Friday, 24 May 2019

Belgium: the new 2020 Belgian Code on Corporate Governance

The Corporate Governance Committee has published a new edition of its corporate governance code ("the 2020 Code"): see here (pdf, Dutch), here (pdf, English) or here (pdf, French). The new Code applies to reporting years beginning on or after 1 January 2020, replacing the Code published in 2009. A list, in English, of the changes contained in the new edition is available here (pdf) and a more general summary can be found in the press release available here (pdf, English).

UK: FRC plan and budget 2019/20

The Financial Reporting Council has published its plan and budget for 2019/20: see here (pdf). The work needed to establish the FRC's successor - the Accounting, Reporting and Governance Authority - is the first of five strategic priorities identified.

UK: England and Wales: fraudulent trading and directors' duties

Judgment was delivered by ICC Judge Mullen yesterday in Pantiles Investments Ltd & Anor v Winckler (Rev 1) [2019] EWHC 1298 (Ch). The case concerned claims brought by a liquidator against a company's former director under section 212 ("Summary remedy against delinquent directors, liquidators, etc.") and section 213 ("Fraudulent trading") of the Insolvency Act 1986 (and this involved consideration of the general duties of directors under the Companies Act 2006).

The judgment is noteworthy in providing examples of the breach of section 172 ("Duty to promote the success of company") of the 2006 Act as well as fraudulent trading. The trial judge also recognised, in the context of the fraudulent trading claim under section 213, that the test for dishonesty was as set out by the Supreme Court in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67.

Thursday, 23 May 2019

Australia: perceptions of audit quality among professional investors

The Financial Reporting Council and Auditing and Assurance Standards Board have published a report containing the results of a survey among 47 professional investors of their perceptions of audit quality: see here (pdf). Over 90% of respondents regarded audit quality in Australia as either "average" or "above average" when asked for their overall view of audit quality. This perception of audit quality was influenced by various factors, the three most important being the quality of financial reporting disclosures, reported episodes of fraud within audited companies and the quality of information within the auditor's report.


The report is available on the FRC and AUASB websites. The report I accessed today on the FRC website was watermarked throughout as a 'confidential draft' whereas the report published on the AUASB website was not. The link provided above is to the report on the AUASB website.

IFIAR publishes annual audit inspections survey

The International Forum of Independent Audit Regulators has published its annual inspection findings survey: see here (pdf). IFIAR members from 45 jurisdictions took part in the survey. The survey reports that 37% of the audits of public interest entities inspected by members had at least one "finding" (generally understood to be a significant failure to satisfy the requirements of auditing standards).

Wednesday, 22 May 2019

Germany: new edition of German Corporate Governance Code published

DCGK, the Corporate Governance Code Commission, has today published a new edition of the German Corporate Governance Code: see here. A copy of the new Code, in English, will be published shortly. A press release, in English, explaining the key changes contained in the new Code is available here (pdf).

UK: Draft Registration of Overseas Entities Bill - pre-legislative scrutiny report published

The Joint Parliamentary Committee appointed to conduct pre-legislative scrutiny of the Draft Registration of Overseas Entities Bill has published its final report: see here or here (pdf). The purpose of the Bill is to require all overseas entities owning land in the UK to identify and register information concerning their beneficial owners. The Committee concluded that the Bill is "timely, worthwhile, and, in large part, well drafted" but makes various recommendations for further improvement. A summary of these recommendations is available here.

UK: Scotland: The Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2019

The Companies Act 2006 (Scottish public sector companies to be audited by the Auditor General for Scotland) Order 2019 was made yesterday by the Scottish Ministers and comes into force on 24 May: see here or here (pdf). The accompanying policy note is available here (pdf). The purpose of the Order is to provide that the accounts of ILF Scotland are to be audited by the Auditor General for Scotland.

Tuesday, 21 May 2019

New Zealand: audit quality - perceptions and expectations

The Financial Markets Authority has today published the results of its first research project to explore perceptions of audit quality. Views were sought from investors, directors, managers and auditors. The research reveals very clear differences of opinion - and of expectations - between these groups over (for example) the extent of auditor independence from management, competition and choice in the audit market, and trust in the audit profession. A copy of the report is available here (pdf) and a summary is available here (pdf).

BCBS report on implementation of the Basel III standards

The Basel Committee on Banking Supervision has published its sixteenth report on the implementation of the Basel III standards by member jurisdictions: see here (pdf).

