UK: FCA imposes largest ever penalty for anti-money laundering control framework failings

The Financial Conduct Authority has fined Deutsche Bank AG just over £163 million for its failure to maintain an adequate anti-money laundering (AML) control framework from the start of 2012 to the end of 2015. This is the largest penalty for AML control failings imposed by the FCA or its predecessor (the FSA). A copy of the FCA's decision notice is available here (pdf).

OECD Survey of Corporate Governance Frameworks in Asia

The OECD has published a survey of corporate governance frameworks in Asia: see here (pdf). The survey presents information for 14 jurisdictions and is based on questionnaire responses from organisations including securities regulators, institutes of directors, stock exchanges and governance centres. The jurisdictions included in the survey are Bangladesh, China, Chinese Taipei, Hong Kong, India, Indonesia, Korea, Malaysia, Mongolia, Pakistan, Philippines, Singapore, Thailand and Vietnam. The survey reports on a variety of matters including ownership structure, shareholder rights and board structure.

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

In HRH Emere Godwin Bebe Okpabi v Royal Dutch Shell Plc [2017] EWHC 89 (TCC) the High Court has once more considered the circumstances in which a parent company may owe a duty of care in tort in respect of the actions (or omissions) of subsidiary companies. The decision is noteworthy because of the discussion it contains of the Court of Appeal decision Chandler v Cape Plc [2012] EWCA Civ 525 as well as the significance of statements made in public documents relating to corporate groups. To quote the trial judge (at paras. [95] and [96]):

... even if passages in public documents that state the policies of a group of companies could be construed as being sufficient to establish the presumption of a duty of care on the part of a parent for the acts of its subsidiary, then the words which appear in the Shell documents effectively disclaiming that interpretation would negate that presumption ... [moreover] I do not consider that such a presumption would operate in any event on the basis of such statements. The London Stock Exchange is a Recognised Investment Exchange under UK law, and operates a regulated market. The Exchange must ensure that all securities admitted to trading on its markets, and the dealing in those securities, are conducted in accordance with the relevant legislation (both primary and secondary). That includes complying with certain disclosure standards. It is highly unlikely in my judgment that compliance with such disclosure standards could of itself be characterised as an assumption of a duty of care by a parent company over the subsidiary companies referred to in those statements. There is certainly no authority to this effect and in the absence of any, I would hold that such compliance cannot in itself be a sufficient factor to found a duty of care on the part of a parent holding company."

Update (2 February 2017) - the ICLR has provided a summary of the case: see here.

UK: Finance Bill 2017 - corporate interest and relief for carry forward losses

Draft legislation, part of the Finance Bill 2017, has been published in respect of the Government's proposals to introduce restrictions on [1] the amount of interest (and other financing amounts) that companies can deduct when calculating their profits for corporation tax purposes; and [2] the availability of relief for losses carried forward. For further information see, respectively, here and here.

UK: England and Wales: restoration of companies to the register and the scope of court directions

Judgment was given yesterday by the Court of Appeal in Pickering v Davy [2017] EWCA Civ 30. At issue was the scope of the directions the court is able to make under section 1032(3) of the Companies Act 2006 where a company has been restored to the register of companies. Section 1032(3) provides that the court "may give such directions and make such provision as seems just for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck of the register".

The court's decision is important for two reasons. First, it provides guidance on the granting of limitation directions (e.g., directions of the court concerning the running of limitation periods). The court held that the making of a limitation direction under section 1032(3) required the applicant to show a clear causal link between the dissolution and the failure to bring proceedings within the applicable limitation period. The court therefore rejected as being too low the test that the trial judge had adopted: that there should be a "window of opportunity" in which proceedings might have been brought. Second, the court has confirmed (in what appears to be the first authority where such a direction has been sought) that it has the discretion under section 1032(3) - albeit one that should be exercised with extreme caution - to grant a direction that a petition that had not yet been presented for winding-up the company would be regarded as having been presented on the day the company was struck off.

Update (26 January 2017) - the ICLR has published a summary of the decision: see here.

Pakistan: an update on the Companies Bill 2016

The Companies Bill 2016, drafts of which were published for consultation last year, became law (as the Companies Ordinance 2016: see here, pdf) late last year when it was promulgated by the President in the exercise of a power provided by Article 89 of the Constitution. However, the Ordinance was repealed by a vote in the Senate in December (see here, pdf) and the Bill subsequently introduced in the National Assembly. A sub-committee of the National Assembly has been considering the Bill this month and has made various amendments: see here (pdf).

