Friday, 19 October 2018

Ireland: the representation of companies before the courts

The Supreme Court gave judgment yesterday in Allied Irish Bank plc v Aqua Fresh Fish Ltd [2018] IESC 49. The court unanimously concluded (to quote directly from the judgment of Finlay Geoghegan J at para. [48]):
The so-called rule in Battle v. Irish Art Promotion Centre Limited [1969] I.R. 252, when complemented by the inherent jurisdiction and discretion of the Court to permit, in exceptional circumstances, representation of a company by a person who is not a lawyer with a right of audience, continues to be the law in this jurisdiction and is consistent with the Constitution."

USA: Updated Commonsense Corporate Governance Principles published

A couple of years ago a group comprising of well known company directors, investment managers and institutional investors published a series of corporate governance principles - described as 'commonsense' - for public companies. The principles covered the following: board composition and internal governance; board responsibilities; shareholder rights; public reporting; board leadership; management succession planning; compensation of management; and asset managers' role in corporate governance.

Yesterday a new version of the principles was published - see here (pdf) - and it was announced that Columbia Law School’s Millstein Center for Global Markets and Corporate Ownership would publish the principles and maintain, on its website, a list of companies and investors that have committed to them.

Thursday, 18 October 2018

South Africa: Companies Amendment Bill published

The Department for Trade and Industry has published for public comment a draft of the Companies Amendment Bill: see here (pdf). The Bill will amend the current company law framework as found in the Companies Act, 2008 and Companies Regulations, 2011.

Zimbabwe: comments sought on the Companies and Other Business Entities Bill

The Parliament of Zimbabwe is seeking comments on the Companies and Other Business Entities Bill, which contains Zimbabwe's new company law framework and which has recently been gazetted: see here. A copy of the Bill is available here (pdf).

Wednesday, 17 October 2018

IOSCO final report: equity capital raising - conflicts of interest and associated conduct risks

Following a consultation earlier this year, the International Organisation of Securities Commissions has now published its final report Conflicts of interest and associated conduct risks during the equity capital raising process: see here (pdf). The report identifies various risks and contains non-binding guidance for IOSCO members.

Ghana: company law reform - the Companies Bill 2018

Some sixty years after Professor Gower was appointed to chair a commission on company law reform in Ghana, the product of which was the Companies Act 1963, the introduction of a new company law framework has moved closer with the laying before Parliament of the Companies Bill 2018. A copy of the Bill, which when enacted will replace the 1963 Act, is available here (pdf). To focus on one part of the Bill, it is interesting to compare section 190 of the Bill - "Duties of directors" - with section 172 of the UK's Companies Act 2006.

Tuesday, 16 October 2018

Lithuania: OECD report on corporate governance

As part of the process leading to Lithuania's accession to the OECD, a report on corporate governance in Lithuania has been prepared: see here.

Monday, 15 October 2018

Jersey: the Limited Liability Companies Law

The availability of the LLC structure has moved closer with the adoption of the Limited Liability Companies (Jersey) Law 201- by the States last month (the next two stages are the sanction of Her Majesty in Council and registration by the Royal Court). A copy of the Act is available on the Jersey Legal Information Board website: see here.

UK: financial risk from climate change - what the PRA expects from boards

The Prudential Regulation Authority has today published for consultation a draft supervisory statement setting out its expectations of firms in respect of their approach to managing the financial risks from climate change: see here (pdf). The accompanying press release is available here (pdf). The PRA's expectation of the board is explained as follows (see para. 3.4 of the draft supervisory statement):

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) (SMF(s)) most appropriate within the firm’s organisational structure and risk profile, and ensure that these responsibilities are included in the SMF(s)’s Statement of Responsibilities. The PRA expects to see evidence that the board and its relevant subcommittees exercise effective oversight of risk management and controls. Further, the PRA expects the board to ensure that adequate resources and sufficient skills and expertise are devoted to managing the financial risks from climate change."

Blogging back to normality

I am pleased to report that regular posting has resumed after a break for reasons largely unexpected. The posts that follow will be a mix of the very up to date and those from the last few months that are important to note for the purposes of the record that this blog has become. With best wishes, Robert.

Monday, 6 August 2018

Singapore: MAS publishes new edition of Corporate Governance Code

Following a consultation earlier this year, the Monetary Authority of Singapore has today published a new edition of its Corporate Governance Code: see here (pdf). Practice guidance has also been published: see here (pdf). The accompanying MAS press release is available here. A press release from SGX explains the accompanying Listing Rules changes: see here.

