UK: Wales: ColegauCymru publishes new governance code

A governance code for further education institutions (including sixth form colleges) has been published by ColegauCymru: see here (pdf). The code - according to the accompanying press release - "sets out the shared values and expectations of good college governance under their new legal status as not-for-profit institutions that exist to serve the public". For further information about these changes in legal status, see the notes and materials accompanying the Further and Higher Education (Governance and Information) (Wales) Act 2014.

UK: The Profit-Sharing and Company Governance (Employees' Participation) Bill 2015-16

The Profit-Sharing and Company Governance (Employees' Participation) Bill 2015-16 received its first reading in the House of Commons earlier this week: see here. Introduced by Gareth Thomas MP as a Ten Minute Rule Bill, under Standing Order 23, its purpose is (in very general terms) to require employee representation on company boards and profit sharing amongst employees.

A copy of the Bill has not yet been published (as is common with Private Members' Bills at this stage in the parliamentary process) but this will be done nearer the time of second reading (scheduled for 11 March). The short speech delivered by Mr Thomas on introducing his Bill can be read here. Without Government support the Bill is unlikely to become law; it will, nevertheless, provide an opportunity for debate. The Bill's progress can be followed here.

UK: FCA clarification - the Senior Managers Regime and responsibility for a firm's legal function

The Financial Conduct Authority has today announced that it will soon consult on whether an individual within a firm having responsibility for the legal function should require approval within the Senior Managers Regime: see here. The FCA also provides, in its statement, a clarification of its current position, and an explanation of the approach it will adopt in respect of firms' decisions in the interim period given the uncertainty that exists.

Ireland: insolvency - CLRG recommends Companies Act 2014 amendment following Supreme Court decision in JD Brian Ltd

Last year the Supreme Court gave judgment in In the matter of J.D. Brian Ltd (in Liquidation) t/a East Coast Print and Publicity [2015] IESC 62. The decision concerned section 285 of the Companies Act 1963 (now section 621 of the Companies Act 2014), which provides for certain debts to be granted preferential status (and therefore a priority) in a winding-up. It also provides, in subsection 7(b), that such preferential debts, "so far as the assets of the company available for payment of general creditors are insufficient to meet them, have priority over the claims of holders of debentures under any floating charge created by the company, and be paid accordingly out of any property comprised in or subject to that charge" (italics added).

At issue before the Supreme Court was this italicised phrase. The Supreme Court unanimously held that it meant a floating charge that existed at the commencement of the winding up: it did not include a charge that on creation was a floating charge but had been converted into a fixed charge, by virtue of express crystallisation in accordance with the terms of the debenture, prior to the commencement of the winding up. The decision was referred to the Company Law Review Group and its report was published earlier this month: see here (pdf). The CLRSG has recommended that the Companies Act 2014 is amended to make clear that floating charge means a floating charge as created. This, the CLRSG states, restores the position to what it effectively was in practice if not in law.

Ireland: Government instigates two reviews of company law

The Minister for Jobs, Enterprise and Innovation (Richard Bruton TD) and the Minister for Business and Employment (Ged Nash TD) have announced that two separate reviews of the company law framework are to be undertaken. The reviews will focus on the issues arising in corporate restructuring, particularly where assets are moved between companies in a corporate group, and the protections provided to employees. Concern has been expressed with the way in which the framework operates, particularly following the collapse of Clerys (about which, see here).

The first will be undertaken by the chair of the Labour Court, Kevin Duffy, and Nessa Cahill BL. They have been given eight weeks in which to write a report considering the following questions: (a) could more effective use be made of current legislation to safeguard employees’ interests? (b) at what point in time could any new measures to protect employees’ interests be triggered? (c) are there changes to employment rights legislation that could be considered, or changes at the interface of employment law and company law, including powers to set aside transfers of assets and time periods for same? (d) what solution/framework of measures is required?

A more wide-ranging inquiry, and one that goes to the core of the company law framework, will be undertaken by the Company Law Review Group. The CLRSG has been asked to explore: (a) instances where the corporate veil should be lifted; (b) the strengthening of directors’ duties to employees; (c) checks and balances to strengthen obligations to employees for better protection in company restructuring; and (d) the circumstances in a liquidation of an insolvent company where company liabilities can be met from solvent companies in the same group or in related companies.

