UK: The Criminal Finances Act 2017

The Criminal Finances Bill received Royal Assent yesterday, becoming the Criminal Finances Act 2017: see here and here. A copy of the Act is not yet available, but documents prepared to accompany the Bill's passage through Parliament, together with earlier versions of the Bill, can be found here. There is further background information here. Part 3 of the Act introduces a new corporate criminal offence: the failure to prevent the facilitation of tax evasion.

UK: preliminary announcements and the role of auditors

The Financial Reporting Council has today published a discussion paper on the use and value of companies' preliminary announcements of annual results and the role of auditors in respect of such announcements: see here (pdf).

Malaysia: new edition of the Malaysian Corporate Governance Code published

The Securities Commission has today published a new edition of the Malaysian Code on Corporate Governance: see here (pdf). An overview of the changes made in the new edition is available here and there are some FAQs here. The new Code has moved away from 'comply or explain' towards an approach described as CARE: comprehend, apply and report.

Japan: updating the Stewardship Code - draft published for public comment

The Council of Experts on Japan’s Stewardship Code has published for public comment an updated edition, in English, of Japan's Stewardship Code: see here (pdf). A copy of the draft Code in Japanese is available here. The deadline for submitting comments, in English or Japanese, is 8 May: see here for further information.

Update (30 May 2017) - a final version of the new code is now available: see here.

UK: cyber security, non-executive directors and investors

Nausicaa Delfas, Acting Chief Operating Officer at the Financial Conduct Authority, today delivered a speech titled "Expect the unexpected - cyber security - 2017 and beyond" at the Financial Information Security Network: see here. Of interest is what was said about the role of non-executive directors and investors. To quote directly from the speech:

Then there is also the role of the Non Executive Directors (NEDs) – using them to help to share experiences from other businesses, and to ask challenging questions of their board colleagues, and of the senior leaders within an organisation. In 2014 the UK Government released guidance for NEDs on the types of questions that should be asked, and we very much support this advice. NEDs should be able to satisfy themselves that an organisation is managing cyber risk effectively; the Institute of Directors specifically calls for NEDs to satisfy themselves 'that systems of risk management are robust and defensible'.

Another development we are seeing is security being taken beyond the boardroom, and becoming an investor led conversation. We are seeing the emergence of a number of institutional investors now questioning boards as to how they effectively manage this risk, which in turn is driving increased focus in the Board room. We would encourage investors to ask questions about cyber defences, to use a firm’s cyber maturity as a key indicator of resilience, and to push firms to improve in this space. We have seen how cyber can have an impact on a firm beyond the operational disruption caused, extending into equities pricing, and harming the balance sheet. It’s a key consideration and we will be considering how investors can be better equipped to ask the right questions."

Singapore: MAS consults on the introduction of a new corporate structure - the variable capital company

Last month the Monetary Authority of Singapore began a consultation on the legal framework for a new corporate structure for collective investment schemes: the variable capital company. These new companies will have their own legal framework, set out in the Singapore Variable Capital Companies Act, and will have the ability to create sub-funds with segregated assets and liabilities. Directors will be subject to a fit and proper persons test. For further information, see the consultation paper (here, pdf) and the draft Variable Capital Companies Act (here, pdf).

UK: ICAEW / ICAS technical guidance - realised and distributable profits under the Companies Act 2006

The ICAEW and ICAS have published an updated edition of their technical note on realised and distributable profits under the Companies Act 2006: see here (pdf).

UK: FCA publishes mission and business plan

The Financial Conduct Authority today published, for 2017/18, its mission and business plan: see, respectively, here (pdf) and here (pdf). Amongst the cross-sector priorities identified is the culture and governance of firms. Within this area, work will continue developing an accountability regime for all regulated firms. The FCA wants this new regime (to quote directly from the business plan) "...to be simple practicable for firms to understand and implement, and for the FCA to oversee and regulate. We plan to tailor the new regime to reflect the different risks, impact and complexity of firms".

UK: England and Wales: capital gains tax and the state or nature of shares

The ICLR has provided a summary for the Court of Appeal decision Blackwell v HM Revenue & Customs [2017] EWCA Civ 232: see here. The decision is an interesting one concerning the nature of shares for the purposes of capital gains taxation. To quote directly from the ICLR summary:

The state or nature of the shares was to be identified for the purposes of section 38(1)(b) of the 1992 Act by reference to the rights and obligations which those shares conferred or imposed on a shareholder pursuant to the company’s articles of association, and the state or nature of the asset was unaffected by the making or subsequent discharge of the relevant agreement because it was a purely personal agreement between the taxpayer and a third party. The agreement imposed inhibitions on the taxpayer’s exercise of his rights as a shareholder, but the nature and state of the asset constituted by the shares remained the same throughout. It was not uncommercial to apply a juristic analysis of the intangible asset constituted by shares in a company for the purpose of ascertaining its state or nature at any particular time; and to draw a distinction between the rights and obligations conferred and imposed by the shares themselves and personal undertakings by a shareholder to a third party which might restrict the exercise of those rights was both businesslike and legally correct"

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UK: PRA supervisory statement on remuneration

The Prudential Regulation Authority has published an updated supervisory statement on remuneration: see here (pdf). The purpose of the statement is to set out the expectations of the PRA on how firms should comply with the Remuneration Part of the PRA Rulebook.