Monday, 23 July 2018

UK: The Registration of Overseas Entities - draft Bill published

A draft of the Registration of Overseas Entities Bill has been published by the Department for Business, Energy and Industrial Strategy: see here. The Bill, when law, will provide for the framework requiring overseas entities owning land in the United Kingdom to register with Companies House and to provide information concerning their beneficial owners (and to update this information). Published alongside the Bill is a research report exploring the potential impacts of the proposed register: see here (pdf).

Friday, 20 July 2018

UK: Exiting the EU: The Friendly Societies (Amendment) (EU Exit) Regulations 2018

The European Union (Withdrawal) Act 2018 received Royal assent at the end of June. Under section 8(1) of the Act, a Minister of the Crown is given the power through Regulations to make provisions to prevent, remedy or mitigate any failure of retained EU law to operate effectively or any other deficiency in retained EU law, arising from the UK's withdrawal from the European Union.

A final draft of the Friendly Societies (Amendment) (EU Exit) Regulations 2018 has been published, and will be made in exercise of the section 8(1) power. A copy of the Regulations is available here (pdf) and the accompanying explanatory memorandum is available here (pdf). The Regulations make a number of changes to the Friendly Societies Act 1992, including replacing the references to the EU Audit Directive.

The Regulations will not be be laid in Parliament until they have gone through the new 'sifting' process prescribed within Schedule 7 of the 2018 Act (further guidance is available here; for discussion see here).

Thursday, 19 July 2018

Nigeria: FRC consultation on the Nigerian Code of Corporate Governance

The Financial Reporting Council has published for consultation a draft of the Nigerian Code of Corporate Governance: see here. The Code will operate on the basis of 'apply and explain' and replaces the Code published but subsequently withdrawn in 2017. The new Code contains 28 Principles, the application of which by companies is assumed, together with the practices recommended for implementing the Principles.

Wednesday, 18 July 2018

UK: Cranfield's Female FTSE Board Report 2018

The latest annual edition of Cranfield University's Female FTSE Board Report has been published: see here (pdf). To quote directly from the executive summary:
Since October 2017 the percentage of women on FTSE 100 boards has increased from 27.7% to 29%, meaning that if the current pace continues it is possible to reach the targeted 33% by the end of 2020. In total 264 women hold 305 directorships on FTSE 100 boards. The percentage of female NonExecutive Director (NED) positions is at the all-time high of 35.4%, whilst the percentage of female executive positions has flatlined at 9.7%. On a positive note, seven women hold a Chair position and 18 hold Senior Independent Directorships. A further 85 women hold 95 Chair roles on the various committees across FTSE 100 boards. In contrast, the percentage of women on FTSE 250 boards has only increased marginally from 22.8% in October 2017 to 23.7%, the percentage of female executive directorships has dropped from 7.7% to 6.4% and the number of all male boards has increased to ten. These present challenging conditions for meeting the 33% target in 2020."

Tuesday, 17 July 2018

UK: FRC publishes new edition of the UK Corporate Governance Code

The Financial Reporting Council yesterday published a new edition of the UK's Corporate Governance Code: see here (pdf). A summary of the key changes made in this new edition can be found here. An updated edition of the FRC's guidance on board effectiveness has also been published: see here (pdf).

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Apologies to readers for the absence of posts over the past few weeks (I have, amongst other things, been dealing with the aftermath of flash flooding in Birmingham). There is some catching-up to do, so expect some posts over the next few weeks to cover developments from earlier in the year.

Monday, 4 June 2018

UK: EAC report - 'Greening Finance: embedding sustainability in financial decision making'

The Environmental Audit Committee has today published its report Greening Finance: embedding sustainability in financial decision making: see here or here (pdf). The conclusions and recommendations are available here. The report calls on the Government to set a deadline for all listed companies and large asset owners to report on climate-related risks and opportunities (in line with the TCFD recommendations) on a comply or explain basis by 2022 (with appropriate changes to the UK Corporate Governance Code and UK Stewardship Code).

Friday, 1 June 2018

Japan: a new edition of the corporate governance code and new guidelines on investor and company engagement

A new edition of Japan's Corporate Governance Code was published today: see here (pdf). A copy of the new Code, with the changes highlighted, is available here (pdf). Also published today are Guidelines from the Financial Services Agency on investor and company engagement, designed to complement the new Code and the existing Stewardship Code: see here (pdf).