UK: PRA policy and supervisory statements - external auditor engagement with supervisors and external auditor reports

The Prudential Regulation Authority has published a policy statement on the engagement between external auditors and supervisors: see here (pdf). The policy statement is accompanied by a supervisory statement concerning the reports written by external auditors to the PRA: see here (pdf).

UK: The Bank of England and Financial Services Bill - update

The Bank of England and Financial Services Bill, which will (amongst other things) make changes to the governance of the Bank of England, has passed through the House of Lords and has now begun its journey in the House of Commons. First reading in the Commons took place earlier this week: see here. A copy of the Bill, as introduced in the Commons, is available here or here (pdf). Explanatory notes for this version of the Bill are available here or here (pdf).

UK: Scotland: The Higher Education Governance (Scotland) Bill - stage one completed

The Higher Education Governance (Scotland) Bill completed stage one in the Scottish Parliament last Thursday. The official record of debate - the minutes of proceedings - is available here (pdf). This records that a vote was taken, with the following results: For (84), Against (20) and Abstentions (0). The Bill now proceeds to stage two, and will be considered by the Education and Culture Committee on 9 February. Further information about the Bill, including committee reports with responses from the Scottish Government, is available here.

UK: Insurance Fraud Taskforce final report recommends board level ownership of fraud

The Insurance Fraud Taskforce, set up with the aim of investigating the causes of fraudulent behaviour and recommending solutions to reduce the level of insurance fraud, has published its final report: see here (pdf). The report recommends, on the basis of good practice identified amongst insurers, that there should be board level of ownership of counter fraud activity.

The report states (para. 4.28): "By assigning Board level ownership and ensuring responsibility rests with the most senior decision-makers, firms are better placed to manage potential conflicts of interest between departments and to establish a culture and strategy for tackling fraud. It is for individual firms to decide their own governance structures, but in practical terms the Taskforce considers that fraud would appear on the risk register and be a standing item at Board meetings".

Europe: Commission consultation - non-financial reporting - non-binding guidance methodology

The European Commission is seeking views on the non-binding guidance on methodology it proposes to publish in respect of the new non-financial reporting requirements imposed on certain large companies by Directive 2014/95/EU (on disclosure of non-financial and diversity information by certain large undertakings and groups): see here.

UK: audit reform - BIS consultation - public responses published

The Department for Business, Innovation and Skills has published the responses received in respect of its consultation on the implementation of the new EU statutory audit framework: see here.

UK: Exploring the intermediated shareholding model - BIS research paper

The second BIS research paper for 2016 was published yesterday. Titled 'Exploring the Intermediated Shareholding Model', the paper presents the results of important and interesting research concerning the chains of ownership and voting between individual and institutional investors and the companies in which they have invested. The research found, for example, that interest in attending and voting at the annual general meeting was low amongst individual shareholders. A copy of the paper is available here (pdf).

UK: FRC report - developments in corporate governance and stewardship

The Financial Reporting Council has published its (now) annual report on developments in corporate governance and stewardship: see here (pdf). The report provides an assessment of corporate governance and stewardship in the UK; reports on the quality of compliance with, and reporting against, the UK's governance and stewardship codes; reports findings on the quality of engagement between companies and shareholders; and indicates where the FRC would like to see changes in governance behaviour or reporting.

UK: PRA proposes new rule on buy-outs of variable remuneration by new employers

The Prudential Regulation Authority published a consultation paper today in which it set out proposals for a new rule, to be included in the Remuneration Part of the PRA Rulebook, covering the practice whereby firms recruiting new employees "buy-out" deferred bonus awards that were cancelled by the employees' previous employer. The new rule will apply (subject to certain proportionality exceptions) to all material risk takers at PRA-regulated banks, building societies and designated investment firms. It is based on a model requiring a contract between the employee and new employer, providing for the possibiltiy of malus and clawback to be applied to bought-out awards, based on a determination by the old employer.

A copy of the consultation paper is available here (pdf).

Nigeria: an update on the proposed National Code of Corporate Governance

In the spring last year the Financial Reporting Council published for comment a draft National Code of Corporate Governance: see here. The Code was divided into three parts: private sector, public sector and not for profit. A couple of weeks ago, the FRC published a revised draft of this Code, inviting comments by the end of January: see here.

