FSB policy recommendations to strengthen oversight and regulation of shadow banking

The Financial Stability Board has published policy recommendations to strengthen oversight and regulation of shadow banking entitles and address risks in securities lending and repos. The recommendations are set out in two documents, available here (pdf) and here (pdf). An overview of the recommendations is available here (pdf) and the FSB's press release is available here (pdf).

UK: Scotland: Law Commission proposes new legislative framework for judicial factors

The Scottish Law Commission published its report on judicial factors yesterday: see here. A new legislative framework is proposed, set out in the draft Judicial Factors (Scotland) Bill included in the report. The report discusses, amongst other things, the property over which a judicial factor may be appointed. In this regard it is noted that a number of consultees queried whether it was competent to appoint a judicial factor to the estate of a company. The Commission's view is that it is competent to do so and it states that this may be done under section 996 of the Companies Act 2006 as well as at common law under the nobile officium of the Court of Session (see paras. 3.47 to 3.50). The Commission also supports its position with reference to section 1154 of the 2006 Act, which requires notice to be given to the Registrar of Companies of certain appointments including, in Scotland, a judicial factor.

New Zealand: Financial Markets Conduct Bill receives third reading

The Financial Markets Conduct Bill received its third reading in Parliament yesterday. A draft of the third reading debate is available here. Royal assent is now required for the Bill to become law. The new Act will replace several Acts, including the Securities Act 1978, with the aim of reforming the regulation of financial conduct. It contains rules covering the way financial products are offered, promoted, issued and sold, and the continuing responsibilities of those who offer, issue, manage, supervise, deal in and trade them. An overview of the Bill's provisions is available here. Draft Regulations will be published in the autumn.

UK: FCA consults on proposed changes to the Listing Rules

The Financial Conduct Authority has published a consultation paper setting out consequential changes to the Listing Rules resulting from the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 and Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013: see here (pdf).

India: RBI discussion paper on banking structure

The Reserve Bank of India has published a discussion paper on the structure of banking in India: see here or here (pdf). The paper identifies various policy objectives and reform proposals including enhancing competition increasing financial inclusion.

Isle of Man: Treasury shares consultation

The Treasury and Department for Economic Development are consulting on proposed changes to the company law framework concerning treasury shares: see here (pdf). Amongst other things it is proposed to exercise the power provided by Section 58A of the Companies Act 2006 to permit companies incorporated under the 2006 Act to hold and deal with treasury shares. Changes are also proposed with regard to companies incorporated under earlier legislation. Draft legislation is available here.

BCBS update on Basel III implementation

The Basel Committee on Banking Supervision has published an update regarding implementation of the Basel III regulatory reforms: see here (pdf). The update notes that 25 out of the 27 jurisdictions comprising the Basel Committee have issued the final set of Basel III capital regulations.

UK: Competition Commission statutory audit services market inquiry - provisional decision on remedies - responses published

At the end of last week the Competition Commission published the responses received in respect of its provisional decision on remedies: see here. There is much criticism of the proposal to require FTSE 350 companies to put their statutory audit out to tender at least every five years. The Commission's final report will be published next month.

UK: Sir Adrian Cadbury, the Cadbury Archive and a history of the Cadbury Committee

Later this year a history of the Cadbury Committee, written by Professor Laura Spira and Judy Slinn, will be published by Oxford University Press: see here. The book's sources include papers in the Cadbury Archive at Cambridge donated by Sir Adrian Cadbury. Earlier this year Sir Adrian returned to Cambridge and, at a symposium organised by the Cambridge Corporate Governance Network to mark twenty years since the publication of the Cadbury Report and Code, donated to the archive copies of all of his corporate governance speeches.

Following the symposium Sir Adrian was interviewed and offered some insights into the work of the Committee. During the interview he explained that in his view it would have been helpful if, twenty years ago, a legal requirement for a properly constituted audit committee had been introduced. He also said that board self-evaluation was something that he would have liked to have pursued but it was too early to do so. A video of the interview is available below:

China: CBRC publishes new edition of its corporate governance guidelines for commercial banks

The China Banking Regulatory Commission has published an updated edition of its corporate governance guidelines for commercial banks. An overview is available here (in Chinese) or here (in English).

New Zealand: Law Commission proposes new statute for incorporated societies

The Law Commission report A New Act for Incorporated Societies was published yesterday: see here or here (pdf). The Commission has recommended that the Incorporated Societies Act 1908 should be repealed and replaced by a new statute in which guidance common to other statutes is provided (including, for example, the duties of society officers, dispute resolution, and the constitution). Other more specific recommendations are made including requiring societies to prepare and file at least simple annual financial reports and to have a statutory officer and a committee of at least three members. A summary of the report's recommendations is available here (pdf).