Europe: EFAMA publishes updated Stewardship Code

The European Fund and Asset Management Association (EFAMA) has published an updated edition of its Stewardship Code (as it is now known: it was first published as the 'Code for External Governance' in 2011): see here (pdf). The Code operates on the basis of 'comply or explain' and it has been updated to bring its language in line with the changes recently made to the Shareholders Rights Directive.


Thursday, 31 May 2018

UK: women on FTSE350 boards

Later this month - June 27, to be precise - the latest announcement concerning the number of women on FTSE350 boards will be made. In November 2016, the Hampton-Alexander review called for a minimum of 33% of FTSE350 board positions to be occupied by women. Ahead of the June 27 announcement, some of the explanations offered by CEOs and Chairs for not appointing women have been published (as heard by members of the Hampton-Alexander review team) have been published and these indicate why progress has been slow in some quarters. The comments included: "I don't think women fit comfortably into the board environment"' and "Most women don't want the hassle or pressure of sitting on a board".

India: SEBI's review of the regulatory framework governing credit rating agencies

The Securities and Exchange Board of India began a consultation on the regulatory framework applicable to credit rating agencies last autumn: see here. An update was provided yesterday, including the publication of new guidelines: see here.

Monday, 28 May 2018

Pakistan: the Limited Liability Partnership Regulations, 2018

The Limited Liability Partnership Regulations, 2018, were notified earlier this month: see here (pdf). The Regulations add to the new framework - the Limited Liability Partnership Act, 2017 (pdf) - and contain provisions concerning the incorporation of LLPs.

Friday, 25 May 2018

New Zealand: Members' Bill seeks to provide clarity concerning 'dry shares'

One of the members' bills recently successful in the ballot of those to be introduced was the Companies (Clarification of Dividend Rules in Companies) Amendment Bill. The Bill was introduced by Todd Muller MP - a copy is available here. The explanatory note can be viewed here. The purpose of the Bill is to make it clear that a company's constitution can create a class of shares in which some carry the right to dividends and others (known as 'dry shares') do not. This will be done through amending section 53 of the Companies Act 1993. The explanatory note accompanying the Bill cites as the classic example of such dry shares as being those belonging to a shareholder in a cooperative where the shareholder no longer supplies the cooperative.

Thursday, 24 May 2018

UK: England and Wales: the scope of corporation tax relief for a predecessor company's losses

In 2009, Leekes Ltd acquired the entire share capital of another company, Coles of Bilston Ltd, with the Coles business being incorporated into that of Leekes. Coles had been loss making and Leekes was entitled under tax legislation to offset those losses against its trading income (see, now, section 944 of the Corporation Tax Act 2010).

The question for the Court of Appeal in a judgment given yesterday - Leekes Ltd v HM Revenue & Customs [2018] EWCA Civ 1185 - was whether these losses could be offset against (a) the trading income of the whole Leekes business or (b) the trading income derived from the business acquired from Coles. The court was unanimous in holding that it was (b). Lord Justice Henderson observed that this:
... is the only construction which the ordinary and natural meaning of the statutory language can bear, and it produces an obviously sensible result. If the construction advanced by Leekes [(a)] were correct, the result would be to place the successor company in a more favourable position than the predecessor, because it would enable the successor to utilise the accumulated losses of the predecessor against trading income derived from a business which the predecessor had never carried on. It is hard to think of any sensible reason why Parliament should have wished to confer such an advantage on the successor to a trade, and (had it done so) there would have been obvious potential for tax avoidance and the development of a thriving secondary market in corporate trading losses" (para. [28]).

Wednesday, 23 May 2018

Ireland: Central Bank consults on governance requirements for investment firms and market operators

The Central Bank has published a second consultation paper concerning the corporate governance requirements for investment firms and market operators: see here (pdf). The consultation paper seeks to update the current requirements to deal with the consequences of MiFID II including the European Union (Markets in Financial Instruments) Regulations 2017 and the joint EBA and ESMA Guidelines on the assessment of the suitability of members of the management body andkey function holders.