UK: England and Wales: the principle in Ex Parte James

A few days ago judgment was given by Mr Justice Hildyard in TOC Investments Corporation v Beppler & Jacobson Ltd [2016] EWHC 20 (Ch). The decision is interesting for several reasons, one of which is the endorsement provided for the expansive view taken by Mr Justice David Richards (as he then was), in Lomas v Burlington Loan Management Ltd [2015] EWHC 2270 (Ch), of what is known as the principle in Ex parte James. Mr Justice Richards observed (at para. [174]):

The principle in Ex parte James has been described as anomalous but it is a well-established principle providing a means by which the court can control the conduct of its officers. Administrators, liquidators in a compulsory winding-up and trustees in bankruptcy are all officers of the court and subject to this jurisdiction. The case to which the principle owes its name, like a number of cases immediately following it, concerned the retention by a liquidator or trustee in bankruptcy of money paid under a mistake of law. At that time, money paid under a mistake of law was not recoverable, but the court directed that its officer should not stand on his strict legal rights but should return the funds, notwithstanding that the effect was to deprive the creditors of funds which would otherwise be available for distribution among them. The rationale for the principle was that, although irrecoverable at law, the officer of the court could not in all conscience retain the money, given the circumstances in which it had been paid. It would amount to an unjust enrichment of the estate. Although the principle was first developed and exercised in these circumstances, subsequent cases applied it in other circumstances and it cannot now be said to be confined to particular categories of case".

UK: Supreme Court to hear appeal this week in collective investment scheme case

Later this week, on Wednesday, the Supreme Court will to hear argument in Asset Land Investment Plc v The Financial Conduct Authority (on appeal from [2014] EWCA Civ 435), in which the principal question will be the meaning of collective investment scheme within section 235 of the Financial Services and Markets Act 2000.

Europe: Commission consults on sustainability and investment decisions

The European Commission has begun a consultation seeking information on how institutional investors, asset managers and other service providers in the investment chain, factor in sustainability information and performance of companies or assets into investment decisions: see here.

Jersey: companies regarded as resident in Jersey

A copy of the Finance (2016 Budget) (Jersey) Law 201- has been published on the Jersey Law website, following its adoption by the States: see here. An amendment is being made to Article 123 ("Bodies corporate") of the Income Tax (Jersey) Law 1961 in order to change the test used to determine if a company is resident in Jersey. Under the current law, a company incorporated under the Loi (1861) sur les Sociétés à Responsabilité Limitée or the Companies (Jersey) Law 1991, will be resident in Jersey for tax purposes unless (a) its business is centrally managed and controlled outside Jersey in a country or territory where the highest rate at which any company may be charged to tax on any part of its income is 20% or higher; and (b) the company is resident for tax purposes in that country or territory. The amendment will replace 20% with 10%, and is clearly driven by the downward trend in corporation rates, including in the United Kingdom where it was announced in the Summer Budget 2015 that rates will fall to 19% in 2017 and 18% in 2020.

IOSCO report and statement on the regulation of crowdfunding

The International Organization of Securities Commissions has published the results of its survey of the regulation of crowdfunding (here, pdf) and a statement (here, pdf). In the statement the IOSCO provides a brief summary of the results of its survey and explains that it is not proposing a common international approach to the oversight or supervision of crowdfunding. The IOSCO does, however, highlight for the benefit of regulators the risks relating to crowdfunding.

Cayman Islands: Limited Liability Companies Bill 2015 published

A copy of the Limited Liability Companies Bill 2015 has been published in the Cayman Islands Gazette: see here (pdf). The Bill contains the framework for the introduction of a new corporate form - the LLC, or Limited Liability Company - in the Cayman Islands.

India: a new legal framework for insolvency - Bill introduced in the Lok Sabha

The Insolvency and Bankruptcy Code, 2015, was introduced in the Lok Sabha on 21 December: see here. A copy of the Bill as introduced is available here (pdf); it is accompanied by a list of corrigenda (here, pdf). The Bill was produced by the Bankruptcy Law Reforms Committee and further information about its purpose and content is available in the Committee's final report, published last November: see here (pdf).