UK: Government publishes its anti-corruption strategy for 2017-2022

The Government has published its anti-corruption strategy for 2017-2022: see here (pdf). The strategy identifies priorities and proposed actions. It states, amongst other things, that in the current session of Parliament a draft Bill will be published for establishing a public register of beneficial ownership of overseas legal entities where they own or purchase property in the UK or participate in central government contracts (the creation of such a register was the subject of a consultation exercise that concluded earlier this year).

UK: FRC publishes revised ISA (UK) 250 Section A - Consideration of laws and regulations in an audit

The Financial Reporting Council has published a revised edition of one of its auditing standards: ISA (UK) 250 Section A - Consideration of laws and regulations in an audit of financial statements. The revised standard - effective for audits of financial statements for periods commencing on or after 15 December 2017 - is available here (pdf). It includes a new appendix providing updated guidance on the auditor's responsibilities in respect of money laundering, terrorist financing and proceeds of crime legislation.

Burma: English translation of the new Companies Law published

A copy of the new company law framework - the Companies Law - has now been published in English by the Directorate of Investment and Company Administration: see here (pdf).

Finalising the Basel III reforms

The Basel Committee oversight body, the Group of Central Bank Governors and Heads of Supervision (GHOS), has endorsed the Committee's final Basel III reforms: see here. A high level summary of the Basel III reforms is available here (pdf). A video recording of the press conference at which GHOS approval was announced is available below and the accompanying press release is available here:

Burma: new company law framework - Companies Bill becomes law

The Myanmar Times reports that the Companies Bill has become law following its receiving the signature of the President: see here. A copy of the Bill, as approved by the Pyidaungsu Hluttaw was published in English at the end of November by the Directorate of Investment and Company Administration: see here (pdf). It seems very likely that this version of the Bill has become the new Companies Act.

Update (8 December 2017) - a copy of the new Companies Law has been published: see here (pdf).

UK: Scotland: 2017 edition of the Scottish Code of Good Higher Education Governance

Rather belatedly, I note publication of the 2017 edition of the Scottish Code of Good Higher Education Governance: see here (pdf). Background information is available here.

It is interesting to note - given the publicity around vice chancellor pay in England and the remuneration setting process - that the Scottish Code requires the remuneration committee "...to seek the views of representatives of students and staff of the Institution, including representatives of recognised trade unions, in relation to the remuneration package of the Principal and the senior executive team". This goes beyond what is (currently) expected by the UK Higher Education Governance Code (here, pdf).

Spain: CNMV annual reports on corporate governance and directors' remuneration

The Comisión Nacional del Mercado de Valores (CNMV) has published the latest editions of its annual reports on corporate governance and directors' remuneration: see, respectively, here (pdf) and here (pdf). A summary, in English, is available here (pdf). Of particular interest, in respect of companies' compliance with the Good Governance Code (pdf), are those recommendations not widely followed: these include the recommendations on (a) live broadcasting of the shareholder meetings and (b) the formation of separate appointments and remuneration committees for the largest companies.

UK: FRC consultation on revised UK Corporate Governance Code

The Financial Reporting Council launched its consultation today on proposed changes to the UK Corporate Governance Code. A copy of the new Code is available here (pdf) and the consultation paper is available here (pdf). The proposed changes are designed to make the Code "shorter and sharper" and reflect what the FRC calls the "changing business environment". A summary of the proposed changes is available here (pdf). Accompanying the consultation paper is an updated edition of the Guidance on Board Effectiveness document, designed to support implementation of the Code's Principles: see here (pdf).

The consultation paper also seeks specific views on the UK Stewardship Code, in order to inform a review of this Code next year.

Australia: Royal Commission announced - misconduct in the banking, superannuation and financial services industry

The Government has announced the formation of a Royal Commission to examine alleged misconduct by banks and other financial services firms. Further information is available here and the draft terms of reference are available here (pdf).

