting would be attached to them. Laying this instrument will help to ensure that firms, which can include any entity that seeks to borrow money, can continue to use credit ratings issued in the UK by CRAs as they do now."

Wednesday, 13 February 2019

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

The Takeovers (Amendment) (EU Exit) Regulations 2019 were laid before Parliament earlier this week and come into force on exit day: see here or here (pdf). Their purpose, to quote directly from the accompanying explanatory memorandum (here, pdf), is to "...amend Part 28 of the Companies Act 2006 (the Act) to enable the domestic takeovers regime to operate effectively on a freestanding basis outside the EU framework. Shareholders should continue to receive the protection of takeover regulation that ensures, so far as possible, fair treatment during a takeover bid".

Tuesday, 12 February 2019

Singapore: formation of the Corporate Governance Advisory Committee

The Monetary Authority of Singapore has announced the formation of a Corporate Governance Advisory Committee, the purpose of which is advocate good corporate governance practice. Further information about the Committee, including its terms of reference and membership, is available here.

Monday, 11 February 2019

IFIAR survey of audit regulator enforcement regimes

The International Forum of Independent Audit Regulators has published a survey of audit regulators enforcement regimes: see here (pdf). The report, based on responses from 42 IFIAR members, highlights (amongst other things) how members use their investigative and disciplinary powers.

Friday, 8 February 2019

UK: Companies, Limited Liability Partnerships and Partnerships (Amendment etc) (EU Exit) Regulations 2019

An update on the Companies, Limited Liability Partnerships and Partnerships (Amendment etc) (EU Exit) Regulations 2019. Approval was given in the House of Commons earlier this week (see here) and a debate in the House of Lords has been scheduled for next Monday: see here. The full journey taken by the Regulations can be seen here and the accompanying (draft) explanatory memorandum is available here.

Update (12 February 2019) - the Regulations were approved in the Lords yesterday: see here.

UK: England and Wales: the creditors' interests duty

A couple of days ago the the Court of Appeal gave judgment in BTI 2014 LLC v Sequana S.A. & Ors [2019] EWCA Civ 112. The judgment, a summary of which has been provided here by the ICLR, is one of the leading authorities on directors' duties (in particular section 172 of the Companies Act 2006 and the common law duty requiring directors to consider, in certain circumstances, the interests of creditors (sometimes called the creditors' interests duty). Lord Justice David Richards stated (at paras. [195], [215] and [216]):
There is no decision in any English authority which is clearly based on the proposition that the creditors' interests duty is triggered by anything short of actual insolvency. In all the cases, the company was insolvent, as the directors knew or ought to have known, and in few (if any) cases does this seem to have been the subject of argument. Nonetheless, the number of times that judges, many of them with considerable experience in this field, have assumed that something less than actual insolvency will trigger the duty carries weight.

... the test of a real, as opposed to a remote, risk of insolvency is not part of the present law as regards the creditors' interests duty, and it would not be appropriate, in the light of the policy considerations and other provisions of the Companies Act to which I have referred, for the courts to introduce such a test as a development of the common law.

I have, however, concluded that the duty may be triggered when a company's circumstances fall short of actual, established insolvency. This is certainly the view taken by many judges in the cases to which I have referred. However, for good reason, not least because it has rarely been necessary, judges have shied away from a single form of words, preferring instead a variety of expressions...".

Thursday, 7 February 2019

UK: The Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2019

The Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2019 were made on 1 February: see here or here (pdf). They come into force on exit day (except for Part 5 which comes into force later this month). The accompanying explanatory memorandum is available here (pdf). To quote from the memorandum (paras. 2.4 to 2.6):
As a result of the UK’s withdrawal from the EU, references to arrangements with the EU, its institutions and those of Member States, to EU institutions, EU law and concepts under EU law are no longer workable in legislation implementing the Audit Directive. The Audit Regulation forms part of retained EU law under the European Union (Withdrawal) Act 2018 and will therefore continue to apply in the UK as a domestic instrument ... This instrument makes amendments to the legislation that implements the Audit Directive and to the retained UK version of the Audit Regulation. It also grants powers previously held by the European Commission, to the Secretary of State and to the FRC ... This instrument amends references to non-retained EU law, EU institutions and functions exercised by EU institutions contained in UK law ... so that those references instead refer to legislation, institutions and functions that are provided for in UK law".