The report was tabled before Parliament yesterday: see here. The Government has welcomed the report and undertaken to respond formally by February 2014: see here.

Singapore: SGX consults on reducing board lot size

The Singapore Exchange is consulting on proposals to reduce board lot size from 1,000 to 100: see here (pdf). The justifications offered to support the proposal include making equity investments more accessible to the general population and improving market liquidity and price discovery.

UK: BIS research paper - the listing decisions of UK companies

The most recent paper published by the Department for Business, Innovation and Skills, as part of its research paper series, considers the motivations behind the listing decisions of the UK companies: see here (pdf). The paper's findings are based on a survey of 31 predominantly UK owned and based mid-sized businesses (defined as those with sales turnover of between £25m and £500m), including 17 listing on the London Stock Exchange and 14 unlisted. Chapter five of the report considers corporate governance.

Canada: CSA review of the proxy voting infrastructure

The Canadian Securities Administrators have published a consultation paper titled Review of the Proxy Voting Infrastructure: see here (pdf). The paper identifies the following two principal questions for consideration. Is accurate vote reconciliation occurring within the proxy voting infrastructure? What type of end-to-end vote confirmation system should be added to the proxy voting infrastructure?

Ireland: Central Bank reviews corporate governance code for credit institutions and insurance undertakings

The Central Bank is undertaking a review of its corporate governance code for credit institutions and insurance undertakings: see here (pdf). A number amendments to the code are proposed including: requiring all institutions to appoint a chief risk officer; requiring the audit committee chairman to be a member of the risk committee and the risk committee chairman to be a member of the audit committee. Views are also sought on other matters including whether it is necessary to include a provision concerning board diversity.

UK: Companies House publishes statistical tables for company registration activities in 2012/13

Companies House has published statistical tables for company registration activities in 2012/13, including a summary of the number of companies on the register between and 2008/09 and 2012/13: see here (pdf).

Australia: ASX consults on changes to its corporate governance principles and recommendations

The ASX Corporate Governance Council is seeking views on changes to its corporate governance principles and recommendations. Details are set out in a consultation paper that was published today: see here (pdf). A draft of the new principles and recommendations is available here (pdf). A copy of the current principles and recommendations is available here (pdf). An overview of some of the proposed changes is available here (pdf).

UK: England and Wales: liquidators were not data controllers

The ICLR has published a summary for the recent High Court decision Re Southern Pacific Personal Loans Ltd. [2013] EWHC 2485 (Ch): see here. The summary's headnote reads: "Joint liquidators of a company were not data controllers within the meaning of section 1(1) of the Data Protection Act 1998 in respect of data processed by the company prior to its liquidation."

UK: England and Wales: properties were held on resulting trust

Judgment was given earlier this week in M v M [2013] EWHC 2534 (Fam). The case concerned a wife's application for an order for financial relief under Part III of the Matrimonial and Family Proceedings Act 1984. At issue was whether a husband had a beneficial interest in properties the legal title of which was vested in companies. The trial judge found that the husband at all times intended to retain the beneficial interest in the properties and that they were held on resulting trust. The properties were therefore capable of being the subject of an order for relief under Part III. Permission to commence the Part III proceedings was given three years ago but the hearing was delayed until after the Supreme Court gave judgment in Prest v Petrodel Resources Ltd. [2013] UKSC 34.

UK: FRC consults on strategic report guidance

The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 make amendments to the Companies Act 2006 and require, amongst other things, certain companies to prepare a strategic report. The Department for Business, Innovation and Skills asked the Financial Reporting Council to prepare non-mandatory guidance in respect of the strategic report. Today the FRC published for consultation its draft guidance and stated its hope that the new reporting requirements would encourage the preparation of more concise and relevant narrative reports: see here (pdf).

Australia: ASIC publishes dark liquidity and high frequency trading rules

The Australian Securities and Investments Commission has published its market integrity rules on dark liquidity and high-frequency trading: see here. Accompanying guidance has also been published setting out ASIC's expectations of market operators and participants: see here.

UK: The Companies and Partnerships (Accounts and Audit) Regulations 2013

The Companies and Partnerships (Accounts and Audit) Regulations 2013 were made earlier this month: see here or here (pdf). The Regulations make amendments to Part 15 ("Accounts and reports") of the Companies Act 2006 as well as the Partnerships (Accounts) Regulations 2008. The amendments are needed to correct a defect in the UK's implementation of Council Directive 90/605/EEC. Further information is available in the explanatory memorandum available here (pdf).

Hong Kong: A history of company incorporation

To mark the twentieth anniversary of the Companies Registry a report has been published, written by Professor S H Goo, providing a history of company incorporation in Hong Kong: see here (pdf).