France: AMF annual report on corporate governance and executive compensation

France's financial market regulator, the Autorité des Marchés Financiers (AMF), has published its 2017 report on corporate governance and executive compensation in large listed companies. A summary, in English, is available here (pdf).

OECD publishes updated edition of Guidelines on Insurer Governance

The OECD has published an updated edition of its Guidelines on Insurer Governance: see here (pdf). An overview of some of the changes made in the new edition is available here.

Canada: corporate governance reform - an update

Here is a further update on the Bill that will, when enacted, make changes to the governance framework by amending the Canada Business Corporations Act, the Canada Cooperatives Act, and the Canada Not-for-profit Corporations Act. The Bill completed second reading in the Senate yesterday and has now been referred to the Standing Senate Committee on Banking, Trade and Commerce: see here. The text of the Bill is available here and further information is available here. Among the changes proposed are those relating to the election of directors (including annual elections and votes for individual directors), the disclosure of information regarding board diversity and communications with shareholders.

Pakistan: SECP approves the Listed Companies (Code of Corporate Governance) Regulations 2017

Following a consultation earlier this year, the Securities and Exchange Commission has approved the final version of the Listed Companies (Code of Corporate Governance) Regulations 2017: see here (pdf). Further background information is available here (pdf).

Canada: CSA consultation on director independence

The Canadian Securities Administrators have published for comment a consultation paper the purpose of which is to seek views on the approach taken in determining the independence of directors, including those sitting on the audit committee. The paper, CSA Consultation Paper 52-404 Approach to Director and Audit Committee Member Independence, is available here (pdf).

UK: Review Panel report - the FRC's enforcement sanctions

The Panel established to conduct a review of the Financial Reporting Council's enforcement sanctions has published its report and recommendations: see here (pdf). Making greater use of non-financial penalties is one of the recommendations that is made and, whilst the Panel concluded that it would not be appropriate to set a tariff for financial sanctions, it suggested that a fine exceeding £10 million could be appropriate where a major firm - one of the Big 4 - was found guilty of "seriously bad incompetence" in respect of the audit of a major public company where the errors were measured in nine figures (or more).

EU: Commission consultation on institutional investor and asset manager duties regarding sustainability

The European Commission has published a consultation paper on institutional investor and asset managers' duties regarding sustainability: see here (pdf). This is part of work being undertaken by the Commission to determine whether, and how, a clarification of such duties could contribute to (a) more efficient allocation of capital and (b) sustainable and inclusive growth. Further information is available here.

UK: updated edition of the voluntary code of conduct for executive search firms

An updated edition of the voluntary code of conduct for executive search firms was published earlier this week: see here (pdf). Thirty-nine firms are code signatories and each is committed to following the Code in respect of their board and senior executive search activities: see here. The Code was created following a recommendation from the Davies Review ("Women on Boards") in 2011.  One of the Code's provisions states that search firms should, when presenting their longlists, ensure that at least 30% of the candidates are women.

New Zealand: FMA consults on updated (and refocused) Corporate Governance Handbook

The Financial Markets Authority has published for consultation an updated edition of its Corporate Governance Handbook: see here (pdf). The consultation follows the publication earlier this year by the NZX of an updated edition of its corporate governance code (here, pdf). The FMA regards the NZX Code as providing the primary guidance on governance practices for NZX listed companies; the focus of the FMA Handbook has therefore moved away from listed companies and is intended instead to provide practical guidance for directors of non-listed companies including state owned enterprises and public sector entities.

Zambia: the Companies Bill 2017

A new framework for companies in Zambia - the Companies Bill 2017 - was introduced in the National Assembly earlier this year. The Bill - a copy of which is available here (pdf) - is nearing the end of its parliamentary journey (its progress can be followed here).

Hong Kong: HKEX consults on amendments to the HK Corporate Governance Code

HKEX has published a consultation paper setting out proposed changes to the Hong Kong Corporate Governance Code: see here (pdf). The proposed changes address a variety of issues including concerns with 'over-boarding' by NEDs, board diversity and NEDs' attendance at general meetings and the factors affecting NEDs' independence.