Tuesday, 5 February 2019

UK: Brydon Review | The Future of Audit Inquiry

Sir Donald Brydon, the chair of the recently established review of the quality and effectiveness of the UK audit market, gave evidence yesterday before the Parliamentary future of audit inquiry. Sir Donald said that the final terms of reference for his inquiry would be published "very, very soon"; he also stated that he did not start from the position that "the whole thing is rotten" but "clearly significant improvements must be possible". A video recording of his evidence session is available below (and also here). The chief executive of the Financial Reporting Council, Andrew Haddrill, will give evidence today: see here.

Monday, 4 February 2019

Australia: Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry - final report and recommendations

The final report and recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, led by the Hon Kenneth Hayne AC QC, was published today: see here. The Australian Government's response, highlighting the actions it will take in respect of all of the recommendations, is available here (pdf).

The report (and the preceding interim report) found widespread misconduct (and misconduct that often went unpunished or which had consequences not reflecting its seriousness) and its recommendations are similarly wide in scope. Primarily responsibility for this misconduct was found to be with boards and senior management.

The report argues for the retention of the 'twin peaks' model of financial regulation but calls for a new oversight authority, independent of Government, for the APRA and ASIC. It also makes recommendations concerning the culture, governance and remuneration of regulated entities (see, in particular, chapter 6).

Australia: ASIC report - the 2018 AGM season

The Australian Securities and Investments Commission has published an overview of the 2018 annual general meeting season for S&P/ASX 200 listed companies: see here (pdf). Most companies held their AGM between 1 October and 30 November. ASIC reports: votes on remuneration have been used to signal discontent with boards more generally and not just with remuneration; the most frequently raised ESG issue was climate change risk and sustainability; and 29% of ASX200 board members are women (three ASX200 boards contained no women).

Friday, 1 February 2019

Canada: insolvency and the common law anti-deprivation rule

Earlier this week the Court of Appeal of Alberta gave judgment in Capital Steel Inc v Chandos Construction Ltd, 2019 ABCA 32. The case provided the court with the opportunity to consider the existence and application of important principles of insolvency law.

At issue was a provision in a construction contract under which Capital Steel agreed to forfeit, on its insolvency, a sum of money to Chandos. The majority (Rowbotham and Veldhuis JJA) held that the provision was unenforceable because it offended the anti-deprivation rule that formed part of the common law of Canada. The rule was, the majority held, effects based. The minority, Wakeling JA, held that if such a rule existed at common law (which his honour doubted) a purpose-based approach ought to be adopted (as in the UK Supreme Court decision Belmont Park Investments PTY Ltd v BNY Corporate Trustee Services Ltd & Anor [2011] UKSC 38, the application of which the majority had explicitly rejected).

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

A draft of the International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 were published today: see here. The accompanying (draft) explanatory memorandum is available here and this explains the purpose of the Regulations as follows (paras. 2.6, 2.7 and 2.8):
After the UK’s exit from the EU, the EU acquis will be frozen in time and directly applicable EU law will become UK legislation, by virtue of provisions in the European Union (Withdrawal) Act 2018. This means that existing EU-adopted IFRS will be brought into UK law, but frozen as at exit day, and public companies listing in the UK will be required to produce their consolidated accounts in accordance with these standards. However, as the UK will no longer be a member of the EU, future adoptions, interpretations and amendments of IFRS by the EU will no longer apply in the UK. This means, to maintain up-to-date usage of IFRS, the UK requires a national framework to adopt new standards and/or changes to existing standards.

It is in the UK’s interest to maintain convergence with IFRS after EU Exit. The standards are used as the basis for preparing company accounts globally, in over 140 jurisdictions including 15 out of the 20 G20 countries, providing comparability and transparency to investors in capital markets. The instrument is therefore consistent with the UK Government’s policy that, after departure from the EU, the UK will retain its reputation as a global hub for business, while avoiding costs from unnecessary disruption.