Thursday, 16 May 2019

UK: England and Wales: Ofwat consultation - licencing and mandatory governance requirements

Ofwat - the regulator for the water sector in England and Wales - published its updated Board leadership, transparency and governance principles earlier this year: see here (pdf). These new principles, replacing those first published in 2014, came into force last month. This month - this week, in fact - the regulator announced the start of a consultation in respect of its intention to make several of the new principles mandatory by amending the licences of the largest regulated water companies: see here (pdf).

Wednesday, 15 May 2019

UK: The Proxy Advisors (Shareholders’ Rights) Regulations 2019

The Proxy Advisors (Shareholders’ Rights) Regulations 2019 were laid before Parliament yesterday and come into force on 10 June: see here or here (pdf). The Regulations are accompanied by an impact assessment and explanatory memorandum: see, respectively, here (pdf) here (pdf). The Regulations introduce a new transparency framework for proxy advisors; as the memorandum explains (para. 2.1):
This instrument transposes Article 3j of the revised EU Shareholder Rights Directive (SRD II) into UK law, in line with the UK’s obligations as a member of the EU. Article 3j of SRD II places requirements on proxy advisors, which primarily offer voting services and/or advice to shareholders in publicly listed companies, to make certain disclosures about the way in which they conduct their business". 

Under the framework being introduced by the Regulations, the Financial Conduct Authority will become responsible for enforcing the new requirements placed on proxy advisors, including the obligation to disclose publicly the code of conduct* that has been adopted (with an explanation provided if a code is not adopted). Proxy advisors will be required to notify the FCA if they fall within the new framework and the FCA will maintain a public list.

* - The BPP Group is currently revising its Best Practice Principles for Shareholder Voting Research. The review is expected to be completed next month; an update on the review was published last month: see here.

Tuesday, 14 May 2019

Isle of Man: corporate governance requirements for insurance intermediaries

In November last year, the Isle of Man Financial Services Authority published for consultation a draft corporate governance code for insurance intermediaries: see here (pdf). The consultation closed in January and the IOMFSA has since announced that it will "take account of feedback ... when incorporating the governance requirements proposed in CP18-07/T08 into consolidated regulatory requirements for intermediaries, which will be subject to further consultation in due course".

Monday, 13 May 2019

UK: KPMG Report - Executive Remuneration in AIM Listed Companies

KPMG has published a report surveying executive remuneration in AIM listed companies: see here (pdf). One of the research findings concerned the governance code adopted by such companies. Under Rule 26 of the AIM Rules (here, pdf), AIM listed companies are required to disclose: which governance code the board has decided to apply; how compliance with that code is achieved; and the reasons for any departures from the chose code. The KPMG report notes that, of the 50 largest AIM companies by market capitalisation, 42% have adopted the UK Corporate Governance Code and 58% have adopted the QCA Corporate Governance Code. A different picture is painted when more companies are considered. Research by the QCA published last year, which surveyed all AIM listed companies, found 89% following the QCA Code, 6% following the UK Corporate Governance Code and 5% following other codes: see here.

Friday, 10 May 2019

Singapore: the new variable capital company framework - further consultation

The Variable Capital Companies Act 2018 - setting out a new corporate form in Singapore for investment funds - was passed last year: see here. Last month, the Monetary Authority published a consultation paper concerning further aspects of the new framework, including the criteria that will be used to determine whether a director (or proposed director) of a variable capital company is "fit and proper" to act as such: see here.

Myanmar: recommendations to improve corporate governance practices

A joint report considering the governance of 24 companies has been published by the International Finance Corporation, the Securities and Exchange Commission, the Yangon Stock Exchange and the Directorate of Company Investment and Company Administration: see here (pdf). The report's analysis is based on the ASEAN Corporate Governance Scorecard (here, pdf) and included all of the companies listed on the Yangon Stock Exchange (five in total), four private companies and fifteen public companies. The public and private companies were selected for reasons including economic significance or their potentially becoming listed. It is worth noting that, according to data published earlier this year, the number of companies registered in Myanmar is approximately 61,600.

The report, which surveyed companies before the new Companies Law came into force, notes that governance practices are at a "nascent stage" of development. A large number of recommendations for improvement are made, including the development of a corporate governance code (to operate on the "comply or explain" basis). Other recommendations seek improvements in the quality and quantity of the information that is disclosed; improvements in monitoring and enforcement powers are also suggested.