UK: Tax strategy reporting among the top 50 FTSE100 companies

Schedule 19 of Finance Act 2016 contains the framework requiring large businesses to publish a tax strategy report. The extent to which the largest 50 companies (by market capitalisation) in the FTSE100 have published such a report (and, where they have, the nature of its content) is the subject of a report published by Fair Tax: see here (pdf). The report's headline is: "Slow to emerge, poorly executed, but some examples of excellence". According to the report, 66% of companies had failed to publish online a compliant Tax Strategy at the study's cut off date (30 June 2017).

UK: Grant Thornton's 2017 corporate governance review

Rather belatedly I note the publication of the 2017 edition of Grant Thornton's Corporate Governance Review: see here (pdf). Based on an analysis of FTSE350 company annual reports, it is noted that 66% of companies claim full compliance with the UK Corporate Governance Code. Other highlights are noted here.

Ireland: 'Measures to Enhance Ireland's Corporate, Economic and Regulatory Framework ('Ireland combatting white collar crime')

The Department for Business, Enterprise and Innovation, working with other Government Departments, has published a report titled Measures to Enhance Ireland's Corporate, Economic and Regulatory Framework (subtitled Ireland combatting 'white collar crime'): see here (pdf). The report contains wide-ranging proposals, divided into the following areas: (a) organisational and procedural reforms; (b) corporate governance; (c) enhancing the powers of the authorities to identify and combat economic and regulatory offences in the financial sector; and (d) countering Money Laundering and Corruption. Under (a), the Office of the Director of Corporate Enforcement will become an independent agency responsible for company law enforcement (the ODCE has welcomed this proposal: see here, pdf).

EU: TFEU articles 49 and 54 and the transfer of a company's registered office

The Court of Justice of the European Union gave judgment at the end of last month in Polbud v Wykonawstwo sp. z o.o.  (Case C‑106/16). A summary of the decision is available here (pdf). To quote directly from the judgment:

Articles 49 and 54 [of the Treaty on the Functioning of the European Union, on the right of establishment] must be interpreted as precluding legislation of a Member State which provides that the transfer of the registered office of a company incorporated under the law of one Member State to the territory of another Member State, for the purposes of its conversion into a company incorporated under the law of the latter Member State, in accordance with the conditions imposed by the legislation of that Member State, is subject to the liquidation of the first company".

South Africa: unfair prejudice claims and beneficial shareholders

The Supreme Court of Appeal gave judgment last week in Smyth v Investec Bank Ltd (674/2016) [2017] ZASCA 147. A summary is available here (pdf). At issue was whether those owning shares beneficially through a nominee were able to seek relief under section 252 of the Companies Act 61 of 1973 (the unfair prejudice remedy).

Referring to section 103 (who are members of a company) of the Act, and authorities from other jurisdictions, the court unanimously held that the beneficial shareholders were unable to bring a claim under section 252: relief was available only to those whose names appeared in the register of members. The court also rejected the argument that the beneficial shareholders could, on the grounds that they had a direct and substantial interest in the section 252 proceedings, be joined as co-applicants.  Petse JA, delivering the judgment of the court, stated (para. [55]):

It was a simple matter for the appellants, if they wished to avail themselves of the remedy provided for in s 252 of the Act in their own names, to terminate the nomination of their respective nominees so as to procure the entry of their names in the register of ... members. Instead, they obdurately elected ‘to saddle what has proven to be an unruly horse’ by seeking to invoke the s 252 remedy in their own names as beneficial owners. They were ill-advised in doing so. As I see it, for as long as the nominees’ names remained in the register of members, the beneficial owners lacked a legal interest in the subject-matter of the litigation". 

UK: Judicial Committee of the Privy Council on piercing the corporate veil and 'one man' companies

Yesterday the Judicial Committee of the Privy Council delivered its judgment in Persad v Singh (Trinidad and Tobago) [2017] UKPC 32. At first instance, and upheld by the Court of Appeal in Trinidad and Tobago, the trial judge found that a director and shareholder of a company (CHTL) was liable for a lease granted to the company.