This instrument provides for a national framework for endorsement and adoption of IFRS after departure from the EU."

Gibraltar: The Companies (Amendment) Bill 2019

The Companies (Amendment) Bill 2019 was published earlier this week in the Gibraltar Gazette: see here (pdf). The short explanatory memorandum at the end of the Bill states: "This Act amends Parts XII, XIV, XV, XVI, and Schedule 26 of the Companies Act 2014 . The amendments extend the provisions relating to the registration or establishment in Gibraltar of a branch or place of business by overseas companies, to overseas entities having a legal personality other than companies".

Thursday, 31 January 2019

UK: England and Wales: auditor liability and trading losses

In 2017 the Financial Reporting Council sanctioned Grant Thornton UK LLP and one of its retired partners for misconduct in relation to the audits of AssetCo plc: see here. A negligence claim against Grant Thornton was brought, in which judgment was delivered by the High Court today: see Assetco Plc v Grant Thornton UK LLP [2019] EWHC 150 (Comm).

Damages of approximately £21 million have been awarded and Grant Thornton's claim that it should be relieved from liability under section 1157 of the Companies Act 2006 was strongly rejected, the trial judge (Bryan J.) stating (at para. [1268]): "The breaches consisted of a catalogue of failures over two audit years that were of the utmost gravity and that went to the very heart of an auditor's duties and the 'very thing' GT admits it was responsible for but failed to do".

One of the more controversial issues in the case was the extent to which Grant Thornton should be liable for trading losses.  It is worth, in this regard, quoting directly from the judgment (paras. [961] to [964],[966] emphasis in the original): 
In the present case GT's negligence deprived the decision-makers within AssetCo of the opportunity to "exercise their powers in general meeting to call the directors to book" for the dishonest way in which the business was being run, to "influence future policy and management" in that regard "and to ensure that errors in management" – i.e., that dishonesty – "were corrected". Thus, GT's (admitted) audit failures deprived AssetCo not only of the opportunity to call the directors to book but also to ensure that errors in management were corrected, and the company did not continue to trade, and be run in a "fundamentally dishonest" way. The losses that were suffered were not suffered simply because the company remained in existence and carried on trading, but rather as a result of AssetCo continuing to trade in a particular fashion in reliance on the (negligent) audit.

I therefore conclude and find that the trading losses fell within the scope of GT's duty on the basis that they were sustained through AssetCo's (continued) trading in a fundamentally dishonest manner, in reliance on the negligent audit, in circumstances where if GT had acted in accordance with its duties it would have uncovered most if not all of the instances of Mr Shannon's and Mr Flynn's dishonesty, and AssetCo would (as I have found on the Counterfactuals) have entered into a Scheme of Arrangement, carried out a refinancing, placed the LFEPA and Lincoln Contracts on a sustainable footing, whilst allowing other subsidiaries to "sink or swim" and would have focussed on securing business in Abu Dhabi.

GT's general points about how Caparo [[1990] 2 AC 605] shows that the auditor's duty is not to create financial statements but to review them, and that its duties in terms of any investigation into the company are somewhat limited as compared to the duties on directors themselves, are not in point in circumstances where it is common ground that GT's duty was sufficiently broad that GT should, in the proper exercise of that duty, have uncovered many, if not all, of the instances of management deceit carried out by Messrs Shannon and Flynn, consequent upon which AssetCo would have called the directors to book and ensured that the company did not continue to trade (given that the company was "ostensibly sustainable only on the basis of dishonest representations or unreasonable decisions made or taken by management – Revised List of Issues para 6(1)).

I am also unpersuaded by GT's submission that the effect of the conclusion that I have reached would be that an auditor that fails to identify a particular fraud effectively becomes an insurer of the company for any dishonesty or fraud within the company and trading losses suffered as a result. That is not the effect of my conclusion.