Thursday, 9 May 2019

UK: England and Wales: directors and officers insurance was capable of recovery through service charge

The Upper Tribunal (Lands Chamber) gave judgment yesterday in Chiswick Village Residents v Southey [2019] UKUT 148 (LC). One of the issues before the Tribunal was whether a lessee was liable to pay, as part of his service charge, an expense to cover the cost of the insurance for those lessees acting as directors of the company owning the freehold. The First-tier Tribunal held that this expenditure could not be included but the Upper Tribunal disagreed. 

The Upper Tribunal held that the provision in the lease covering the insurance expenses that could be recovered as part of the service charge - “Effecting insurance against the liability of the Lessor to third parties and against such other risks and in such amount as the Lessor shall think fit (but not against the liability of individual tenants as occupiers of the flats in the Building).” - could not be given a wide interpretation whereby "the liability of the Lessor" included the liability of its directors and officers. It held, however, that this provision contemplated the Lessor company obtaining insurance against liabilities of persons other than itself and that, in the context of the case, without insurance cover for the directors it would be difficult to find individuals willing to act as such or for the company to function at all.

Wednesday, 8 May 2019

Ghana: The Companies Act 2019

It is now over sixty years since Professor Gower was appointed to chair a commission on company law reform in Ghana, the product of which was the Companies Act 1963. A new company law framework, to replace the 1963 Act, was placed before Parliament last year: the Companies Bill 2018. Media reports suggest that the Bill has been passed and the new company law framework - the Companies Act 2019 - will become law on receiving the President's assent: see here. The Parliament website has yet to be updated with further information.

Australia: ACSI calls for Stewardship Code for all institutional investors

The Australian Council of Superannuation Investors has called for the introduction of a Stewardship Code applying to all institutional investors in Australia, as part of a wider review of the regulatory framework for stewardship: see here (pdf).

UK: The AIC Code of Governance for Investment Companies

A belated post. Earlier this year the Association of Investment Companies published a new edition of its Code of Governance for Investment Companies. Further information about the Code is available here but registration is required to obtain a copy. The Code is intended for UK, Guernsey and Jersey member companies.

Tuesday, 7 May 2019

Malaysia: Securities Commission publishes inaugural corporate governance monitor report

The Securities Commission has published its first corporate governance monitor report: see here. The report provides information on a wide range of governance practices among listed companies, including board diversity and adoption of new best practice recommendations in the 2017 edition of the Malaysian Corporate Governance Code. It notes, for example, that among 930 listed issuers, just under 16% of directors were female and a little over 24% of independent board positions have been held by the same director for more than 9 years.

Monday, 6 May 2019

UK: Government consultation 'Corporate Transparency and Registration Reform'

The Department for Business, Energy and Industrial Strategy has published a consultation paper titled Corporate Transparency and Registration Reform: see here (pdf). The paper sets out reforms to the company incorporation process within the UK, in particular the information and checks that are necessary to ensure the accuracy of the information on the register concerning directors, shareholders and those with significant control.

Views are sought on extending the powers of Companies House so that it can query information that is filed, seek further evidence and share information with other agencies. The paper also seeks views on proposals to limit the power, under section 392 of the Companies Act 2006, to shorten a company's accounting reference period; this mechanism, the paper states, is being used abusively by some in order to delay the availability of financial information.

The press release accompanying the consultation paper carries the headline "Companies House reforms consultation launched today" but it is important to note that the paper also seeks views on aspects of company law not immediately obvious from this focus on Companies House. The best example of this is a question that may well prove controversial: should there be a cap on the number of directorships that one person can hold? The paper states: " unlikely that a person could reasonably be considered to be performing their duties as a company director where they are holding large numbers of directorships ... The government is therefore considering the introduction of a cap on the number of directorships that an individual may hold concurrently" (at para. 237).

Views are also sought on the extension of section 124A of the Insolvency Act 1986 - which provides that the Secretary of State may seek to wind-up a company or limited liability partnership on public interest grounds - to limited partnerships. This suggestion follows other proposals published last year on the reform of limited partnership law: see here (pdf).

