New Zealand: FMA publishes new edition of its Corporate Governance Handbook

The Financial Markets Authority has published an updated edition of its Corporate Governance Handbook: see here (pdf). The Handbook has been updated following the publication last year of an updated edition of the NZX Corporate Governance Code. The new Handbook sets out eight principles, each with accompanying guidance and commentary from the FMA. It is intended primarily for non-listed and public-sector companies and, as such, complements the NZX Code.

Singapore: Financial Stability Board publishes peer review report

The Financial Stability Board has published its peer review of Singapore, which focused on the macroprudential policy framework and the framework for resolution of financial institutions: see here (pdf). Various recommendations are made including, with respect to the resolution regime, extending the scope of the bail-in to include senior debt.

IOSCO consultation report: conflicts of interest and the equity capital raising process

The International Organisation of Securities Commissions has published a consultation report titled Conflicts of interest and associated conduct risks during the equity capital raising process: see here (pdf). The report identifies various risks and contains non-binding guidance for IOSCO members.

Jersey: commercial contracts and an implied term of good faith

Judgment was given earlier this month by the Royal Court (Samedi division; Deputy Bailiff Le Cocq and Jurats Nicolle and Ronge) in Hard Rock Ltd v HRCKY Ltd [2018] JRC026. The court returned, once more, to the question of the existence of an implied term of good faith in a commercial contract. It was held that the defendant had no real prospect of success in recovering damages under an alleged implied term of good faith; the plaintiff's application for this part of the counter-claim was therefore summarily dismissed.

There was limited discussion concerning the existence of such an implied term, but the court nevertheless observed that it had not yet been decided definitively whether every Jersey contract contained an implied term of good faith and the extent to which such a term could be removed or obviated by express terms. The court did, however, make this observation (para. 29):

A term of good faith, even were one to exist, cannot it seems to us be used to qualify the general purpose and commercial rationale of an agreement. To act in good faith, expressed as its corollary, must be not to act in bad faith. Could it be said that a party to a commercial contract was acting in bad faith where on the evidence it acceded to some requests from the counter party and did not accede to others for its own commercial reasons? We cannot think that such could amount to bad faith or an absence of good faith in any event."

BCBS report on implications of fintech for banks and bank supervisors

The Basel Committee on Banking Supervision has published a report titled Sound practices - Implications of fintech developments for banks and bank supervisors: see here (pdf). Ten main implications and related considerations are identified, including, for example, the fact that the current regulatory, supervisory and licensing frameworks generally predate the emergence of technology-enabled innovation.

UK: Scotland: the Scottish Law Commission's tenth programme of law reform

The Scottish Law Commission launched its tenth programme of law reform yesterday: see here or here (pdf). The Commission states that it expects to complete its project on the law of contract in the light of the Draft Common Frame of Reference in the spring of this year. A final report and Bill will be published covering topics on which the Commission has already consulted, including remedies for breach of contract, penalty clauses and contract interpretation. Earlier reports under this project have resulted in Acts of the Scottish Parliament: the Legal Writings (Counterparts and Delivery) (Scotland) Act 2015 and the Contract (Third Party Rights) (Scotland) Act 2017.

UK: Treasury Select Committee launches inquiry into digital currencies and distributed ledger technology

The Commons Treasury Select Committee has launched an inquiry into digital currencies and distributed ledger technologies: see here. The terms of reference are available here.

UK: England and Wales: Law Commission call for evidence on Commonhold

The Law Commission (England and Wales) has published a call for evidence concerning Commonhold, a form of property ownership created by the Commonhold and Leasehold Reform Act 2002: see here (pdf). One element of the commonhold framework is the commonhold association, a private company limited by guarantee. The commonhold association is governed by the commonhold legislation as well as company law. In respect of the application of company law, the Law Commission notes several positions including, for example, the view that commonhold associations should not be be a company subject to company law; another view is that greater guidance and clarity is required in respect of the application of company law.