USA: PCAOB proposes new auditing standards to enhance the auditor's report

The Public Company Accounting Oversight Board has proposed two new auditing standards in order to improve usefulness of the auditor's report: see here (pdf). An overview of the new standards is available here. The PCAOB chairman, James R. Doty, described the publication of the standards as a watershed moment for auditing in the United States: see here. The remarks of his fellow board members are available here.

India: The structure of the banking industry - views of the RBI Governor and an imminent discussion paper

The Governor of the Reserve Bank of India, Dr D. Subbarao, delivered a speech today in which he reflected on the structure of the banking industry in India: see here. His speech comes a few days before the Reserve Bank is due to publish its much anticipated discussion paper on the structure of banking in India.

Cayman Islands: Monetary Authority consults on mutual fund corporate governance guidance

The Cayman Islands Monetary Authority is consulting on a proposed statement of guidance concerning the corporate governance of mutual funds: see here.

UK: The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013

The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 were made last week and come into force on 1 October 2013: see here or here (pdf). An explanatory memorandum is available here (pdf). The Regulations set out new requirements for the content of the remuneration report, including greater disclosure with regard to remuneration policy and the obligation to provide a single figure for the total remuneration received by each director.

UK: FRC responds to Competition Commission's provisional decision regarding remedies for the statutory audit market

The Financial Reporting Council has today published its response to the Competition Commission’s provisional decision on remedies for the statutory audit market: see here (pdf). The FRC explains, amongst other things, why it is opposed to requiring the audit to be put out to tender every five years (the UK Corporate Governance Code, which operates on the basis of comply or explain, provides that FTSE 350 companies should put the external audit contract out to tender at least every ten years).

UK: Company narrative reporting - implementing the new framework

Several statutory instruments relating to company reporting were published today, including the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, the Companies (Revision of Defective Accounts and Reports) (Amendment) Regulations 2013 and the Companies (Receipt of Accounts and Reports) Regulations 2013. The first of these, through changes to the Companies Act 2006, sets out the new narrative reporting framework for companies, including the obligation to prepare a strategic report (there is, however, an exemption in place for small companies).

Spain: CNMV report on governance of IBEX 35 companies

The Spanish securities market regulator, Comisión Nacional del Mercado de Valores, has published its annual report of corporate governance at IBEX 35 companies: see here (pdf, Spanish). The report notes, amongst other things, that the number of women on boards has increased by 8% in the past year. It also notes an improvement in the quality of explanations provided where recommendations within the Unified Good Governance Code are not followed.

Hong Kong: Unfair prejudice and listed companies

Earlier this month the Court of Appeal of the High Court gave judgment in Luck Continent Ltd v Cheng Chee Tock Theodor (CACV 107/2012). This is an interesting and important decision concerning section 168A of the Companies Ordinance Cap 32 in the context of listed companies. Section 168A provides that a shareholder may petition the court for relief where the company's affairs are being, or have been, conducted in an unfairly prejudicial manner. An equivalent provisions exists in the United Kingdom: section 994 of the Companies Act 2006.

The case concerned a company incorporated in Bermuda with a listing on the Hong Kong Stock Exchange. Its articles stipulated that a special resolution was required to remove a director. This provision was inconsistent with the HKSE Listing Rules which required an ordinary resolution (see para 4(3) of Appendix 3: here, pdf).  Several attempts were made to comply with the Listing Rules by amending the company's articles but these were blocked by shareholders holding just over 25% of the company's shares. The shares were later suspended from trading.

The company's largest shareholder - holding a little under 47% of the shares - sought an order under section 168A for the amendment of the company's articles. This was granted last year by Barma J. in the Court of First Instance (see HCMP 702/2010), and upheld by the Court of Appeal several days ago in a decision considering English authorities including O'Neill v Phillips [1999] 1 WLR 1092 and Re Astec (BSR) plc [1998] 2 BCLC 556. Noting that amending the articles would facilitate the resumption of trading in the shares, the court found that the blocking of the amendment breached a fundamental understanding between the shareholders that the company would maintain its listing status. The breach of this understanding was unfairly prejudicial.

India: Rajya Sabha passes Companies Bill 2012

The Companies Bill 2012 was passed, with amendments, today by the Rajya Sabha: see here (pdf). The Bill, which will become the Companies Act 2013, now requires the approval of the president. A copy of the Bill, as passed by the Lok Sabha last December, is available here (pdf).

Canada: OSC consults on new board diversity disclosure obligations

The Ontario Securities Commission is seeking views on new disclosure obligations in respect of women on boards and in senior managements positions: see here (pdf). It is also asking: what are effective policies for increasing the number of women on boards and in senior management?

Isle of Man: Government consults on the introduction of one member LLCs

The Isle of Man Government is proposing to amend the Limited Liability Companies Act 1996 (here, pdf) in order to permit an LLC to be formed with a single member (two are currently required). Further information is available in the consultation paper available here (pdf). The change will be made by the Limited Liability Companies (Amendment) Bill 2013, a draft of which is available here (pdf).