Nigeria: suspension of the national code of corporate governance

Last October the Financial Reporting Council published the new National Code of Corporate Governance, consisting of three separate codes: one for the private sector; one for not-for-profit entities; and one for the public sector. The not-for-profit code proved controversial and the FRC has now confirmed that the Code has been suspended following a directive from the Federal Government; a new Executive Secretary/Chief Executive Office of the FRC has also been appointed: see here.

UK: reviewing limited partnership law - a call for evidence

A review of the law of limited partnerships is underway and has begun with a call for evidence: see here (pdf). The review extends to England, Wales, Scotland and Northern Ireland (there are some legal differences between limited partnerships in these jurisdictions; in Scotland, for example, the limited partnership has separate legal personality). The review is wide-ranging, although it has been motivated in large part by the significant increase in the registration of Scottish limited partnerships and concerns that this may be linked to criminal activity. Between 2000/01 and 2009/10 there was a 63% increase in the number of limited partnerships registered in Scotland; between 2010/10 and 2015/16, the increase was 239%.

Egypt: the Egyptian code of corporate governance

The codes and principles directory maintained by the European Corporate Governance Institute was updated earlier this month with a copy, in Arabic, of the Egyptian Code of Corporate Governance published last year: see here.

UK: PLSA publishes updated Corporate Governance Policy and Voting Guidelines

The Pensions and Lifetime Savings Association has published an updated edition of its Corporate Governance Policy and Voting Guidelines: see here (pdf). Important changes have been made in respect of remuneration: the new guidelines recommend, for example, that where shareholders vote against a company's remuneration policy they should also oppose the re-election of the remuneration committee chair as a company director.

Gibraltar: the Private Foundations Bill 2017

A copy of the Private Foundations Bill 2017 has been published in the Gibraltar Gazette: see here (pdf). The Bill sets out the framework for the creation of private foundations in Gibraltar including the definition of foundations, the purposes for which they can be created, registration and accounting requirements and the duties of councillors.

UK: introducing the Private Fund Limited Partnership (PFLP) structure

Several days ago a draft of the Legislative Reform (Private Fund Limited Partnerships) Order 2017 was laid before Parliament together with an accompanying explanatory document: see, respectively, here (pdf) and here (pdf). An impact assessment has also been published: see here (pdf). The Order will be considered by the Parliamentary Regulatory Reform Committee and the Delegated Powers and Regulatory Reform Committee.

The purpose of the Order is to amend the Limited Partnerships Act 1907 to introduce a Private Fund Limited Partnership (PFLP) structure. The structure is intended for private investment funds (i.e., those not authorised to be promoted to retail consumers and structured as limited partnerships).

UK: Ministry of Justice seeks views on the case for new corporate economic crime offences

The Ministry of Justice published a press release last week titled "New crackdown on corporate economic crime" but all was not what it seemed at first sight, the opening line of the press release saying that "[a] call for evidence seeks views on whether further reform is needed...". The call for evidence, which focuses on criminal offences designed to punish and prevent economic crimes including fraud, false accounting and money laundering when committed by companies, is available here. Views are sought on the identification doctrine and, if needed, various reform options including the creation of new 'failure to prevent' offences adopting the model found in section 7 of the Bribery Act 2010.

India: SEBI guidance note on board evaluation

According to the Securities and Exchange Board of India, board evaluation in India is at a "nascent stage". For this reason, and against the background of the requirements in the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements)Regulations, 2015, SEBI has issued a guidance note on the nature and operation of board evaluation: see here (pdf).

Update (15 January 2017) - governance matters were discussed at the most recent meeting of SEBI's International Advisory Board: see here.

Switzerland: Ethos publishes updated proxy voting guidelines and corporate governance principles

Ethos, the Swiss Foundation for Sustainable Development comprising Swiss pension funds and institutions, has published an updated edition of its proxy voting guidelines and corporate governance principles. An overview of the changes in the new edition is available in English here. A copy of the new guidelines and principles is available in English here (pdf).

UK: FRC report - developments in corporate governance and stewardship [and what next for the FRC?]

The Financial Reporting Council - the organisation responsible for the UK's Corporate Governance and Stewardship Codes (amongst many other things) - has published its annual report on developments in corporate governance and stewardship: see here (pdf).

It is reported that compliance with the UK Corporate Governance Code is high: 90% of FTSE 350 companies report that they comply with all, or all but one of the Code's 54 provisions. Full compliance has risen from 57% to 62% this year. The provision most frequently not complied with is B.1.2, which states that at least half the board, excluding the chairman, should comprise non-executive directors determined by the board to be independent.