I also reject the suggestion that the consequences of my conclusion are either draconian or unfair to the auditor. On the contrary, I consider it entirely appropriate that GT assumed a responsibility to protect AssetCo against losses suffered as a result of fraudulent trading conducted by the AssetCo management in circumstances where it is agreed that GT should have detected that the business was being conducted fraudulently, and in circumstances where such fraudulent trading would not have continued had GT complied with its auditing duties".

UK: England and Wales: unfair prejudice and excessive remuneration

Judgment was given earlier this week in McCallum-Toppin & Anor v McCallum-Toppin & Ors [2019] EWHC 46 (Ch). The case concerned a successful petition under section 994 of the Companies Act 2006. This first instance judgment deserves a note here because it provides a very good illustration of the difficulties inherent in determining whether remuneration can be regarded as excessive in the context of a section 994 claim, including the appropriateness of benchmarking and comparators for a private company.

Tuesday, 29 January 2019

UK: England and Wales: a proper instrument of transfer?

Judgment was given yesterday in Yusuf v Yusuf & Anor [2019] EWHC 90 (Ch) by Mrs Justice Falk. The trial judge found that a company's affairs had been conducted in an unfairly prejudicial manner for the purposes of section 994 of the Companies Act 2006. I note the decision here not because of the discussion of section 994 but because the trial judge considered the requirement, under section 770(1)(a) of the 2006 Act, for there to be a "proper instrument of transfer" where a share transfer is registered.  According to the trial judge, such an instrument was "a document that is capable of being stamped" and she held that the document at issue in the case before her - a letter - was only an instruction to transfer which contemplated the execution of a further document.  It was not, as such, a proper instrument of transfer.

UK: England and Wales: terminating membership and an implied term

Judgment was given lat week in Dymoke v Association for Dance Movement Pyschotherapy UK Ltd [2019] EWHC 94 (QB) by Mr Justice Popplewell. The case concerned a company limited by guarantee and, in the context of a decision to terminate a member's membership, an argument based on the existence of an implied term concerning the manner of the termination. The trial judge held that an implied term existed and in doing so stated (paras. [60], [61] and [65]):
.... generally an implied term must not be inconsistent with any express term. The duty to act fairly in relation to decisions to terminate membership of a company must be consistent with the articles of association and with the fiduciary duties of the directors. However, I see no difficulty in the content of the duty of fairness in any given circumstance being fashioned to ensure such consistency. It is common ground in this case that the contract included the terms of the Ethics Code and Complaints procedure which confer powers to impose sanctions ranging from reprimand through suspension to withdrawal of registration and termination of membership. In the context of an organisation such as ADMP, there is every reason to treat those decision-making powers as subject to an obligation of procedural fairness in just the same way as would apply to decisions of a public body. Indeed one would only have the now out of fashion officious bystander ask, "Can the Council act unfairly in deciding to terminate membership?" for the testy suppression "of course not" to be forthcoming.

Expressed in this way, there is no inconsistency between implying a duty of procedural fairness and the fiduciary duties of a director, which include now those now statutorily defined in s. 172 of the Companies Act 2006.

I conclude that it was an implied term of the contract between ADMP and Ms Dymoke that she would be treated fairly in relation to her termination; and in particular that she would be informed of the complaints or concerns in sufficient detail to enable her to respond to them and would be given a reasonable opportunity to respond. That applies not only to the substance of the complaints or concerns, but also to the question whether they justified the sanction of termination of membership. Such a term satisfies the test in Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72; [2016] AC 742, and accords with public law principles and those which govern the exercise of a contractual discretion"

UK: Companies, Limited Liability Partnerships and Partnerships (Amendment etc) (EU Exit) Regulations 2019