Friday, 3 May 2019

UK: LAPFF survey of workforce engagement methods under the UK Corporate Governance Code

The new edition of the UK Corporate Governance Code, published last year, contains a new provision on board engagement with the company's workforce and states that at least one of the following methods should be adopted: (a) the appointment of a director from the workforce; (b) the creation of a formal workforce advisory panel; (c) designating a non-executive director with specific responsibility for engagement. Under the comply or explain principle, and also as this new provision explicitly reiterates, if the board decides not to adopt one of these methods, it is required to explain what alternative arrangements are in place and why these are seen as effective.

Earlier this week, LAPFF published a report - see here (pdf) - in which it explained the results of its research exploring whether and how companies propose to comply with this new provision on engagement. The headline finding is that two-thirds of companies in the survey have said that they will comply and, of these companies, the majority will appoint a designated non-executive director.

Thursday, 2 May 2019

Canada: the CBCA and the 'best interests of the corporation'

The Federal Budget was delivered earlier this year and among the proposals in the accompanying legislation - Bill C-97 - are those making amendments to the Canada Business Corporations Act: see here.

One of these will amend section 122 ("Duty of care of directors and officers"), which provides (in subsection (1)) that "Every director and officer of a corporation in exercising their powers and discharging their duties shall (a) act honestly and in good faith with a view to the best interests of the corporation; and (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances".

A new subsection - 122(1.1) - will be added titled "Best interests of the corporation" and this will state:
When acting with a view to the best interests of the corporation under paragraph (1)‍(a), the directors and officers of the corporation may consider, but are not limited to, the following factors:

(a) the interests of (i) shareholders, (ii) employees, (iii) retirees and pensioners, (iv) creditors, (v) consumers, and (vi) governments;

(b) the environment; and

(c) the long-term interests of the corporation.

Wednesday, 1 May 2019

UK: Tax Tribunal decides that preference shares were part of company's ordinary share capital

The First-tier Tribunal (Tax) gave its decision a few days ago in Warshaw v Revenue & Customs [2019] UKFTT 268 (TC). The central question before Tribunal Judge John Brooks was whether the preference shares held by a taxpayer, Mr Warshaw, were regarded as "ordinary share capital" within the definition provided by section 989 of the Income Tax Act 2007: "all the company's issued share capital (however described), other than capital the holders of which have a right to a dividend at a fixed rate but have no other right to share in the company's profits". If Mr Warshaw's shares fell within this definition, the company in which he held the shares would have been his "personal company" under section 169S(3) of the Taxation of Chargeable Gains Act 1992 (as amended) and he would have been entitled to entrepreneurs relief.

The shares in question gave a right to a dividend and no other rights to share in the profits. This right was set out in the articles of association as follows:
“In priority to any other class of shares, each Preference Share shall have the right to a fixed cumulative preferential dividend (“the Preference Dividend”) which shall accrue on a daily basis from the dividend commencement date at the rate of 10 per cent per annum on the aggregate of (i) the subscription price of such Preference Share and (ii) the aggregate amount of Preference Dividend that has previously compounded and not yet paid. The Preference Dividend accruing on each Preference Share shall be compounded on each anniversary of its dividend commencement date to the extent not previously paid.”

Did these shares give a right to a dividend at a fixed rate? Mr Warshaw's counsel argued that because the rate of dividend was calculated by reference to any previously unpaid dividends, the preference shares did not have a right to a dividend at a fixed rate. Counsel for HMRC argued that there was a right to a dividend at a fixed rate because the rate at which the dividends were paid remained fixed at 10% even if the base in respect of which they were paid varied.

Judge Brooks agreed with Mr Warshaw's counsel and allowed the taxpayer's appeal: Mr Warshaw was, therefore, entitled to entrepreneur's relief because his preference shares fell within the definition of "ordinary share capital" under section 989. Judge Brooks stated: "if, as in the present case, at the time the preference shares are issued the Articles of Association provide that only one of these, the percentage element, is fixed and the amount to which that percentage is to be applied may vary, those shares cannot be regarded as having a right to a dividend at a fixed rate and are therefore ordinary share capital as defined by s 989 ITA" (para. [19]).

An appeal by HMRC seems inevitable.

Tuesday, 30 April 2019

Croatia: consultation on new corporate governance code

The Croatian Financial Services Supervisory Agency and Zagreb Stock Exchange have begun a consultation on a revised edition of their joint Corporate Governance Code. A copy of the revised Code is available here (pdf). The accompanying consultation paper and consultation questionnaire can be found, respectively, here (docx) and here (docx).

