UK: England and Wales: parent company liability for subsidiary company operations

Judgment was given last week by Mr Justice Coulson in Lungowe v Vedanta Resources plc [2016] EWHC 975 (TCC). Although not a full hearing, the decision is noteworthy because of the (albeit brief) discussion it contains of the circumstances in which a parent company may be liable in tort for the operations of subsidiary companies.

UK: non-compete clauses - a call for evidence

The Department for Business, Innovation and Skills (BIS) has published a consultation paper seeking views on the operation of non-compete clauses: see here (pdf). In particular, BIS is interested to know whether such clauses unfairly hinder workers from moving freely between employers or from starting their own business.

Bhutan: company law reform - joint sitting to consider Companies Bill

The seventh session of the second Parliament of Bhutan began earlier this week: see here. A Bill to introduce a new company law framework - the Companies Bill 2015 - was introduced last year and now looks close to completing its legislative journey: it has been scheduled for debate at a joint sitting next Monday: see here (pdf).

UK: Modern Slavery (Transparency in Supply Chains) Bill

The Modern Slavery (Transparency in Supply Chains) Bill was introduced in the House of Lords earlier this week and received its first reading: see here. A copy of the Bill, as introduced by Baroness Hamwee (on behalf of Baroness Young of Hornsey) as a Private Members' Bill, is available here and here (pdf). The Bill will, amongst other things, amend section 54 of the Modern Slavery Act 2015 in order to require publication of the 'slavery and human trafficking statement' in companies' annual reports.

UK: a review of the corporate insolvency framework

A joint consultation paper - from the Insolvency Service and Department for Business, Innovation and Skills - was published today and seeks views on reforms to the corporate insolvency framework: see here (pdf). Four main proposals are outlined, including the introduction of a new moratorium as well as reforms designed to make it easier for companies to continue trading during restructuring. Further information, including a response form and impact assessment, is available here.

Kenya: guidelines on the Companies Act 2015

The Companies Act 2015, which contains Kenya's new company law framework, became law last year. A copy of the Act was published in a special issue of the Kenya Gazette Supplement: see here (pdf). More recently, guidelines on the operation of the new Act, including information about secondary legislation and those provisions that have been enacted, have been published by the Office of the Attorney General and Department of Justice: see here.

UK: Tomorrow's Company Futures Project - rethinking governance structures

Tomorrow's Company has published a report, as part of its Futures Project, titled "UK Business: what's wrong? what's next": see here (pdf). As well as calling for more diversity in business forms, the report also calls for a rethinking of established governance structures. Are controlling shareholders a problem? Is too much expected of non-executive directors? Does the UK Corporate Governance Code place too much emphasis on risk mitigation?

UK: FRC feedback statement on board succession planning discussion paper

The Financial Reporting Council has published a feedback statement for its recent discussion paper on board succession planning: see here (pdf). Providing further guidance for nomination committees, as part of the revision of the Guidance on Board Effectiveness, is being considered by the FRC within its Culture Project. The FRC also plans to review and analyse nomination committee disclosures and to comment on these in the next edition of its Developments in Corporate Governance and Stewardship report.

UK: PRA publications - audit committee requirements (policy statement) and internal governance (supervisory statement)

The Prudential Regulation Authority has published a policy statement (reference 16/16) on the implementation of audit committee requirements under the Statutory Audit Directive: see here (pdf). The publication of this policy statement has resulted in several changes being made to the PRA's supervisory statement on internal governance (reference 21/15). The revised statement is available here (pdf).

FSB task force publishes phase 1 report on climate-related disclosure by companies

At the end of last year the Financial Stability Board set-up a task force on climate-related financial disclosures: see here. The group was given the task of developing recommendations for climate-related disclosure by companies. The group's phase 1 report was published earlier this month: see here (pdf). The report sets out the principles needed for an effective disclosure regime (including, for example, that disclosures are specific, complete and consistent over time) and identifies the objectives for the second phase of the group's work. The objectives include producing recommendations relating to the near, medium and long-term physical and non-physical impacts faced by the financial sector and non-financial companies, in order to further understanding and evaluation of relevant financial risks and opportunities.