An update on the Companies, Limited Liability Partnerships and Partnerships (Amendment etc) (EU Exit) Regulations 2019. The Regulations were relaid on 10 January (replacing those laid on 5 November 2018). The Joint Select Committee on Statutory Instruments considered the Regulations on 23 January and decided that the Regulations did not need reporting to both House of Parliament: see here. A motion to approve the Regulations has since been tabled by the Government, notwithstanding the concerns expressed by the Secondary Legislation Scrutiny Committee in its thirteenth report of the 2017/19 session: see here. To quote directly from this report (emphasis in the original):
The purpose of these draft Regulations is to ensure that the UK’s company law framework can operate effectively after a possible ‘no deal’ exit from the EU. While the Department for Business, Energy and Industrial Strategy (BEIS) says that the instrument aims to preserve the company law framework unchanged as far as possible and appropriate, the information provided in the Explanatory Memorandum (EM) suggests that some of the proposed changes appear to be more significant. A key proposal in the draft Regulations is to end the preferential treatment currently afforded in some aspects of UK company law to businesses from the European Economic Area (EEA). Amongst other changes, the instrument proposes to revoke provisions that enable the current regime for mergers between UK companies and companies in EEA countries. BEIS estimates that around 50 cross-border mergers are carried out under this regime every year. Other proposed changes would involve a loss of voting rights and a loss of the ability to make distributions for certain EEA businesses after a one-year transition period following exit. Despite the significance of these proposals, the EM provides only limited information on the expected impact of these changes on shareholders and other relevant stakeholders. The EM also says that to minimise sensitivities ahead of negotiations with the EU, only the Law Society was consulted. The Committee recommended an upgrade of these Regulations to the affirmative procedure when they were initially laid before Parliament as a proposed negative instrument, because of the significance of the changes and the lack of information provided on their expected impact. The Committee remains concerned that the Department has not provided more extensive information to assist Parliament in its scrutiny of these draft Regulations".

Wednesday, 23 January 2019

UK: FCA consultation on cryptoasset guidance

The Financial Conduct Authority today published a consultation document containing proposed guidance on cryptoassets and, in particular, the circumstances in which such assets fall within the FCA's regulatory remit: see here (pdf). The document notes (at para. 1.27) that HM Treasury will publish a consultation paper early this year to ask if legislative change is needed to broaden the FCA's regulatory remit in this area.

Tuesday, 22 January 2019

Sri Lanka: IRCSL issues Direction on Governance of Insurers

A new Direction on the governance of insurers came into force earlier this month: see here (pdf). The Direction, published by the Insurance Regulatory Commission, contains various mandatory provisions concerning the boards of insurers.

Monday, 21 January 2019

Singapore: service of garnishee order nisi did not make creditor secured

The Court of Appeal gave judgment earlier this month in SCK Serijadi Sdn Bhd v Artison Interior Pte Ltd [2019] SGCA 5. A copy of the judgment is available here (pdf) and a summary is available here. The decision is an important one in which the court explained why the service of a garnishee order nisi did not render the judgment creditor a 'secured creditor' for the purposes of sections 299(2) and 334(1) of the Companies Act, 2006 Rev Ed, Cap 50.

Hong Kong: the Companies (Amendment) (No 2) Ordinance 2018

The first external circular of 2019 published by the Companies Registry - available here (pdf) - provides an overview of the changes to the company law framework coming into force at the start of February by virtue of the Companies (Amendment) (No. 2) Ordinance 2018. Further information is available here.

Friday, 18 January 2019

IOSCO statement on issuers' disclosure of ESG matters

The International Organisation of Securities Commissions has published a statement in which it stresses the importance, for issuers, of considering the inclusion of environmental, social and governance (ESG) matters in the disclosures made to investors: see here (pdf). To quote directly from the statement: "IOSCO encourages issuers to consider the materiality of ESG matters to their business and to assess risks and opportunities in light of their business strategy and risk assessment methodology. When ESG matters are considered to be material, issuers should disclose the impact or potential impact on their financial performance and value creation".

Thursday, 17 January 2019

IOSCO report: Good Practices for Audit Committees in Supporting Audit Quality

The International Organisation of Securities Commissions has today published its final report Good Practices for Audit Committees in Supporting Audit Quality: see here (pdf). The report, as its title suggests, proposes various features that an audit committee should have in order to promote and support (external) audit quality.  These include the qualities, qualifications and experience of audit committee members.