The revised Code applies to all companies whose shares are listed on the regulated markets of the Zagreb Stock Exchange and comes into force on 1 January 2020. Among the new recommended practices included within the Code are those concerning codes of conduct for supervisory and management board members; engagement with minority shareholders; and the setting of targets for the proportion of women on both boards (with annual reporting of progress towards those targets).

Monday, 29 April 2019

Pakistan: a new corporate governance code for listed companies

The Securities and Exchange Commission of Pakistan has published, for consultation, a draft of a new corporate governance code for public listed companies. A draft of the Listed Companies (Code of Corporate Governance) Regulations, 2019, is available here.

Note: at the time of posting this note, links to the SEC website were not working (for me, at least) and I could not consult the Regulations. The SECP's Twitter page was unaffected, from where the below announcement was taken:

The Bahamas: the oppression remedy

The Judicial Committee of the Privy Council gave its opinion earlier this month in Galantis v Alexiou [2019] UKPC 15, on appeal from the Court of Appeal of the Commonwealth of The Bahamas. A summary of the opinion, which concerned sections 272 ("Continuation of liability") and 280 ("Restraining oppressive action") of the Bahamian Companies Act 1992 [here, pdf] - has been published by the ICLR: see here.

Friday, 26 April 2019

South Korea: improving the functioning of annual general meetings

Proposals intended to improve the operation of annual general meetings have been published by the Financial Services Commission and the Ministry of Justice: see here (pdf). One of the problems identified is the concentration of AGMs over a short period of time. This is to be addressed by a change in the law limiting the number of AGMs that can be held on particular days.

It is also noted that it is unclear whether shareholders can receive a small gift or other incentive for attending an AGM because of the prohibition, under Article 467-2 of the Commercial Act, of the grant of pecuniary benefits to shareholders in connection with the exercise of their rights as shareholders. The Ministry of Justice proposes to remove this uncertainty by publishing an interpretation to make clear that shareholders can receive a benefit, of a value that does not breach social norms, for their participation at the AGM.

Other proposals address the information that shareholders receive and how they receive notice of the AGM.

OECD survey of corporate governance frameworks in the Middle East and North Africa

The OECD has published a survey of the corporate governance frameworks in the Middle East and North Africa: see here. The survey identifies, amongst other things, the sources of the governance framework (e.g., law; regulation) and responsibility for governance codes; it also highlights various shareholder rights (e.g., to convene a meeting) as well as board structure and composition requirements.

BCBS publishes Consolidated Basel Framework

The Basel Committee on Banking Supervision has published a consolidated version of its standards, titled The Basel Framework, containing the full set of standards that it has issued: see here. This version of the Framework has been published for consultation purposes because, as the BCBS separately explains, its production revealed some inconsistencies between standards as well as ambiguities that needed to be addressed, some through policy changes. The BCBS decided that it was best to consult on all such changes as part of the launch of the Consolidated Framework. The Framework is briefly explained in the below video (or on this page if the video below does not work).

France: a new regulatory regime for crypto-assets

France's financial market regulator, the Autorité des Marchés Financiers (AMF), has published a summary (in English) of the new regulatory regime for crypto-assets in France: see here.

Wednesday, 24 April 2019

Japan: Council of Experts recommendations for the further promotion of corporate governance reform

The Council of Experts set-up to review Japan’s Corporate Governance Code and Stewardship Code has published an "opinion statement", directed at those subject to the Codes, with recommended areas for review: see here (pdf).

UK: England and Wales: bankruptcy and the concept of property

The ICLR has published a summary for the recent Court of Appeal decision Gwinnutt v George & Anor [2019] EWCA Civ 656: see here. While concerned with a case of personal insolvency, the decision contains wide-ranging discussion of the concept of property and for this reason it is likely to be of wider significance. To quote directly from the ICLR headnote:
A barrister’s fees, even when non-contractual, were “property” for the purposes of the 1986 Act and so vested in a trustee in bankruptcy. “Property” was explained in the widest of terms in section 436, but even that “definition” was inclusive rather than comprehensive. Unpaid fees, regardless of whether they were contractual, were capable of realisation. The fact that something could be realised or turned to account did not invariably make it “property”, but it pointed in that direction and, here, the expectation of payment was not founded on mere hope or morality but reflected the unique nature of non-contractual barristers’ fees. Payment of such a fee was not to be regarded as voluntary". 