The report is published in the year in which the twenty-fifth anniversary of the publication of the Cadbury Committee Code and Report will be marked; it was the Cadbury Committee that gave us 'comply or explain' that has since been a central pillar - indeed, foundation - of the UK's governance framework for large, listed companies since the early 1990s. A great deal has happened since the publication of the Cadbury Report and much has changed in the past year: a new prime minister in the UK who placed governance reform as part of her personal manifesto; a vote to leave the European Union; and two governance reviews are underway (see here and here), instigated for reasons that challenge the effectiveness of aspects of the UK's governance framework and, indeed, the role and effectiveness of the FRC in this regard. It is not, therefore, surprising to see today's FRC development report adopt a tone quite different from the developments report published last year.

Consolidation was the message last year - it was stated that no substantial changes were proposed to the UK Governance Code for the next three years - and no hint was given that the FRC sought wider powers. But from today's report we learn that the FRC "stands ready" to revise the Code; that it has established a Stakeholder Panel to "bring a broader range of perspectives into [its] ... policy-making and work" (the FRC's website does not, however, provide any information about the Panel, its members and the selection/recruitment process); and that the market model's "checks and balances" require reassessment and revitalisation. This is very welcome, against the background of debate about how best to achieve appropriate standards of governance and the extent to which the ethos of encouragement and reflection that 'comply or explain' seeks to promote can (and/or should) coexist with a stronger and wider enforcement role for the FRC.

Ireland: new code for community, voluntary and charitable organisations

Towards the end of last year an updated governance code for community, voluntary and charitable organisations was published by the Governance Code Working Group: see here (pdf). The new code, which is divided into versions for three types of organisation (small, medium and large), is accompanied by a set of stewardship guidelines: see here (pdf).

Singapore: MOF/ACRA consultation - AGMs, beneficial ownership and foreign companies seeking domicile

The Ministry of Finance and the Accounting and Corporate Regulatory Authority are consulting on proposed amendments to the legislation governing companies and limited liability partnerships. Amongst the proposals are the following: introducing a new regime for foreign companies wishing to be domiciled in Singapore; removing the requirement for private companies to hold an annual general meeting; and requiring companies and LLPs to hold and maintain beneficial ownership information and to make this available, on request, to law enforcement agencies. For further information is available here.

Denmark: recommendations on active ownership by institutional investors

The Committee on Corporate Governance has published recommendations regarding active ownership by institutional investors (aka a stewardship code): see here (Danish, pdf). The recommendations - there are seven of them and they have not yet been published formally in English - seek to promote long-term value creation; they came into effect at the start of the year.

Update (8 February 2017) - a copy of the recommendations in English is now available: see here (pdf).

Netherlands: Commission report finds high compliance with code

The Dutch Corporate Governance Code Monitoring Committee published its annual governance code monitoring report at the end of December: see here (pdf). A summary is available here. The report found that compliance with the code by listed companies was high.

UK: England and Wales: substantial property transactions and the meaning of 'non-cash asset'

The Court of Appeal gave judgment last month in Granada Group Ltd v The Law Debenture Pension Trust Corporation Plc [2016] EWCA Civ 1289 and affirmed the first instance decision ([2015] EWHC 1499 (Ch)). A summary of the court's decision has been published by the ICLR: see [2016] WLR(D) 686.

The case concerned the operation of the rules requiring shareholder approval for certain transactions between companies and their directors (or those connected with the directors) involving non-cash assets . The meaning of "non-cash asset" was central and, in this regard, the court held (to quote the opening sentences from the ICLR summary):

As established by the authorities, section 739(2) of the Companies Act 1985 [now section 1163 of the Companies Act 2006, which defines "non-cash asset"] extended to rights that were not proprietary rights, provided that they could still be properly described as rights in or over property. An “interest in property” for the purposes of section 739(1) meant a proprietary interest ... An “interest” in property under section 739 was one that could be defined by reference to proprietary concepts, or at least by concepts that were legally recognisable and enforceable".

Australia: attribution, aggregation and unconscionable conduct

A few days before Christmas the Federal Court of Australia (Full Court) gave judgment in Commonwealth Bank of Australia v Kojic [2016] FCAFC 186. One of the issues before the court was whether the knowledge of officers and employees could be aggregated and attributed to a corporation for the purposes of finding that the corporation had acted unconscionably under section 51AB or section 51AC of the Trade Practices Act 1974 (or the equivalent provisions in the Australian Securities and Investments Commission Act 2001).

At first instance ([2016] FCA 368) the trial judge held that the knowledge of two bank employees should be aggregated and that the bank had acted unconscionably. The Full Court (Allsop CJ, Besanko and Edelman JJ) unanimously overturned this decision, in an important judgment exploring the scope for aggregation and the meaning of unconscionable conduct.