USA: Comments sought on proposed rule to prohibit incentive-based pay that encourages inappropriate risk taking in financial institutions

Six federal agencies, including the Securities and Exchange Commission, have published for comment a proposed rule to prohibit incentive based pay that encourages inappropriate risk taking in financial institutions: see here (pdf). The proposed rule will implement section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. For an update on the SEC's progress in implementing the Act's rule-making requirements, see here.

India: IRDAI publishes updated governance guidelines for insurers

The Insurance Regulatory and Development Authority of India has published an updated edition of its Corporate Governance Guidelines for Insurers: see here. The new Guidelines take effect from the 2016/17 financial year.

UK: England and Wales: a representation that shares are fully paid

Judgment was given yesterday by HHJ David Cooke in Blomqvist v Zavarco Plc & Ors [2016] EWHC 1143 (Ch). The decision is interesting and noteworthy because of what is said about the representation made by a company when its shares are traded on an exchange: that they are fully-paid. To quote the trial judge (at paras. [86], [89] and [90]):

In modern markets, share transactions are likely to be uncertificated. The reality of the market is that [it] is assumed by participants that all listed shares are fully paid. Some will know that it is a condition of listing that shares must be fully paid. Others will give no thought to the point, because the concept of the unpaid share is wholly alien to the system of public share markets.

It is in my view wholly necessary that market participants should be able to assume that shares are fully paid unless specifically informed otherwise. Given the way in which market transactions are now conducted, it is in my judgment unsatisfactory to provide this assurance by a legal mechanism (estoppel by representation) that derives from the conduct of individual transactions between identified persons ... In the absence of statutory protection however, the available legal mechanism must be interpreted and adapted to modern conditions.

In my judgment, a company that applies to have its shares or other securities listed on an exchange, or traded through a system such as Crest, which in either case requires that the securities be fully paid, is to be taken as thereby representing to potential acquirers of its shares that they are fully paid. That representation should be taken as relied upon, unless the company proves the contrary, by any purchaser or transferee who buys or acquires the securities with knowledge that the shares are so listed or traded. An acquisition through the market would clearly demonstrate such knowledge. But an off-market purchaser is very likely also to have the requisite knowledge".

UK: CMA retail banking market investigation - provisional decision on remedies

The Competition and Markets Authority has today published its provisional decision on remedies, as part of its retail banking market investigation: see here (pdf, 3.72MB, 405 pages). A summary is available here. The CMA states that competitive pressures are weak. Breaking-up the largest banks is not proposed; the CMA relies, instead, on other measures including improved disclosure and the better use of technology to improve the switching process. The CMA also proposes requiring banks to set a monthly maximum charge for unarranged overdrafts.

UK: The purposeful company task force publishes interim report and seeks views on wide-ranging options

The Purposeful Company Task force - formed within the Big Innovation Centre, under the direction of the Purposeful Company Steering Group - has published its interim report: see here (pdf). The purpose of the report, to quote directly from it, is to argue for better conditions to allow companies to increase long-term value creation.

The report does not contain recommendations, but instead invites views on 21 policy options grouped under the following headings: business implementation and remuneration; corporate governance and commitment devices; blockholding, monitoring and engagement; strengthening the capabilities of asset owners; and reversing the decline of British equity ownership

A summary of the options (with information about making a submission) is available here (pdf).

UK: HM Treasury consultation - the tax deductibility of corporate interest expenses

Earlier this year, as part of the Budget, the Government announced that new rules limiting the tax relief available to large multinationals in respect of interest expenses would be introduced next April. A consultation on the detailed policy design and rules has now begun with the publication by HM Treasury of a consultation paper: see here (pdf).