Thursday, 18 April 2019

UK: CMA report and recommendations - statutory audit market

The Competition and Markets Authority has today published its final report followng its statutory audit market study: see here (pdf). A summary of the final report is available here (pdf) and a press release highlighting the recommendations is available here. The recommendations include:
  • An operational split within (initially) the 'Big Four', requiring separate governance and management structures (e.g., a separate CEO and board; separate financial statements for the audit practice).  If this does not deliver the anticipated benefits, the case for a structural split should be revisited.
  • Mandatory joint audits, with challenger firms working with the 'Big Four' and having joint liability.
  • Greater regulation of audit committees by the new Audit, Reporting and Governance Authority (ARGA), the proposed successor of the Financial Reporting Council. ARGA should have the power to request information from audit committees and to issue public reprimands; it should have the power to appoint an observer on the committee.
  • A review of progress in five years, by the ARGA.

Wednesday, 17 April 2019

UK: Transposition of the Fifth Money Laundering Directive

The Government has published a consultation paper concerning its transposition of the Fifth Money Laundering Directive (Directive (EU) 2018/843): see here (pdf). Implementation of the Directive will expand the scope of the current anti-money laundering framework within the UK, including with regard to crypto-assets.

Tuesday, 16 April 2019

UK: FRC/ARGA - first Government remit letter published

One of the recommendations made by Sir John Kingman, in his review of the Financial Reporting Council, was that the Government should issue the FRC (and its propopsed successor: the Audit, Reporting and Governance Authority) with a remit letter, at least once during the lifetime of each Parliament, setting out "those aspects of economic policy that the regulator should have regard to when advancing its objectives and discharging its duties". It was also recommended that the FRC/ARGA should respond publicly to the remit letter. The first of these exchanges took place in March and have now been published: see here (pdf) and here (pdf).

UK: The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019

The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 have been published in draft form: see here or here (pdf). The Regulations implement, in part, Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement.

More specifically, the Regulations will implement elements of articles 9a ("Right to vote on the remuneration policy") and 9b ("Information to be provided in and right to vote on the remuneration report") of the Directive to the extent that they are not already part of UK law. Further information is available in the explanatory memorandum accompanying the Regulations: see here (pdf).

Monday, 15 April 2019

UK: PRA statements - managing the financial risks from climate change

The Prudential Regulation Authority has published a policy statement and supervisory statement regarding banks' and insurers' approaches to managing the financial risks from climate change: see, respectively, here and here.

The supervisory statement explains, to quote directly from it (para. 3.2): "The PRA expects a firm’s board to understand and assess the financial risks from climate change that affect the firm, and to be able to address and oversee these risks within the firm’s overall business strategy and risk appetite"

It also adds (at para. 3.4): "The PRA expects firms to have clear roles and responsibilities for the board and its relevant sub-committees in managing the financial risks from climate change. In particular, the board and the highest level of executive management should identify and allocate responsibility for identifying and managing financial risks from climate change to the relevant existing Senior Management Function(s) ...".

Friday, 12 April 2019

Ireland: The Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies

The Companies Registration Office has provided an update on the creation of the Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies, following the making of the European Union (Anti-Money Laundering: Beneficial Ownership Of Corporate Entities) Regulations 2019: see here. These Regulations contain the obligations on companies to maintain beneficial ownership information as well as the framework for the operation of the new central register. They replace the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016.

The intention is that the Registrar of Companies will act as the Registrar of the beneficial ownership register and that online filing by companies will begin on 22 June 2019 (the date that Part 3 of the 2019 Regulations comes into force). The deadline for filing beneficial ownership information is five months after 22 June 2019, for companies incorporated before this date; companies incorporated on or after 22 June 2019 must file within five months of their incorporation.


In the UK, the House of Commons Library has recently published a short briefing paper on beneficial ownership registers: see here. The paper describes the registers that exist in the UK as well as the position that exists in the British Overseas Territories and the Crown Dependencies. Relevant EU law is also discussed.

UK: Stewardship Code consultation - responses published

The Financial Reporting Council published a consultation paper earlier this year setting out proposed changes to the UK Stewardship Code: see here. The consultation closed at the end of March and the responses received have now been published: see here. When the consultation was launched, the expectation was that the new Code would be published in the summer; the FRC's draft plan and budget for 2019/20, published last month, states that the new Code will be published in 2019/20.

