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.