Tuesday, 22 May 2018

UK: England and Wales: 'the purpose' and transactions defrauding creditors

Judgment was given today by the Court of Appeal in JSC BTA Bank v Ablyazov & Anor [2018] EWCA Civ 1176. The judgment is noteworthy because of what is said about the operation of section 423 ("Transactions defrauding creditors") of the Insolvency Act 1986. Section 423 applies only where a transaction has been entered "for the purpose - (a) of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him, or (b)of otherwise prejudicing the interests of such a person in relation to the claim which he is making or may make" (emphasis added). With regard to "the purpose", Lord Justice Leggatt observed:
I agree with the point made in McPherson's Law of Company Liquidation (4th Edn, 2017), para 11-116, that there is no need to put a potentially confusing gloss on the statutory language. It is sufficient simply to ask whether the transaction was entered into by the debtor for the prohibited purpose. If it was, then the transaction falls within section 423(3), even if it was also entered into for one or more other purposes. The test is no more complicated than that" (para. [14]). 

Monday, 21 May 2018

UK: Labour Party launches review of the auditing and accounting regulatory framework

The Labour Party has announced that it has commissioned a review, by Professor Prem Sikka, of the regulatory framework for auditing and accounting: see here. Professor Sikka has been asked to develop proposals to "reform and reinvigorate" the regulatory system.

Friday, 18 May 2018

Australia: launch of the Australian Asset Ownership Stewardship Code

The Australian Asset Owner Stewardship Code was published yesterday by the Australian Council of Superannuation Investors: see here (pdf). Further information about this new Code is available in the accompanying FAQs (here, pdf) and media release (here, pdf).

Thursday, 17 May 2018

Norway: NUES consults on changes to the Norwegian corporate governance code

The Norwegian Corporate Governance Board (NUES) is consulting on proposed changes to the Norwegian corporate governance code: see here (pdf, English).

UK: Lords ad hoc committee to examine the Bribery Act 2010

An ad hoc, post-legislative scrutiny committee has been set up by the House of Lords to consider the Bribery Act 2010: see here. The committee's membership was announced today: see here. The chair will be Lord Saville of Newdigate, a former Supreme Court Justice. In very broad terms, the committee will explore whether the Act has achieved its objectives in terms of convictions and awareness of the Act among small and medium sized enterprises: see here.

Wednesday, 16 May 2018

UK: BEIS/WP Committees publish joint second Carillion report

The second, joint report concerning the collapse of Carillion plc has been published by the Work and Pensions and Business, Energy and Industrial Strategy committees: see here or here (pdf). Various recommendations are made, including referring the statutory audit market to the Competition and Markets Authority; a focus on a more active and interventionist approach in the next edition of the UK Stewardship Code; and a more prominent role for regulators, including the Financial Reporting Council which, it is argued, should become more proactive and aggressive.

Tuesday, 15 May 2018

Canada: corporate governance reform - Bill receives Royal Assent

The Bill introduced to make changes to the governance framework - by amending the Canada Business Corporations Act, the Canada Cooperatives Act, and the Canada Not-for-profit Corporations Act - has become law having received Royal Assent earlier this month: see here. A copy of the new Act is available here. A short press release, from the Canadian Government, has also been published: see here.

Monday, 14 May 2018

Ireland: a governance code for charities

The Charities Regulator has announced that it will, later this year, publish a governance code for charities: see here (pdf). The creation of such a code was one of the principal recommendations made in the Report of the Consultative Panel on the Governance of Charitable Organisations (herepdf).

UK: ACCA publication - the tenets of good corporate governance

The ACCA has published a report titled Tenets of Good Corporate Governance: see here (pdf). To quote directly from it, the report "...sets out key issues for companies to think about when considering their long term business model and strategy. It examines the interrelation between businesses and the context in which they operate, encouraging them to embrace good practice that facilitates long term growth".

Friday, 11 May 2018

UK: Deloitte LLP fails to be re-appointed at SIG plc annual general meeting

The annual general meeting of SIG plc was held yesterday: see here (pdf). Of note - because it is rare to see - is the rejection by the shareholders of the resolution to re-elect the external auditors (Deloitte LLP). The shareholders voted: 108,962,143 (For); 395,827,122 (Against); and 371,198 (Withheld). The board has announced that a tender of the audit engagement will now take place.

UK: First PRA/FCA case under the Senior Managers Regime - Mr James Staley and what is expected of a CEO

The first case brought by the Prudential Regulation Authority and Financial Conduct Authority under the Senior Managers Regime has seen the chief executive of Barclays Group, Mr James Staley, fined £642,430. Mr Staley was found to have breached Individual Conduct Rule 2 - the requirement to act with due skill, care and diligence - in respect of his attempt to identify the author of an anonymous letter, purporting to be from a Barclays shareholder, in which various allegations were made (some of which concerned Mr Staley). A copy of the final notice is available here (pdf) and this contains the following observations on the expectations of the CEO (paras. 4.3 to 4.6):

The CEO is the most senior executive director on the board, and therefore has a crucial role to play in ensuring that their firm meets the standards expected of it. A CEO is expected to identify conflicts of interest and be appropriately alert to potential whistleblowing situations. As such, they are expected to demonstrate the highest standard of integrity and to act with due skill, care and diligence in carrying out their functions.