UK: Public Accounts Committee report on financial services mis-selling

The House of Commons Public Accounts Committee published a report today titled "Financial services: mis-selling: regulation and redress": see here or here (pdf). Whilst noting that the Financial Conduct Authority has taken action to address some of the causes of financial services mis-selling, the report states that substantial mis-selling risks remain. It calls upon the FCA and Treasury to do more to understand whether, and to what extent, mis-selling continues.

UK: Government outlines plans for a governance code for sport

Yesterday the Government provided further information about the new governance code for sport: see here. Adherence to the code will be necessary for all UK sports bodies and organisations receiving public funding. The code will draw upon the themes contained in the Charter for Sports Governance.

UK: fraud and money laundering - new corporate 'failure to prevent' offence proposed

The Prime Minister, writing in the Guardian newspaper on the day of the Anti-corruption summit in London, has announced that a consultation will soon begin on a proposal to introduce a new corporate offence: the failure to prevent fraud or money laundering.  This will join existing (or proposed) 'failure to prevent' offences: the offence of failing to prevent bribery by a commercial organisation was introduced by the Bribery Act 2010 and the Government has recently consulted on plans to introduce the offence of the failure to prevent the facilitation of tax evasion.

Update (13 May 2016) - The Ministry of Justice has made an announcement regarding the consultation: see here.

UK: The Companies (Bodies Concerned with Auditing Standards etc.) (Exemption from Liability) Regulations 2016

The Companies (Bodies Concerned with Auditing Standards etc.) (Exemption from Liability) Regulations 2016 were made and laid before Parliament on 10 May and come into force on 1 June. The purpose of the Regulations, to quote directly from the explanatory note that accompanies them, is to "grant, to the Financial Reporting Council Limited and the Conduct Committee of that body, exemption from liability in damages in respect of certain activities that they carry out (or purport to carry out) for the purposes of, or in connection with, setting and monitoring the issue of, and compliance with, auditing standards for companies". More detailed information is available in the accompanying explanatory memorandum: see here (pdf).

Cayman Islands: the abolition of bearer shares

A copy of the Companies (Amendment) Bill, 2016, has been published in the Cayman Islands Gazette: see here (pdf). The purpose of the Bill is to amend the Companies Law (2013 Revision) in order to abolish the issue and use of bearer shares in the Islands (a British overseas territory). Bearer shares were prohibited in the UK last year: see here.

Australia: proposals paper published - improving bankruptcy and insolvency laws

The Treasury, as part of the National Innovation and Science Agenda, has published a proposals paper containing measures designed to improve Australia's bankruptcy and insolvency laws: see here (pdf). Views are sought on several proposals including the introduction a safe harbour for directors.

UK: Pre-emption Group publishes 2015-16 monitoring report

The Pre-Emption Group has published its 2015-16 Monitoring Report in respect of companies' application of the Group's Statement of Principles on the Disapplication of Pre-emption Rights: see here (pdf). The Principles apply to Premium Listed companies, whether incorporated in the UK or not. Companies generally adhered to the Principles but the Group has decided to assist companies by publishing a template, containing two resolutions, representing its view of good practice in disapplication requests: see here (pdf).

India: is there a need for a stewardship code?

An interesting item to note from the published summary of a meeting last month of the Sub-Committee of the Financial Stability and Development Council, chaired by the Governor of the Reserve Bank of India: there was discussion of whether there was a need to introduce a stewardship code.

Greece: HCGC consultation - good governance for non-listed companies

The Hellenic Corporate Governance Council has published for public comment a document setting out the 'special practices of good governance' for non-listed companies: see here (pdf). Further information is available in the accompanying press release (here, pdf) and responses should be submitted by 1 June.

UK: Royal Assent for the Bank of England and Financial Services Bill

The Bank of England and Financial Services Bill received Royal Assent yesterday and has become law: see here. A copy of the new Act, which (amongst other things) make governance changes to the Bank of England, has not yet been published but will soon be available here. Further information about the Act is available here, here and here.

