A director’s belief that they have resigned has no correspondence or connection to the underlying purposes of subsection 121(2) ... and its emphasis on an objectively verifiable communication of a resignation to the corporation. To allow a subjective intention to suddenly spring to life, when, in the affairs of the corporation, or in the interests of the director, it is convenient to do so, would significantly undermine corporate governance. A reasonable belief that one has resigned must hew much closer to the requirements for an actual effective resignation. ... The requirement that the resignations be received by the corporation cannot be ignored ... The test applied by the judge in this case also set far too low a standard. He applied a test whereby a director who requests (orally) the executives of the corporation to arrange for counsel to prepare and draft a resignation can, by virtue of that act alone, reasonably believe that they have resigned. On this standard, a director need not ever sign a document or receive an indication to the effect that his or her resignation was delivered to the company. Directors must carry out their duties on an active basis. A director cannot raise a due diligence defence by relying on their own indifferent or casual attitude to their responsibilities. A reasonable director would insist on being satisfied that their intention to resign had been effected".
Friday, 30 September 2016
Earlier this month, in Canada v Chriss, 2016 FCA 236, the Federal Court of Appeal overturned the trial judge's finding that two individuals had resigned as directors. The directors' intention to resign was not enough and there had been no "written resignation received by the corporation" within the meaning of section 121(2) of the Business Corporations Act, RSO 1990, c B.16. Rennie JA observed (at paras. 19, 23 and 24):
The Companies Bill 2015 (Rang Undang-Undang Syarikat 2015) was passed by the Senate (Dewan Negara) earlier this year. The King's Assent (Yang di-Pertuan Agong) came at the end of August and the new Act - known as the Companies Act 2016, and containing Malaysia's new company law framework - was Gazetted earlier this month: see here (pdf, 577 pages).
Thursday, 29 September 2016
At its most recent meeting, SEBI - the Securities and Exchange Board of India - agreed that a consultation should be undertaken concerning remuneration in listed companies: see here. More specifically, the consultation will seeks view on possible amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, including adding new provisions designed to enhance the role of shareholders.
Wednesday, 28 September 2016
UK: Senior Managers and Certification Regime - PRA and FCA updates, consultations and discussion papers
The Financial Conduct Authority and Prudential Regulation Authority have this week published various consultation and discussion papers, as well as further updates, concerning the Senior Managers Regime and Certification Regime: see, respectively, here and here. The PRA has also published a policy statement concerning buy-outs of variable remuneration: see here.
Tuesday, 27 September 2016
His Honour Deemster Doyle (First Deemster and Clerk of the Rolls), sitting in the High Court of Justice, gave judgment at the end earlier this month in Assessor of Income Tax v Holmcroft Properties Ltd. (Case 24 of 2016) The decision is an important one because of the guidance that has been provided by Deemster Doyle concerning the framework for the mutual exchange of tax information between the Isle of Man and the United Kingdom. It is also of interest because of what is said about the importance of sharing of tax information. To quote Deemster Doyle (para. 127):
"To survive in a meaningful and civilised way we must be a responsible member of the international community. We must facilitate bringing wrongdoers to justice. We must encourage compliance with the rule of law both on and off the Island. The Island does not and should not shelter those who do not comply with the law and pay their taxes. The Island does not and should not facilitate wrongdoers attempting to evade tax in their home jurisdictions. We should assist others in ensuring that legal obligations, including the payment of tax, are complied with worldwide".
Monday, 26 September 2016
Mr Ong Chong Tee, Deputy Managing Director of the Monetary Authority of Singapore, delivered a speech today on corporate governance: see here. It contains much of interest including news of work being done to develop a set of best practice guidance on stewardship by institutional investors. Mr Tee also said that the time may well have come for a review of the 2012 Corporate Governance Code.
Friday, 23 September 2016
The European Commission has published a Communication on the Capital Markets Union titled Accelerating Reform: see here (pdf). A press release, and FAQs, were published alongside the Communication. The Communication notes, amongst other things, that a legislative proposal on business restructuring and insolvency will be published very soon (following a consultation earlier this year).