UK: England and Wales: liquidators' appointment not invalidated by failure to give notice of resolution to floating charge holder

Judgment was given by HHJ Purle QC in Bevan v Walker and others [2018] EWHC 265 (Ch) last week. A summary of the decision has been published by the ICLR: see [2018] WLR(D) 103. At issue was the status of liquidators who had been appointed following the passing of a special resolution by shareholders to place a company in members' voluntary liquidation where there had been a failure to give notice of the resolution to a floating charge holder as required by section 84(2) of the Insolvency Act 1986.

The trial judge, HHJ Purle QC, held that the failure to provide notice did not invalidate the appointment of the liquidator first appointed or the appointment of the liquidator subsequently appointed when the company was placed in a creditors' voluntary winding-up.  In doing so, HHJ Purle QC said that the cases on the appointment of administrators were of "no or limited assistance in the present context", stressing that once the special resolution to wind-up the company was passed, the company was placed in liquidation for the purposes of section 84(1)(b) of the 1986 Act, notwithstanding any failure to give notice as required to any charge holders.

Note: HHJ Purle QC retired as a senior circuit judge earlier this month, and was based in Birmingham's Business and Property Courts.

Luxembourg: Stock Exchange publishes revised edition of its Principles of Corporate Governance

The Luxembourg Stock Exchange has published a revised edition of its Principles of Corporate Governance: see here (pdf).

Australia: ASIC's surveillance of credit rating agencies

The Australian Securities and Investments Commission has published a report titled Surveillance of credit rating agencies: see here (pdf). The report presents the results of ASIC's review of credit rating agencies' governance arrangements, transparency and disclosure, between 1 January 2016 and 31 October 2017. It contains six recommendations. All of the licensed credit rating agencies in Australia - six in total - were part of the surveillance activity conducted under section 912E of the Corporations Act 2001.

UK: England and Wales: parent company liability in tort for harm caused by subsidiaries

The Court of Appeal gave judgment earlier this week in Ogale Community & Ors v Royal Dutch Shell Plc & Anor [2018] EWCA Civ 191 (on appeal from [2017] EWHC 89 (TCC); [2017] WLR(D) 52). At issue was the potential liability in tort of a parent company - Royal Dutch Shell Plc (RDS) - for the environmental damage caused by leaks of oil from pipelines and infrastructure in the Niger Delta, stemming from the operations of a subsidiary company.

It was argued that RDS owed the Nigerian claimants a duty of care because (1) it controlled the pipeline operations in Nigeria from which the leaks occurred, or (2) it had assumed direct responsibility to protect the claimants from the damage caused by the leaks. At first instance it was held that there was no arguable case that a duty of care arose. This finding - albeit with criticism of the way in which the trial judge had reached it - was upheld by a majority in the Court of Appeal (Chancellor and Simon LJ; Sales LJ dissenting).

UK: PRA consults on proposed expectations regarding firms' governance and risk management of algorithmic trading

The Prudential Regulation Authority has published a consultation paper in respect of its proposed expectations regarding firms' governance and risk management of algorithmic trading: see here (pdf). The consultation paper includes, as an appendix, the supervisory statement that the PRA intends to publish. The PRA is proposing that a firm's governing body should be required to explicitly approve the governance framework for algorithmic trading. A review of firms by the PRA completed between November 2014 and March 2017 revealed that not all firms’ algorithmic trading activities were adequately captured in their governance frameworks.

UK: The Scotland Act 1998 (Insolvency Functions) Order 2018

The Scotland Act 1998 (Insolvency Functions) Order 2018 came into force earlier this month. The Order will result in the Scottish Ministers and a Minister of the Crown being able to make rules for the winding-up of companies in Scotland, irrespective of whether those rules relate to reserved matters under Schedule 5 of the Scotland Act 1998. Further information is available in the note at the end of the Order as well as the accompanying explanatory memorandum: see, respectively, here and here (pdf).