Update - a copy of the Act is now available: see here or here (pdf).

Europe: Commission report on crowdfunding in the European Union

The European Commission has published, as part of its Capital Markets Union Action Plan, a report on crowdfunding in the European Union: see here (pdf). The report finds that Member States have started to develop national frameworks to support the development of crowdfunding and that these frameworks are broadly consistent in terms of objectives and outcomes. Noting that crowdfunding remains largely local, and subject to rapid change, the report concludes that there is no strong case for an EU level crowdfunding framework at the moment.

South Africa: prescription and the nature of derivative claims

The Supreme Court of Appeal gave judgment at the end of April in Off-Beat Holiday Club v Sanbonani Holiday Spa (20231/2014) [2016] ZASCA 62: see here, here (rtf) or here (pdf). The case is important (and interesting) because of its discussion of the nature of derivative claims under section 266 ("Initiation of proceedings on behalf of company by a member") of the Companies Act 61 of 1973 (now section 165 of the Companies Act 71 of 2008) and, in particular, whether such claims are subject to the Prescription Act 68 of 1969.

UK: Scotland: Higher Education Governance (Scotland) Act 2016

A copy of the Higher Education Governance (Scotland) Act 2016, which was passed by the Scottish Parliament in March and received Royal Assent in April, has been published: see here or here (pdf). The Act contains, amongst other things, provisions about the composition of, and appointments to, the governing bodies of higher education institutions in Scotland. The Scottish Government has prepared explanatory notes to accompany the Act: see here or here (pdf).

UK: Scotland: Sheriff Court considers scope of relief for unfair prejudice

A decision of Sheriff S G Collins QC from last year has recently been reported on the Scottish Courts and Tribunals Service website: see [2016] SC FOR 29. The case concerned a shareholder's petition for relief in respect of alleged unfairly prejudicial conduct under section 994 of the Companies Act 2006. With reference to the English authorities Allmark v Burham [2006] BCLC 437 and Atlasview Ltd v Brightview Ltd [2004] BCLC 191, the Sheriff held that an order for payment was one of the remedies available under section 996, noting that the section provided the "widest possible discretion to grant a remedy where unfair prejudice has been established" (para. [23]).

Ireland: publication of the Duffy-Cahill report

The Duffy-Cahill Report - or, to use its full title, the Expert Examination and Review of Laws on the Protection of Employee Interests when Assets are Separated from the Operating Entity - was published last week by the Department for Jobs, Enterprise and Innovation: see here (pdf). The report was commissioned following the insolvency of a well-known employer - the Clerys Department Store on O'Connell Street in Dublin - and the much publicised job losses.

Prior to the insolvency, the business had been restructured such that ownership of an important property asset and the business operations were separated into two different entities. The monies owing to the employees were not paid, an apparent result - the Report notes - of the transfer of the asset. The transaction that produced this result may have been lawful, but the Report's authors state that "it is difficult to avoid the conclusion that it would be preferable if it were not" (para. 1.10).  A number of employment law reforms are proposed and suggestions are also made as to how certain provisions in the Companies Act 2014 might be more widely used in the protection of employees' interests.

Netherlands: an update on the governance code for companies adopting a single tier board structure

The Dutch Corporate Governance Code Monitoring Committee announced earlier this year that it would produce a version of the Dutch Corporate Governance Code - a new edition of which is in preparation - for companies adopting a single tier board structure: see here. The option of having a single board was introduced several years ago. The Committee's intention was that the single board version would be the subject of consultation and published as an appendix alongside the main Code, which is written from the perspective of companies with a two tier board structure. The Committee has changed its plan: in an announcement published last week - available here - it says that it will delay consultation on the single tier version of the Code until it has reviewed the comments received in respect of the new edition of the main Code.