Thursday, 22 September 2016
Earlier this week the Securities and Exchange Commission published details of the first enforcement action it had taken in respect of auditor independence failings resulting from close personal relationships: see here. To quote directly from the SEC's press release, "Ernst & Young has agreed to pay $9.3 million to settle charges that two of the firm’s audit partners got too close to their clients on a personal level and violated rules that ensure firms maintain their objectivity and impartiality during audits".
Wednesday, 21 September 2016
UK: HM Treasury consultation - transposing the Fourth Money Laundering Directive and the Fund Transfer Regulation
HM Treasury has published a consultation paper seeking views and evidence to inform the transposition of the Fourth Money Laundering Directive and the Fund Transfer Regulation: see here (pdf). The consultation does not consider the proposed amendments to the Directive announced in the summer (about which, see here, pdf). Chapter 10 of the consultation paper considers beneficial ownership and, in particular, what changes may be required in respect of the PSC register. There is also discussion of beneficial ownership as it relates to trusts and the record keeping and reporting requirements that should be required.
Tuesday, 20 September 2016
HM Treasury has published a consultation paper in which it sets out its plan to amend the definition of financial advice contained within Article 53 ("Advising on Investments") of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001: see here. It is proposed, in order to achieve greater clarity and certainty, to bring the Article 53 definition in line with the definition of advice within the Markets in Financial Instruments Directive (MiFID).
Friday, 16 September 2016
The House of Commons Business, Innovation and Skills Committee has today launched a wide ranging corporate governance inquiry. The terms of reference, available here, identify three core areas for attention (accompanied by more precise questions and background information): directors' duties; executive pay; and the composition of boards. The Committee is accepting written submissions and these should be submitted by 26 October using the web based submission form available here.
Thursday, 15 September 2016
The Central Bank has stated that the risks associated with information technology and cyber security are a key concern and has called on firms to increase their resilience to IT failures and cyber security incidents: see here. Guidance for firms has been published - see here (pdf) - and this makes clear that IT risk should be considered as part of the board's responsibility for setting and overseeing strategy and risk appetite. Moreover, the Central Bank expects, to quote directly from its guidance document, that firms "... develop and document a Board approved comprehensive IT strategy that is aligned with the overall business strategy. IT strategy objectives should include maintaining the capacity to effectively anticipate, detect and recover from cybersecurity attacks on the firm so as to ensure overall IT resilience".
Wednesday, 14 September 2016
The High Court has, with reference to several English authorities, recently considered whether a shareholder had standing to bring an oppression claim under section 216 of the Companies Act (Cap 50, 2006 Rev Ed) where the shareholder had, since starting the claim, ceased to be a member of the company. The trial judge, in Lim Seng Wah v Han Meng Siew  SGHC 177, held that the shareholder did not have standing but did note one important exception:
I agree with the statement that 'where a registered shareholder has freely disposed of his shares … he will no longer have locus standi once he has ceased to be registered as a member'. As a matter of principle, this must be correct. After all, it is trite that the matters complained of under s 216 must affect the applicant qua shareholder and that the court’s powers under s 216(2) are to be exercised 'with a view to bringing to an end or remedying the matters complained of'. With one exception, it is difficult to see how a plaintiff would still be entitled to a remedy under s 216 if he has ceased to be a shareholder. In such circumstances, it seems to me quite pointless to allow the plaintiff to carry on with the action. The one exception is where the events which caused the plaintiff to cease to be a shareholder are also the subject matter of the complaint under s 216."
Tuesday, 13 September 2016
The Attorney General, the Rt Hon Jeremy Wright QC MP, delivered a speech earlier this month in which he spoke about the existing and proposed 'failure to prevent' offences: see here. Here is an extract from the speech, in which the Attorney General makes the link between improved corporate governance and the introduction of new 'failure to prevent' offences:
The Government has just consulted on draft legislation and guidance for the new criminal offence of corporate failure to prevent the criminal facilitation of tax evasion ... In addition, the Government will soon consult on plans to extend the scope of the criminal offence of a corporation 'failing to prevent' offending beyond bribery to other economic crimes, such as money laundering, false accounting and fraud. The current 'failure to prevent' bribery legislation has put companies of all sizes on a level playing field where in the past, the reliance on the identification doctrine may have made it easier to prosecute smaller companies, than to prosecute larger, more complex ones. The identification doctrine that currently exists for other economic crime has made it difficult to attribute criminal liability to large corporations where one cannot demonstrate the 'controlling mind' of the individuals involved. This has meant that it has not always been possible to bring corporate bodies to justice for the criminal acts of those who act on their behalf and for their benefit. The new bribery offence has also encouraged better governance within large corporations and this is something that we would seek to encourage further through additional 'failure to prevent' offences. Our current system of limited corporate liability incentivises a company’s board to distance itself from the company’s operations. In this way, it operates in precisely the opposite way to the Bribery Act 2010, one of whose underlying policy rationales was to secure a change in corporate culture by ensuring boards set an appropriate tone from the top. The threat of conviction is greater under ‘failure to prevent’ and as a result, companies might be more likely to not just enter into deferred prosecution agreements but also, crucially, to take the actions necessary to discourage such offending within the organisation in the first place ... An extension of the failure to prevent offence can enhance the UK’s reputation in the fight against fraud and help to promote improved corporate governance".