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 has begun Third Reading in the Senate, with debate starting last Thursday.  Hansard, the record of debate, is available here and the text of the Bill 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.

UK: PRA policy statement - insurers - board diversity and separation of the CEO and chair roles

The Prudential Regulation Authority has published Policy Statement 1/18 Strengthening Individual Accountability in Insurance - Optimisations to the SIMR: see here (pdf). The statements confirms various changes being made to the PRA Rulebook in respect of insurers, including requiring the separation of the chief executive and chairman roles at large insurance firms and, for solvency II firms and large non-directive insurers, to put in place a policy promoting diversity on the governing body.

UK: The Taxation of Securitisation Companies (Amendment) Regulations 2018

The Taxation of Securitisation Companies (Amendment) Regulations 2018 were laid before Parliament today come into force on 28 February: see here. The explanatory memorandum (here, pdf) accompanying the Regulations explains their purpose: to make provision for specific areas of uncertainty over the appropriate tax treatment of securitisation companies, through amendments to the existing Taxation of Securitisation Companies Regulations 2006.

UK: PLSA AGM review for 2017

The Pensions and Lifetime Savings Association has published its review of AGM voting in 2017, focusing in particular on identifying cases of significant shareholder dissent (20% or more of the votes cast) in FTSE350 companies: see here (pdf). The PLSA found that 56 FTSE250 companies and 17 FTSE100 companies experienced significant dissent in respect of at least one AGM resolution in 2017.

UK: FCA consults on EU Benchmarks Regulation implementation

The Financial Conduct Authority has published a consultation paper setting out proposed changes to its Handbook in respect of the changes introduced by the EU Benchmarks Regulation (EU 2016/1011) and the UK's Financial Services and Markets Act 2000 (Benchmarks) Regulations 2018: see here. The 2018 Regulations were laid before Parliament today, accompanied by an explanatory memorandum (here, pdf). Updated Q&As were also published yesterday by ESMA in respect of the EU Regulation: see here (pdf).

Singapore: High court finds 'insider reverse piercing' contrary to principle and unsupported by authority

The High Court decision Jhaveri Darsan Jitendra v Salgaocar Anil Vassudeva [2018] SGHC 24, handed down earlier this week and available here (pdf), is noteworthy because of the discussion it contains of 'reverse piercing' and, in particular, 'insider reverse piercing'. The latter arises where a controlling or dominant shareholder attempts to disregard the company's separate legal personality in order that they can bring or benefit from company claims against third parties. Such piercing was held by the court to be unsupported by authority and contrary to the fundamental principle that the company is an entity separate from its shareholder.  Moreover, Kannan Ramesh J. stated (at para. [74]):

Where one chooses to conduct one’s affairs using a company, one takes advantage of the independent legal status of the company and the consequences that flow from that, including the fact that the property of the company does not belong to the shareholder and vice versa. It did not seem correct as a matter of principle that, having chosen to claim the benefits of separate legal personality, a shareholder could then avoid the disadvantages of the same by inviting the court to allow insider reverse piercing".

UK: England and Wales: abuse of law and cross-border mergers

A belated note for the Court of Appeal decision Easynet Global Services Ltd, Re [2018] EWCA Civ 10, on appeal from [2016] EWHC 2681 (Ch). Handed down last month, the principal question was whether the Companies (Cross-Border Mergers) Regulations 2007 applied to a merger involving UK companies and a single Dutch company. The Dutch company was dormant and had never traded, but its inclusion meant that the merger would be a cross-border merger for the purposes of the Regulations (the Regulations implementing the Cross-Border Mergers Directive 2005/56/EC).

At first instance, the trial judge, Birss J., held that the merger did not fall within the Regulations. The cross-border character of the proposed merger was, in his view, "only the result of a device" (para. [20]). The Court of unanimously disagreed: the proposed merger constituted a cross-border merger within the scope of the 2005 Directive and Regulations and did not involve any abuse of law.