The Board took a very different view, with Lord Neuberger stating that "the facts of this case [do] not begin to justify piercing the veil of incorporation" (para. [16]) and proceeding to observe (para. [20]):

The fact that CHTL was a “one man company” is also irrelevant: see Salomon v A Salomon and Co Ltd [1897] AC 22, which famously established the difference between a company and its shareholders. That case also exposes the fallacy of the notion that the court can pierce the veil where the purpose of an individual interposing a company into a transaction was to enable the individual who owned or controlled the company to avoid personal liability. One of the reasons that an individual, either on their own or together with others, will take advantage of limited liability is to avoid personal liability if things go wrong, as Lord Herschell said [in Salomon] at pp 43 to 44. If such a factor justified piercing the veil of incorporation, it would make something of a mockery of limited liability both in principle and in practice."

An end to the hiatus...

I apologise for the hiatus. I have been unwell and, having caught up (to the extent possible) with work related matters, can give the blog the attention it deserves. This term is proving very busy, not least because I have designed and am now teaching a new interdisciplinary undergraduate module - Fraud, Bribery and Corruption* - alongside my corporate governance and taxation teaching.
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* - please get in touch if you would like to know more.

Australia: Treasury consultation paper on illegal phoenix activity

The Treasury has published a consultation paper in which it seeks views on law reform proposals designed to deter and disrupt illegal phoenix activity: see here (pdf). A specific offence of "illegal phoenixing" is not proposed. Instead, a series of proposals is made including, for example, an amendment to the Corporations Act 2001 to specifically prohibit the transfer of property from Company A to Company B where the main purpose of the transfer was to prevent, hinder or delay the process of that property becoming available for distribution amongst Company A's creditors.

Hong Kong: HKEX analysis of issuers' corporate governance disclosures

HKEX has published its analysis of listed companies' corporate governance disclosures in respect of the HKEX Corporate Governance Code: see here (pdf). The analysis looked at the annual reports of 1,428 issuers with a financial year end of 31 December 2016, representing 72% of the issuers listed on this date. 34% of these issuers reported compliance with all of the Code's provisions.

It is interesting to note those provisions of the Code that have the lowest compliance rates. One such provision is A.2.1 on the separation of the roles of chief executive and chairman: 63% of issuers report that they comply with this provision. HKEX's analysis reports that the most common reason given for non-compliance with A.2.1 is the view that one person occupying these two positions "can provide strong and consistent leadership and can enable more effective planning and better executive of long-term strategies".

UK: Parker review report - the ethnic diversity of company boards

The Parker Review final report concerning the ethnic diversity of UK boards has been published and makes recommendations to increase the ethnic diversity of boards: see here (pdf). A target is set of all FTSE100 boards having at least one director of colour by 2021, and all FTSE250 boards by 2024. The report notes that of the total population of FTSE100 directors, only 2% are UK citizen directors of colour and 51 of the FTSE100 companies do not have any directors of colour.

India: SEBI governance committee publishes report and recommendations

The committee formed by the Securities and Exchange Board of India to provide advice on a range of governance matters - with a view to enhancing the standard of governance amongst listed companies - has published its report and recommendations: see here. The recommendations are wide-ranging. An increase in the minimum number of directors a listed company must have is proposed as well as an increase in the proportion of independent directors.  An increase in the minimum frequency of board and committee meetings is also proposed.  The Committee also recommends that a Stewardship Code should be introduced.

UK: ICSA / IA guidance - the stakeholder voice in board decision making

ICSA and the Investment Association have published a guidance document titled The Stakeholder Voice in Board Decision-Making: see here (pdf). The guidance - welcomed by the Government and Financial Reporting Council - contains ten core principles, and its purpose is "...to help company bards think about how to ensure they understand and weigh up the interests of their key stakeholders when taking strategic decisions".