Australia: corporate insolvency law reforms

The Treasury has published an exposure draft of the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017: see here (pdf). The purpose of the Bill is to make some significant changes to the corporate insolvency regime, including: (a) the introduction of a safe harbour regime for company directors from personal liability for insolvent trading in the context of a restructuring; and (b) making unenforceable, where a company is being restructured, 'ipso facto' clauses in contracts which permit one party to terminate or modify the contract due to an insolvency event.

Further information is available in the draft explanatory memorandum accompanying the Bill: see here (pdf).

UK: FCA discussion paper on distributed ledger technology

The Financial Conduct Authority has published a discussion paper on distributed ledger technology (DLT): see here (pdf). To quote directly from the discussion paper, the FCA has published the paper in order "to start a dialogue on the potential for future development of DLT in the markets we regulate. We are particularly interested to explore where the balance of risk and opportunities may lie in relation to DLT". The FCA also notes that there has been "a broad range of reactions to DLT. We remain aware that exponents of new technologies, particularly vendors, will often hype or oversell new technologies. Equally, detractors will remain sceptical about their capabilities. One of the purposes of this DP is, therefore, to invite debate and clarify what the real benefits and risks of DLT may be, and how they might impact our objectives".

UK: the new charity governance code - an update

A consultation began last year in respect of proposed changes to the code of governance for the voluntary and community sector: see here. The steering group leading the review proposed, amongst other things, that the code should be renamed the "Charity Governance Code". The consultation period has now closed and the steering group is now drafting the new code. Meanwhile, a summary of the consultation responses has been published: see here (pdf).

Europe: ESMA report on shareholder identification and communication systems

The European Securities and Markets Authority has published the results of a survey of the harmonisation of national regulatory frameworks for shareholder identification and communication systems: see here (pdf). The report is intended to assist the European Commission in respect of the implementing acts needed under Article 3 of the new Shareholder Rights Directive (the latter was approved by the Council of the European Union earlier this week: see here and here, pdf).

UK: The Statutory Auditors and Third Country Auditors Regulations 2017

The Statutory Auditors and Third Country Auditors Regulations 2017 were made on the 30th of March and laid before Parliament yesterday: see here or here (pdf). The Regulations continue the UK's implementation of the EU Statutory Audit framework (Directive 2014/56/EU and Regulation 537/2014) in respect of the audit of limited companies and other entities classified as public interest entities. An explanatory memorandum is available here (pdf).

UK: Creating a register of beneficial ownership for overseas companies owning property in the UK

The Government has today published a call for evidence as part of its plan to introduce a register of beneficial ownership for overseas companies (and other legal entities) owning property in the UK: see here (pdf). The register will also apply to entities wishing to participate in central government procurement.

UK: BEIS Committee publishes its corporate governance inquiry report

The Business, Energy and Industrial Strategy Committee published its corporate governance inquiry report this morning: see here or here (pdf). A summary of the report's conclusions and recommendations is available here.

Some of the recommendations are addressed to the Financial Reporting Council (FRC) and include, for example, suggested amendments to the UK Corporate Governance Code to require companies to report on how they ensure they meet section 172 of the Companies Act 2006; extending the FRC's enforcement powers; and reviewing the UK Stewardship Code to provide more explicit guidance on what constitutes high quality engagement.

Amongst the recommendations addressed to the Government is one advocating the creation of a target that from May 2020 at least half of all new appointments to senior and executive management level positions in listed companies should be women.

OECD publishes new edition of its Corporate Governance Factbook

The OECD has today published the 2017 edition of its Corporate Governance Factbook: see here (pdf). The factbook covers 47 jurisdictions and provides information in four areas: (1) the corporate landscape (including the ownership structure of listed companies); (2) the corporate governance framework; (3) the rights of shareholders and key ownership functions; and (4) the board of directors.

The Factbook contains much of interest including the extent to which the 'comply or explain' approach has been adopted internationally as well as the increasing significance of jurisdictions with concentrated forms of ownership.

South Africa: unalterable provisions of the Companies Act and the appointment of proxies

Judgment was given last month by the Supreme Court of Appeal in Richard Du Plessis Barry v Clearwater Estates NPC and others (187/2016) [2017] ZASCA 11: see here or here (pdf). A press summary is available here (pdf). At issue was the validity of a provision in a company's memorandum of incorporation requiring notice to be served at least 48 hours before a general meeting where a shareholder wished to appoint a proxy.

Swain JA delivered the judgment (Leach, Willis, Mbha JJA and Schippers AJA concurring) and held that this provision was void because it was inconsistent with an unalterable provision of the Companies Act 2008 - section 58 - which stated that a proxy could be appointed at any time. It had been argued before the court that such a conclusion would impose practical difficulties on companies, to which Swain JA responded (para. [22]):

It was submitted that should a corporation be unable to regulate the submission of proxies by the imposition of a deadline before a meeting, general meetings of corporations, particularly large corporations, will become unworkable. The situation is postulated of a large company with thousands of shareholders being hamstrung by the submission of thousands of proxies on the day of a scheduled meeting ... If these practical difficulties are real and not simply apparent, their resolution lies not in a strained interpretation of the Act, but by legislative intervention".