Ireland: Companies Bill 2012 - Committee invites submissions

The Joint Committee on Jobs, Enterprise and Innovation will consider the Companies Bill 2012 later this year and in this regard has invited written submissions: see here.

Portugal: CMVM publishes new edition of corporate governance code

The Portuguese Securities Market Commission, Comissão do Mercado de Valores Mobiliários, has published a new edition of its corporate governance code. A copy, in Portuguese, is available here (pdf).

India: Companies Bill 2012 tabled for approval in the Rajya Sabha

The new session of the Indian Parliament began yesterday and the Companies Bill 2012 has, once more, been tabled for approval by the Rajya Sabha: see here (pdf). The Bill was passed by the Lok Sabha last December; a copy of the Bill as passed is available here (pdf).

UK: The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (No. 2) Regulations 2013

The Financial Services and Markets Act 2000 (Over the Counter Derivatives, Central Counterparties and Trade Repositories) (No. 2) Regulations 2013 were laid before Parliament on 31 July: see here or here (pdf). An explanatory memorandum is available here (pdf). The Regulations concern the clearing of financial transactions through recognised clearing houses and make amendments to insolvency law to facilitate the segregation and transfer of indirect clients’ assets and positions. Changes are also made to the supervisory, investigatory and enforcement powers of the Bank of England and Financial Conduct Authority. These changes are necessitated by the EMIR Regulation (EU 648/2012) and Commission Delegated Regulation (EU) No 149/2013.

UK: PRA consults on CRD IV implementation

The Prudential Regulation Authority has published a consultation paper in which it sets out proposed changes to its rules needed to implement CRD IV: see here (pdf). These changes concern banks, building societies and those investment firms which are regulated by the PRA. Chapter four of the consultation paper concerns governance and relates to Articles 74–76, 88 and 91–96 of the Capital Requirements Directive (2013/36/EC).

IAASB proposals to improve the auditor's report

The International Auditing and Assurance Standards Board has published proposals to improve the usefulness of the auditor's report. The proposals are set out in an exposure draft titled Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs): see here. A summary of the proposals is available here (pdf). The UK's Financial Reporting Council has welcomed the proposals: see here.

Australia: AICD publishes 'Good Governance Principles and Guidance for Not-for-Profit Organisations'

Following a consultation earlier this year, the Australian Institute of Company Directors has published a final version of its Good Governance Principles and Guidance for Not-for-Profit Organisations: see here.

Singapore: SGX amends listing rules to promote shareholder engagement

The Singapore Exchange has announced changes to its listing rules, including the addition of a new rule requiring general meetings to be held in Singapore. Further information about this, and other changes designed to promote shareholder engagement, is available here.

UK: House of Lords Economic Affairs Committee calls for review of UK corporate tax system

The House of Lords Economic Affairs Committee yesterday published its report Tackling corporate tax avoidance in a global economy: is a new approach needed?: see here or here (pdf). The Committee has called on HM Treasury to review urgently the UK's corporate taxation regime, considering, amongst other things, different approaches to the taxation of multinational companies' profits including a destination-based cash flow tax. Also identified for review is the question of whether an allowance for corporate equity should be introduced. Evidence received by the Committee is available here (pdf).

UK: FCA consults on Handbook changes in respect of CRD IV

The Financial Conduct Authority has published a consultation paper setting out proposed changes to its Handbook as part of the transposition of CRD IV in relation to investment firms: see here (pdf).

UK: England and Wales: Court of Appeal rejects application of 'sole actor exception' and considers extra-judicial effect of section 213 of the Insolvency Act 1986

The Court of Appeal gave judgment yesterday in Jetivia SA v Bilta (UK) Ltd [2013] EWCA Civ 968 (on appeal from [2012] EWHC 2163 (Ch), [2012] WLR (D) 236). The court unanimously held that section 213 ("Fraudulent trading") of the Insolvency Act 1986 had extraterritorial effect. The court also rejected the argument that the sole actor exception was an established feature of English law for all purposes, noting that it was bound by Belmont Finance Corpn Ltd v Williams Furniture Ltd [1979] Ch 250 and Attorney-General's Reference (No 2 of 1982) [1984] QB 624 to hold that the director of a one-man company could be held liable to account for breaches of fiduciary duties which he committed against the company. The fact that a fraudulent director was the directing mind and will of the company was not an answer to a claim by the company against the director for breach of duty committed against the company.

UK: Financial Reporting Standard for Smaller Entities published by FRC

The Financial Reporting Council has published a copy of the Financial Reporting Standard for Smaller Entities, which applies to accounting periods beginning on or after 1 January 2015: see here (pdf). This new standard updates and supersedes Financial Reporting Standard for Smaller Entities (effective April 2008).