Japan: Legislative Council publishes corporate governance reforms

The Nikkei Asian Review reports that "[a] government panel [a subcommittee of the Ministry of Justice Legislative Council] released a package of corporate governance reform proposals on Wednesday, setting out such rules as requiring larger corporations - both listed and unlisted - to have outside directors. The government plans to submit relevant legislative revisions to the ordinary Diet session slated to convene soon, with 2020 set as the target year for implementation". A copy of the news report is available here.

Wednesday, 16 January 2019

Nigeria: launch of the national corporate governance code

The Financial Reporting Council has announced the unveiling (by His Excellency, Prof. Yemi Osinbajo, Vice President of the Federal Republic of Nigeria) of the new Nigerian Code of Corporate Governance. It is not yet clear, from the FRC's announcement and website, whether the unveiled Code is different from the version published last year for consultation (about which, see here).

Update (17 January 2019): a copy of the Code is available here.

Tuesday, 15 January 2019

UK: Report calls for new approach to corporate and financial regulation

The report commissioned by the Shadow Chancellor, the Rt Hon John McDonnell MP, on the UK's financial and corporate regulatory architecture, has been published: see here (pdf). The report is highly critical of the current framework and makes various recommendations including the creation of a Business Commission, an umbrella organisation that would oversee and coordinate the activities of sub-Commissions. The sub-Commissions would have responsibility for specific aspects and sectors (e.g., corporate governance; accounting; insolvency). All of the Commissions would have a Supervisory Board formed of citizens and societal stakeholders. A separate Commission would be responsible for enforcement.

Monday, 14 January 2019

UK: England and Wales: section 423 of the Insolvency Act 1986

Judgment was given last Friday in Deansgate 123 LLP v Workman & Anor [2019] EWHC 2 (Ch). The decision is of interest because of the discussion it contains about the extent to which the bringing of a claim under section 423 ("Transactions defrauding creditors") of the Insolvency Act 1986 would amount to an abuse of process. It is interesting, too, because of what the trial judge, HHJ Eyre QC, said about section 423: it "provides the the court with a discretion to set aside transactions in certain circumstances but it is not to be seen as some form of punishment of wrongdoers – if only because the recipient of a transfer which is ultimately set aside may be entirely innocent of any wrongdoing" (para. [57]).

Friday, 11 January 2019

IFC and BRVM to develop corporate governance code

The International Finance Corporation, part of the World Bank Group, has published details of its partnership with the Bourse Régionale des Valeurs Mobilières (BRVM; the West Africa Regional Stock Exchange) one of the aims of which is to help BRVM develop and introduce a corporate governance code: see here.

Thursday, 10 January 2019

OECD consults on new anti-corruption and integrity guidelines for state owned enterprises

The OECD has published for comment a draft of its new Anti-Corruption and Integrity Guidelines for State-Owned Enterprises. The Guidelines, available here (pdf), are intended for the use of states in their promotion of integrity and anti-corruption and complement the OECD's Guidelines on Corporate Governance of State-Owned Enterprises.

France: AMF report on corporate governance and executive compensation

France's financial market regulator, the Autorité des Marchés Financiers (AMF), has published its 2018 report on corporate governance and executive compensation in large listed companies. A copy of the report, in English, is available here. A summary, also in English, is available here.

Wednesday, 9 January 2019

Ireland: Establishing the Corporate Enforcement Authority

In October 2017, the Government accepted a recommendation that the Office of the Director of Corporate Enforcement (ODCE) should no longer be an Office within the Department of Business, Enterprise and Innovation and should instead become an Agency, in the form of a Commission. The legislation that will bring about this change, including the renaming of the ODCE to the Corporate Enforcement Authority, was published last month alongside a regulatory impact assessment: see here.

UK: CIPD/HPC report on remuneration committee reform

The CIPD and High Pay Centre have published a joint report on the operation of remuneration committees: see here (pdf). Amongst the recommendations made is one calling for the replacement of the remuneration committee with a 'people and culture' committee, the membership of which to be more broadly based than is currently the case with remuneration committees.