Canada: corporate governance reform - an update

An update on the Bill that will, when enacted, make changes to the governance framework by amending the Canada Business Corporations Act, the Canada Cooperatives Act, and the Canada Not-for-profit Corporations Act. The Bill has begun its journey through the Senate, receiving first reading on June 21 and starting its second reading on September 19.  The text of the Bill is available here and further information is available here and here. Among the changes proposed are those relating to the election of directors (including annual elections and votes for individual directors), the disclosure of information regarding board diversity and communications with shareholders.

Netherlands: draft of the first Dutch Stewardship Code published

Eumedion - the foundation representing institutional investors in the Netherlands - has published a draft Stewardship Code: see here (pdf). The new Code builds on Eumedion's Best Practices for Engaged Share-Ownership, published in 2011 (here, pdf). It contains eleven principles and is intended to come into force on 1 January 2018.

Singapore: MAS removes requirement for mandatory audit rotation of local banks

Last month the Monetary Authority of Singapore announced, in response to an earlier consultation, that it would be removing the requirement for the mandatory rotation of firms auditing local banks: see here (pdf). In reaching this decision, MAS cites the "regulatory developments since 2008 that have introduced additional safeguards to enhance the quality and independence of external audit, the primary responsibility of audit committees in ensuring the independence, objectivity and quality of external audit, and the potential risk of audit gaps arising from frequent change of auditors".

UK: Takeover Panel - consultation paper on statements of intention and related matters

The UK Takeover Panel Code Committee has published a consultation paper titled Statements of intention and related matters: see here (pdf). Amendments are proposed to Rules 2.7, 19.5, 19.6, 24 and 25 of the Takeover Code, the effect of would be, for example, to bring forward the requirement for an offerer to make statements of intention to the time at which the announcement of a firm intention to make an offer is made.

South Africa: shareholder voting and auditor reappointment

Mandatory audit firm rotation will be introduced in South Africa from 2023. Meanwhile, the Independent Regulatory Board for Auditors has been monitoring shareholder voting at general meetings in respect of auditor reappointment and has found what it describes as a "visible trend towards voting against the reappointment of auditors": see here.

India: SEBI consults on the credit rating agency regulatory framework

The Securities and Exchange Board of India is consulting on the regulatory framework applicable to credit rating agencies: see here.

Pakistan: the Listed Companies (Code of Corporate Governance) Regulations 2017

Last week the Securities and Exchange Commission announced the publication of draft Regulations setting out governance standards for listed companies: see here (pdf). A copy of the Regulations (their full title being the Listed Companies (Code of Corporate Governance) Regulations 2017) is now available in English: see here (pdf).

Update (24 November 2017) - the final version of the Regulations has been published: see here (pdf).

UK: PLSA discussion paper - 'Good governance - how to get there'

The Pensions and Lifetime Savings Association has published a discussion paper titled 'Good governance - how to get there': see here (pdf). The paper calls, amongst other things, for a rebalancing of the regulatory priorities of the Pensions Regulator, with a stronger emphasis on the scrutiny of board appointments and effectiveness.

Hong Kong: the Companies (Amendment) Bill 2017

The Companies (Amendment) Bill 2017 was introduced in the Legislative Council earlier this year and has received its first reading. A copy of the Bill, as introduced, is available here (pdf). A briefing note is available here (pdf). The Bill contains, for companies incorporated in Hong Kong, the framework for maintaining a register of significant controllers.

A joint statement from the "Five Chairmen Group"

Earlier this year the chairmen of corporate governance committees from Germany, France, Italy, the United Kingdom and the Netherlands met for their third annual meeting: see here. A joint statement was published after the meeting: see here (pdf). The Group has, amongst other things, called for a flexible approach in the new implementation of the new Shareholders' Rights Directive.

South Africa: reviewing the Companies Act, 2008

Reports in the media suggest that the Department for Trade and Industry has begun a review of the Companies Act, 2008: see, for example, here.

Pakistan: SECP publishes draft Listed Companies (Code of Corporate Governance) 2017

The Securities and Exchange Commission has announced the publication of draft Regulations setting out governance standards for listed companies. The draft Regulations, titled the Listed Companies (Code of Corporate Governance) 2017 - will be published shortly. Meanwhile, some background information is available in the accompanying press release: see here (pdf).