Monday, 12 September 2016
The Law Commission today published proposals for the reform of the law governing bills of sale. The Commission is proposing the repeal of the Bills of Sale Act 1878 and the Bills of Sale Act (1878) Amendment Act 1882, and the introduction of new legislation providing more protection for borrowers and fewer burdens on lenders. The Commission's report and recommendations, which apply to England and Wales but not Scotland, are available here (pdf). The Commission found that logbook loans account for the great majority of bills of sale, with most of these loans secured against a vehicle already owned by the borrower.
Friday, 9 September 2016
The Scottish Government has published its 2016 programme for Government: see here. Among the proposed Bills is one, the Gender Balance on Public Boards Bill, which (to quote the Government directly) will require positive action to be taken to redress the gender imbalances on public sector boards, focusing in particular on non-executive appointments: see here.
Thursday, 8 September 2016
A revised edition of the Code of Practice for the Governance of State Bodies was published last month by the Department of Public Expenditure and Reform: see here. Updated audit and risk committee guidance has also been published: see here.
Wednesday, 7 September 2016
The Joint Committee of the European Supervisory Authorities (European Banking Authority, European Securities and Markets Authority and European Insurance and Occupational Pensions Authority) today published its second 2016 risk assessment report for the EU financial system: see here (pdf). An overview is available here. As well as noting the legal and political uncertainty caused by the UK referendum on EU membership, the report also notes the growing interconnectedness between the financial sector outside of the banking, insurance and pension fund industries with the wider financial system.
Tuesday, 6 September 2016
The Finance Bill 2015-16 to 2016-17 completed Report stage in the House of Commons yesterday: see here. Among the amendments accepted by the Government, and therefore incorporated into the Bill, was one tabled by the Rt Hon. Caroline Flint MP. This amendment, number 145, provides the Treasury with power, through Regulations, to require the new group tax strategy report - a public document, which certain large businesses will be required to publish - to include a country by country report (as defined by the Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016, which do not currently provide for public disclosure).
Monday, 5 September 2016
In a press conference this morning, at the end of the G20 summit in Hangzhou, the Prime Minister, the Rt Hon Theresa May MP, said that the Government would publish a consultation this autumn on proposals to tackle 'corporate irresponsibility': see here. This follows the speech that Mrs May delivered, shortly before becoming prime minister, in which she highlighted weaknesses in the governance framework and proposed various reforms: see here. Update: a copy of the Prime Minister's press conference speech has been published: see here. With regard to the consultation paper, here is what the Prime Minister said:
.... to restore greater fairness, we will bring forward a consultation this autumn on measures to tackle corporate irresponsibility – cracking down on excessive corporate pay and poor corporate governance, and giving employees and customers representation on company boards".
Friday, 2 September 2016
The Securities and Exchange Commission has begun a consultation on the introduction of two new codes: a Corporate Governance Code, to replace the Principles of Good Governance for Listed Companies 2012, and a new Code for Institutional Investors. Further information is available here. A public hearing on the new Governance Code was held last month.
Thursday, 1 September 2016
The Law Commission, as part of its technical issues in charity law project, today published a supplementary consultation paper seeking views on two areas - cy-près and trust corporation status - that have arisen from its initial consultation: see here (pdf). In particular, the Commission seeks views on proposals to (1) make consistent across all charity types the powers for changing a charity's purpose, and (2) simplify the process for seeking trust corporation status.