Ireland: The Companies (Amendment) Act 2019

The Companies (Amendment) Act 2019 was signed into law yesterday by the President: see here. The Act will be published shortly on the Irish Statute Book website: see here. Meanwhile, further information - and a copy of the Bill that became the Act - is available on the Oireachtas website: see here. The Act is short and has a single principal purpose: to extend, in certain circumstances, the time permitted for the filing of an annual return; this is achieved by amending section 343 of the Companies Act 2014.

UK: The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) (No. 2) Regulations 2019

The European Union (Withdrawal) Act 2018 (Exit Day) (Amendment) (No. 2) Regulations 2019 were made yesterday: see here or here (pdf). They have amended section 20 of the European Union (Withdrawal) Act 2018 in order to provide a new date for the UK's departure from the European Union (exit day): 31 October 2019 at 11.00 pm. Further information is available in the accompanying explanatory memorandum: see here (pdf).

Thursday, 11 April 2019

UK: England and Wales: accessory liability for breach of trust or fiduciary duty

A quick note, a little late in the day. The Court of Appeal gave judgment earlier in LLB Verwaltung (Switzerland) AG v Group Seven Ltd & Ors [2019] EWCA Civ 614 and held, amongst other things, that "In the light of [Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67], it must in our view now be treated as settled law that the touchstone of accessory liability for breach of trust or fiduciary duty is indeed dishonesty, as Lord Nicholls so clearly explained in [Royal Brunei Airlines v Tan [1995] 2 AC 378], and that there is no room in the application of that test for the now discredited subjective second limb of the Ghosh test [[1982] QB 1053]" (para. [57]).

Update (15 April 2019) - the ICLR has published a summary: see here.

Germany: consultation on a revised Corporate Governance Code - an update

Last November, the Corporate Governance Code Commission published for consultation a revised edition of the German Corporate Governance Code: see here (German, pdf) or here (English, pdf). Further supporting materials were published at the time: see here (in German) or here (in English).

Earlier this month an update on the consultation and new Code was given in a speech by the Commission's chairman (Prof. Nonnenmacher). A copy of the speech was published a few days later on April 8: see here (pdf). An (official) English translation is not (so far) available.

My interpretation of the speech suggests that there may be a delay in the coming into force of new Code - originally planned for 10 June 2019 - should there be a delay in the coming into force of the legislation - ARUG II - implementing the Shareholder Rights Directive (2017/828). Depending on the delay in implementing ARUG II, the Commission is considering publishing a final draft of the new Code in May 2019, highlighting the changes it proposes to the draft published last year. This is not intended to open a second period of consultation, although Prof. Nonnenmacher has indicated the Commission's willingness to accept further feedback.

Wednesday, 10 April 2019

UK: Brydon Review launches 'call for views' regarding audit quality and effectiveness

Earlier this year, the terms of reference for Sir Donald Brydon's review of the quality and effectiveness of the UK audit market were published: see here (pdf). These have been followed today by a 'call for views': see here (pdf). In very general terms, the review is seeking "views, supported by evidence wherever possible, on the extent of assurance that audit currently provides to the users of financial statements, and how it might develop to meet better those users’ needs and to serve the interests of other stakeholders and the wider public interest". It is stressed that attention should focus on the audit process and audit product. Views are particularly invited on how the statutory audit of public interest entities could be improved to provide greater assurance to shareholders and other stakeholders.

UK: England and Wales: parent company liability in tort for subsidiary company actions or omissions

The UK Supreme Court gave judgment today in Vedanta Resources PLC v Lungowe [2019] UKSC 20: see here (pdf). A summary of the judgment is available here (pdf). Of particular interest is that part of the judgment in which Lord Briggs (with whom Lady Hale, Lord Wilson, Lord Hodge and Lady Black agreed) considered the potential liability of a parent company in tort for the actions (or omissions) of its subsidiary companies.

Lord Briggs stated (at para. [49]) that parent company liability for the activities of subsidiary companies was not, of itself, a distinct category of liability in common law negligence.  He rejected the argument that a parent company could never incur a duty of care in respect of its subsidiaries' activities merely by the adoption of group-wide policies and guidelines and the expectation that the management of each subsidary would comply (para. [52]).  He further stated (at para. [53]):
Even where group-wide policies do not of themselves give rise to such a duty of care to third parties, they may do so if the parent does not merely proclaim them, but takes active steps, by training, supervision and enforcement, to see that they are implemented by relevant subsidiaries. Similarly, it seems to me that the parent may incur the relevant responsibility to third parties if, in published materials, it holds itself out as exercising that degree of supervision and control of its subsidiaries, even if it does not in fact do so. In such circumstances its very omission may constitute the abdication of a responsibility which it has publicly undertaken".

