UK: MG Rover report published

In May 2005 the (then) Secretary of State for Trade and Industry appointed inspectors (Gervase MacGregor FCA and Guy Newey QC) under Section 432(2) of the Companies Act (1985) to investigate the affairs of Phoenix Venture Holdings Limited, MG Rover Group Limited and 33 other companies. Rover entered administration in April 2005. 

The inspectors' report was published today.  It is very long and split into volume one and volume two. On the basis of the report, Lord Mandelson - the Secretary of State for the Department of Business, Innovation and Skills - has announced that: "work has been commissioned to start legal proceedings to seek to declare relevant directors unfit to hold office and to disqualify them from management of any company in future". The report is also being considered by the Financial Reporting Council, given the issues it raising concerning, e.g., governance and financial reporting. 

Chapter 12 (in volume two) is titled "Aspects of corporate governance" (although corporate governance issues arise throughout the report, including the financial rewards received by the so-called Pheonix Four directors discussed in chapter 11 and found to be "unreasonably large"). The focus of chapter 12 is with the conduct of board meetings and the inspectors record that some directors were not always invited to such meetings. On page 661 the inspectors conclude:

It is obviously desirable to dispense with unnecessary bureaucracy. It is doubtless also the case ... that there are other companies which do not fully comply with legal requirements in relation to, say, the calling of board meetings. Even so, we consider that the members of the Phoenix Consortium paid insufficient regard to legal requirements. With respect, in particular, to board meetings, it seems to us that all directors should have been notified of all board meetings of their companies both because there was a legal requirement to do so and because that obviously represented proper corporate governance. It is of little significance in this context that transactions can sometimes be legally effective even where meetings were not properly called or minuted or directors were excluded from decision-making. Legal efficacy need not connote good corporate governance".

For background information, see here.