The CEO has responsibility for proposing strategy to the board and for delivering the strategy as agreed. Further, the CEO has, with the support of the executive team, primary responsibility for setting an example to the firm’s employees, and communicating to them the expectations of the board in relation to the firm’s culture, values and behaviours. 

Further, a CEO of an authorised firm must comply with ICR 2, acting with due skill, care and diligence at all times in performing their role. The standard is an objective one and requires a CEO to exercise the degree of due skill, care and diligence as a reasonable CEO would exercise in like circumstances.

The steps that a person needs to take to comply with ICR 2 will be informed by, amongst other things, the circumstances, the specific nature of their role and their experience. Given the crucial role of the CEO, the expectations of the CEO will be more exacting than for other employees of their firm. This is consistent with the CEO’s responsibility for setting an example to the firm’s employees. For example, where a CEO is faced with circumstances that might undermine the impartiality of their judgement, they need to ensure that appropriate standards of probity and governance are maintained".  

UK: England and Wales: High court sanctions Lloyds ring-fencing scheme

Earlier this month, in Lloyds Bank Plc & Ors R(ring-fencing transfer scheme) (Rev 1) [2018] EWHC 1034 (Ch), Mr Justice Hildyard sanctioned the proposed ring-fencing transfer scheme for Lloyds Bank. This is the second time that the High Court in England and Wales has done so; the first was in March: Re Barclays Bank Plc And Woolwich Plan Managers Ltd, Re [2018] EWHC 472 (Ch), [2018] WLR(D) 158.

In this first decision the Chancellor noted various factors that ought to be taken into account by the court in exercising its discretion, one of which was:
The design of a ring-fencing transfer scheme is a matter for the board of the bank concerned. There may be many possible approaches to the design of a statutorily-compliant ring-fencing transfer scheme that will affect stakeholders differently. The choice is for the directors of the bank concerned, acting properly in accordance with their duty under section 172(1) of the Companies Act 2006 (which is to act in the way they consider, in good faith, would be most likely to promote the success of the company having regard to matters including those specified in that subsection)."

The Lloyds decision is of interest because Mr Justice Hildyard chose to add what he termed a "reservation" or "gloss" in respect of the courts' acceptance of the judgment of directors in proposing a particular scheme:

I accept that the court will give considerable latitude to commercial decisions of a board which has appeared properly to address the correct question and acted in accordance with its duties under statute and common law. I accept, more particularly, that where there are different designs of scheme, none of which leaves people materially adversely affected, or no more so than is reasonably necessary to achieve the ring-fencing purpose, the choice is for the promoters (and thus the directors) to make.

However, I would wish to emphasise that when the second part of the Statutory Question [see section 109A(4) of the Financial Services and Markets Act 2000] is being addressed, the question is not whether any adverse effect is greater than is reasonably necessary given the constraints of the particular scheme design, but whether that adverse effect is such as to be greater than reasonably necessary in order to achieve the statutory purpose. If the adverse effect appears material, and it appears likely that another scheme design would have avoided the adverse effect, that may call in question the scheme design chosen; and the court would not be required to accept the directors' choice (albeit that it would then also have to consider potential adverse effects of other designs). In other words, the greater the adverse effect, the more justified the scrutiny of the scheme design, and the less may be the readiness of the Court to accept the commercial judgment of the directors". 

Wednesday, 9 May 2018

Zimbabwe: copy of the Companies and Other Business Entities Bill now available

A copy of the Companies and Other Business Entities Bill, which contains Zimbabwe's new company law framework, is now available on the Parliament website: see here.

Friday, 4 May 2018

IOSCO: consultation report - good practices for audit committees in supporting audit quality

The International Organisation of Securities Commissions has published a consultation report titled 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 audit quality.  These include the qualities, qualifications and experience of audit committee members.

Australia: ASX consults on fourth edition of its corporate governance principles and recommendations

The ASX Corporate Governance Council has begun a consultation in respect of the publication of a fourth edition of its corporate governance principles and recommendations. The documents published as part of the consultation are available here.