Isle of Man: FSA consults on new edition of governance code for insurers

The Isle of Man Financial Services Authority is consulting a new edition of its corporate governance code for insurance companies (previously known more formally as the code of practice for regulated insurance entities): see here.

UK: Government publishes corporate governance reform proposals

The Government today published its corporate governance reform proposals, following the publication of a green paper last year: see here (pdf). The proposals, contained in a response document (and therefore lacking the precision that would be expected in a white paper), are principally concerned with directors' remuneration and employee and stakeholder voice. Some proposals will require legislation but others - in the form of "invitations" - are directed to the Financial Reporting Council for consideration as part of its forthcoming review of the UK Corporate Governance Code. This raises interesting questions about the status of the Financial Reporting Council and, indeed, the way in which the Code is updated. When the FRC says that it is "independent", what does this mean?

New secondary legislation is proposed, for example, to require all companies of significant size to explain how the directors comply with section 172 of the Companies Act 2006 in respect of those factors to which they are required to have regard (e.g., the interests of the company's employees; the impact of the company's operations of the community and environment). Amongst the invitations sent to the FRC is one suggesting that the FRC consult on a new Principle in the UK Corporate Governance Code "establishing the importance of strengthening the voice of employees and other non-shareholder interests at board level as an important component of running a sustainable business". As part of this, the FRC has been invited to consider and consult on a new Code provision requiring premium listed companies, on a comply or explain basis, to adopt one of three employee engagement mechanisms (a designated non-executive director; a formal employee advisory council; or a director from the workforce).

European Union: High Level Group on Sustainable Finance publishes interim report

The High Level Group on Sustainable Finance published its interim report Financing a Sustainable European Economy last month: see here (pdf). The report sets out, for discussion, policy recommendations. A final report will be published later this year. The Group has recommended, amongst other things, that a set of European level governance and stewardship principles incorporating long-term value creation should be developed. Other recommendations relating to governance, reporting and fiduciary duty are also made.

Switzerland: Ethos survey of governance, remuneration and shareholder voting

Ethos, the Swiss Foundation for Sustainable Development comprising Swiss pension funds and institutions, has published the results of its survey of shareholder voting, executive remuneration and governance of companies in the SPI index. The report notes, amongst other things, an increase in shareholder opposition with 14% of resolutions receiving less than 90% support from shareholders (up from 12% in the previous year). An overview of the report, in English, is available here. Copies of the report, in French and German, are available here.

UK: FT report on forthcoming corporate governance reform white paper

The Financial Times newspaper reports that the Government's Corporate Governance Reform white paper is likely to be published next week, following on from the green paper published last November: see here (subscription required). The FT report is titled 'May shelves plan for crackdown on high pay' and it suggests that the Government is now unlikely to propose giving shareholders an additional binding vote on remuneration.

UK: Board diversity - Green Park's 10,000 report

Green Park has published the fourth edition of its Leadership 10,000 report, which now includes a ranking of FTSE100 companies in respect of their success and commitment in improving leadership diversity: see here. The report notes that 58% of FTSE100 boards have no directors from ethnic minorities; the Parker Review recommended, last year, that by 2021 all FTSE100 boards should have at least one director of colour.

IOSCO consults on recommendations to improve the transparency of corporate bond markets

The International Organisation of Securities Commissions has published for public consultations a series of recommendations the aim of which is to improve the transparency of corporate bond markets: see here (pdf).

UK: FRC consults on updated Guidance on the Strategic Report

The Financial Reporting Council has published for consultation an updated edition of its Guidance on the Strategic Report: see here. The amendments take into account the increased disclosure obligations to which certain large companies are subject under the Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016, but also reflect the FRC's intention to strengthen the link between the purpose of the strategic report and the matters to which directors should have regard as part their duty to promote the success of the company under section 172 of the Companies Act 2006.