Tuesday, 9 April 2019

UK: England and Wales: director liability for inducing breach of contract by their company

Judgment was given yesterday in Antuzis & Ors v DJ Houghton Catching Services Ltd & Ors [2019] EWHC 843 (QB).The judgment is noteworthy because of the discussion it contains of what has become known as the rule in Said v Butt [1920] 3 KB 497 - that a director will not be liable for inducing breach of contract by their company if they act bona fide within the scope of their authority - and the linked discussion of the duty imposed on directors to promote the success of the company under section 172 of the Companies Act 2006. It is also noteworthy in providing an example of a company secretary being found in breach of duty.

The facts of this and an earlier case have been well publicised by the media and involved, in the UK, the exploitation of people from Lithuania: see here. Employed by a company, DJ Houghton Catching Services Ltd, the Lithuanian workers - the claimants in the case - received less than the statutory minimum prescribed wages, worked extremely long hours, had payments withheld as a form of punishment, did not receive holiday pay and were subject to other unlawful deductions.

The trial judge (Mr Justice Lane) found, as a preliminary issue, that the director and company secretary were jointly and severally liable to the claimants for inducing the breaches of contract by the company. With regard to Said v Butt, Lane J. held that it was "the officer's conduct and intention in relation to his duties towards the company - not towards the third party - that provide the focus of the 'bona fide' enquiry" (para. [114]). The director and company secretary had, in the judge's view, acted in breach of section 172 and section 174 of the Companies Act 2006.

Monday, 8 April 2019

UK: The Small Business, Enterprise and Employment Act 2015 (Commencement No. 7, Consequential, Transitional and Savings Provisions) Regulations 2019

The Small Business, Enterprise and Employment Act 2015 (Commencement No. 7, Consequential, Transitional and Savings Provisions) Regulations 2019 were made last week: see here or here (pdf). These bring into force, in Scotland, certain provisions of the 2015 Act including section 122 (abolition of requirements to hold meetings: company insolvency), section 124 (ability for creditors to opt not to receive certain notices: company insolvency), and section 126 (sections 122 to 125: further amendments) and Part 1 of Schedule 9. The Regulations are accompanied by a short explanatory note: see here.

Friday, 5 April 2019

UK: Scotland: leave to act as a director while disqualified

Section 17 of the Company Directors Disqualification Act 1986 provides that an individual disqualifed from acting as a director may nevertheless seek the court's leave to act as a director. In a recent Scottish decision - Re Joseph Meng Loong Lee [2019] ScotSC 27, available here (pdf) - Sheriff Peter J. Braid granted leave for a disqualified director to act as a director of six companies. This number makes the decision unusual (leave had originally been sought to act in respect of 13 companies). The decision is also worth noting because of the discussion it contains about enforcement and, in particular, the lack of monitoring in respect of any conditions that are imposed as part of the grant of leave. In this regard, Sheriff Braid stated (para. [28]):
.... while the undertakings and conditions appear stringent, there is in fact no means of policing them. The pursuer is willing to undertake to comply with the conditions but it seems to me that does not add anything because he requires to comply with the order of the court in any event. While it is the Secretary of State who suggested the conditions, he has no intention of monitoring compliance, and to that extent the insistence on conditions may on one view be seen as something of a cosmetic exercise, with no teeth attached in the event of non compliance. ... it was previously the Secretary of State’s practice to ask the court to include in any order granting leave, a formula of words to the effect that in the event of any of the conditions attached to the order being breached, the permission granted by the court would immediately cease. However, Lady Wolffe declined to approve such wording in Buckley v Secretary of State for Business, Energy and Industrial Strategy [2017] CSOH 105 on the grounds that it would lead to uncertainty.  I respectfully agree with that approach, and the Secretary of State no longer requests that such wording be inserted into any interlocutor, but the consequence of that is that one possible theoretical safeguard which may have existed if such wording had been adopted, is no longer there.  The fact is that the effect of a breach of any of the conditions remains unclear".